Case Law Details
Cengres Tiles Ltd. Vs State of Gujarat (Gujarat High Court)
The Gujarat High Court has held that only after the notice is served under Section 46 of the CGST Act and the assessment is done by the proper officer under Section 62, can the goods and the bank accounts of the taxable person be attached under Section 83. The High Court observed that Section 46 indicates that if registered person fails to furnish return under Section 39 or 44 or 45, a notice is to be issued requiring him to furnish return and if he fails to furnish it, proper officer may assess tax liability. Only in such pendency if the Commissioner intends to protect interest of revenue, can property be attached.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
1.00. RULE, returnable forthwith. Ms. Maithili Mehta, the learned Assistant Government Pleader waives service of notice of Rule for and on behalf of the respondents.
2.00. By this writ application under Article 226 of the Constitution of India, the writ applicant, a Company, registered under the Companies Act, 1956, has prayed for the following main reliefs :-
“[A]. That this Hon’ble Court be pleased to admit the petition.
[B]. That this Hon’ble Court be pleased to quash and set aside the provisional orders of attachment dated 30/10/2018, 26/11/2018 and 27/11/2018 passed by the Assistant Commissioner of Sales Tax (Unit-33), Kadi, District Mehsana / respondent No.3 herein (Annexure-C, D and E to the petition) and declare them to be illegal, highhanded, unjust, arbitrary and premature.
[C]. That this Hon’ble Court be pleased to direct the respondents more particularly the respondent No.3 to withdraw orders of provisional attachment dated 30/10/2018, 26/11/2018 and 27/11/2018 and direct the respondents to withdraw the petitioner to allow the petitioner to pay the arrears of the Goods and Service Tax by way of equal monthly installments as requested in its representation dated 26/11/2018 and 28/11/2018 respectively.”
3.00. The writ applicant seeks to challenge the provisional attachment orders dated 26/11/2018 directing the attachment of the Bank Account No.30336873890 held by the writ applicant with the State Bank of India, commercial Branch, Ahmedabad and also the Account No.910020038421143 held by the writ applicant with the Axis bank, Sarkhej Gandhinagar Highway Branch, Ahmedabad, passed by the Assistant Commissioner of State Tax (Unit-33), Kadi, District Mehsana. The writ applicant also seeks to challenge the provisional attachment orders dated 30/10/2018 and 27/11/2018, respectively, directing attachment of the stock worth Rs.12,00,00,000/- (Rupees Twelve Crores) and Rs.19,17,81,818/- (Rupees Ninteen Crores Seventeen Lacs Eighty One Thousand Eight Hundred Eighteen only) respectively, held by the writ applicant in its factory premises on the respective dates.
4.00. As a neat question of law has been raised in this writ application, we need not to go much into the facts.
5.00. On 11/12/2018, a Co-ordinate Bench of this Court passed the following order :-
“”1. Mr. Zubin Bharda, learned advocate for the petitioner has invited the attention of the court to the provisions of section 83 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the Act”), to point out that the same provides for provisional attachment to protect revenue in certain cases, and lays down that where during the pendency of any proceedings under sections 62, 63, 64, 67, 73 or 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, provisionally attach any property including a bank account, belonging to the taxable person. Reference was made to section 62 of the Act, to submit that the same comes into operation where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, in which case the proper officer may proceed to assess the tax liability of the said person. Reference was made to section 46 of the Act which bears the heading “Notice to return defaulters” and provides that where a registered person fails to furnish a return under section 39 or section 44 or section 45, a
notice shall be issued requiring him to furnish such return within fifteen days in such form and manner, as may be prescribed. It was pointed out that a notice under section 46 of the Act was issued to the petitioner on 27.11.2018 calling upon it to furnish a return within fifteen days failing which, the tax liability would be assessed under section 62 of the Act. It was pointed out that though such notice under section 46 has been issued only on 27.11.2018, the third respondent Assistant Commissioner of State Tax Unit-33, Kadi has proceeded to provisionally attach the stock held by the petitioner under section 83 of the Act on 30.10.2018 and thereafter, proceeded to provisionally attach the bank accounts of the petitioner with the State Bank of India as well as the Axis Bank on 26.11.2018 and has thereafter made a revised provisional attachment of stock held by the petitioner under section 83 of the Act on 27.11.2018. It was submitted that provisional attachment can be made during the pendency of any proceeding under section 62 of the Act which would not commence till a period of fifteen days from the date of the notice under section 46 of the Act. Therefore, in the absence of
pendency of any proceeding under section 62 of the Act, the orders of provisional attachment made by the third respondent are without authority of law.
2. It was submitted that the petitioner has no intention of evading payment of the tax and that the petitioner had approached the concerned authority to grant installments to it to clear the outstanding dues. It was submitted that despite the same, the respondent has continued with the provisional attachment.
3. Having regard to the submissions advanced by the learned advocate for the petitioner, Issue Notice returnable on 17th December, 2018. Direct service is permitted”
6.00. Thereafter, on 26/12/2018, the same Co-ordinate Bench passed the following order :-
“1. Mr. Utkarsh Sharma, learned Assistant Government Pleader, has tendered affidavit in reply on behalf of respondent No.3. The same is taken on record.
2. Zubin Bharda, learned advocate for the petitioner, has submitted that though at present, the petitioner is not liable to make any payment, however, the petitioner is still ready and willing to pay the amount, as estimated in the show cause notice dated 27.11.2018, to the respondents. It was submitted that however, since the stