Analysis of powers of Provisional attachment of property by GST Authorities

Amazonite Steel Pvt. Ltd Vs. UOI (Calcutta High Court); W.P. No. 18429 of 2019; 04/03/2020

1. FACTS OF THE CASE

• An Investigation u/s 67 of the CGST Act had been initiated by Additional Director General, Directorate General of Goods & Services Tax Intelligence (hereinafter referred “ADGGI”) against M/s Amazonite Steels Private Limited (herein referred to as “petitioner”) to determine the tax or any other amount due from the petitioner under section 74 of CGST Act.
• The ADGGI addressed the letter dated 5th June, 2018 to bank branch manager of the petitioner to provisionally attach the current account, under Section 83 of the CGST Act, 2017, through FORM GST DRC – 22.
• The said bank through a letter dated 11^th June, 2018, informed the petitioner about the Order passed by the ADGGI which directed to freeze the current account of the petitioner.
• After more than a year, on 19th July, 2019, the petitioner, by way of a letter, made representation before the ADGGI, requesting to de-freeze the current account of the company which was earlier provisionally attached under Section 83 of the CGST Act,
• On 31st July, 2019, the petitioner wrote to the bank praying for immediate de freezing of the current account since in terms of section 83 of CGST Act the letter for provisional attachment was issued  by the ADGGI, GOI on 05-06-2018 shall ceases to have effect after one year from the letter dated 05-06-2018.
• Thereafter, several other representations were made by the petitioner before the bank as well as the ADGGI respectively praying to de-freeze the said current account but there was no response to the representations by either of the parties.
• Being aggrieved and dissatisfied with the inaction on the part of the respondents the writ petitioner preferred a writ application before Court bearing.
• Thereafter, on 31st October, 2019, the Principal Additional Director General, Directorate General of Goods & Services Tax Intelligence (hereinafter referred to as “PDDGI”) passed a fresh provisional order directing the bank to provisionally attach the current account of the petitioner.

2. ISSUE FOR CONSIDERATION

The legal issues which need to be addressed in the said writ petitions are as follows:

1. Whether the Principal Additional Director General, DGGI and Additional Director General, DGGI are competent to pass orders under Section 83 of the CGST Act, 2017?

2. Whether an order passed u/s 83 of the CGST Act, 2017, remains valid after the expiry of one year from the date of the order?

3. Whether the authorities can issue fresh order of provisional attachment/multiple orders under Section 83 of the CGST Act, 2017?

3. LEGAL POSITION

Analysis of section 83 of CGST Act, 2017 which deals with the provisional attachment to protect revenue in certain cases is as follow. The relevant section is reproduced below:

(1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).

 ISSUE A

Whether the Principal Additional Director General, DGGI and Additional Director General, DGGI are competent to pass orders under Section 83 of the CGST Act, 2017?

Contention by the petitioner

• Section 83 of the CGST Act, 2017 read with Rule 159 of the CGST Rules only empowers the ‘Commissioner’ to attach any property including bank account provisionally for the purpose of protecting the interest of the
• Further, the petitioner placed reliance on section 2(24) of CGST Act, 2017 to indicate that ‘Commissioner’ means Commissioner of Central Tax and includes Principal Commissioner of Central Tax appointed under Section 3 and the Commissioner of Integrated Tax appointed under the IGST Act,
• The petitioner submitted that the ‘Principal Additional Director General’ and Additional Director General are not ‘Commissioner of Central Tax’ or ‘Principal Commissioner of Central Tax’ or ‘Commissioner of Integrated Goods & Service Tax’. Hence, power vested under Section 83 of the CGST Act, 2017 cannot be exercised by the Principal Additional Director General, DGGI and Additional Director General, DGGI.

Contention by the respondent

• Section 3(c) and 3(d) of the CGST Act make it clear that ‘Principal Commissioner of Central Tax’ and “Commissioner of Central Tax’ are equivalent to ‘Principal Additional Directors General of Central Tax’ and ‘Additional Directors General of Central Tax’
• Section 5(2) allows an officer of central tax to exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of central tax who is subordinate to him

Decision by the Hon’ble Court

• Section 3 equates the ‘Principal Commissioner of Central Tax’ as the “Principal Additional Director of Central Tax’ and the “Commissioner of Central Tax’ as the ‘Additional Director General of Central Tax’.
• Furthermore, the fresh orders of provisional attachment have been passed by ‘Principal Additional Director of Central Tax’ who is the superior officer and therefore, as per Section 5(2) of the CGST Act, 2017 she possesses the power to pass the provisional attachment orders under Section 83. Hence, the first issue is answered in favour of the

ISSUE B

Whether an order passed u/s 83 of the CGST Act, 2017, remains valid after the expiry of one year from the date of the order?

Contention by the petitioner

• The current account of the petitioner was provisionally attached by the order dated 5th June,2018, and ceased to have any effect after one year according to Section 83(2) of the CGST Act, 2017 i.e. after 5^th June 2019

Contention by the respondent

• Non-issue of the fresh orders within time was an error on the part of the

Decision by the Hon’ble Court

• The authorities have acted in a blatantly highhanded and illegal manner by keeping the provisional attachments in a state of continuance for the period from 5th June, 2019 (when the first order of provisional attachment ceases to operate) till 31st October, 2019 (when fresh order for provisional attachment was passed).
• Section 83(2) is crystal clear that the provisional attachment shall cease upon expiry of one year. It was therefore incumbent on the authorities to either release the provisional attachment by informing the bank or by issuing a fresh order of provisional attachment, if the law so
• The above action is clearly in violation of the petitioners’ rights for carrying on business under Article 19(1) of the Constitution of India and under Article 300A of the Constitution of India wherein the petitioners have been deprived of their property without authority of

ISSUE C

Whether the authorities can issue fresh order of provisional attachment/multiple  orders under Section 83 of the CGST Act, 2017?

Contention by the petitioner

• Section 83 of the CGST Act, 2017 does not provide either for any extension of an order of provisional attachment or for issuance of any fresh order of provisional attachment.
• If a fresh order of provisional attachment on the same property of the petitioner in the same case is allowed, the same would make redundant 83(2) of the CGST Act, 2017, and accordingly, that cannot be the intention of the

Contention by the Respondent

• Fresh order of provisional attachment was issued on the grounds that fresh evidences were found against the petitioners and also that there is no bar under Section 83 of the CGST Act, 2017, preventing a fresh order of provisional
• Reliance was placed on judgements passed under erstwhile Gujarat VAT law, wherein the court interpreted that Section 45 of Gujarat VAT Act (provisional attachment similar to Section 83) does not limit the discretion of the officer to provisionally attach the property again if the situation so arises nor there is any debar from fresh issue of provisional attachment order if such order could be passed for protecting the interest of government
• Section 74 provides for 5 years for completion of the investigation, issuance of show cause notice and adjudication. Accordingly, it is submitted that Section 83 of the GST Act 2017 cannot be read in a manner detrimental to the interest of the
• The respondent further submitted that the words “every such” in sub-Section (2) of Section 83 makes it clear that multiple provisional attachment orders may be issued by the Revenue, if the need so

Decision by the Hon’ble Court

• As per judgements on provisional attachment (which is parimateria to section 83) in erstwhile Gujarat VAT law, it was held that fresh order for provisional attachment can be issued after the expiry of the time as prescribed under the
• Section 83(2) provides for a period for cessation of the provisional attachment and does not in any manner prevent the authorities to issue a fresh order of provisional attachment if the requirements under Section 83(1) are met. To say this would amount to supplying such requirements into the section which would go against the well- established principles of interpretation of statutes
• After the expiry of the time period, the appropriate authority may be of the opinion that such an attachment is further required to protect the interest of government revenue, and may therefore, issue a fresh order upon compliance of the formalities in Section 83(1)
• Issue of a fresh order u/s 83 will require a fresh review and assessment of the circumstances in In no manner, a fresh order should be issued in the garb of an extension of the earlier order without actually evaluating and analysing the requirement of doing so.

Summary of Judgement

• Hon’ble Calcutta HC, has held that a issuance of fresh order of provisional attachment will require a fresh review and assessment of the circumstances in hand.
• However, a fresh order should be issued in the garb of an extension of the earlier order without actually evaluating and analyzing the requirement of doing so.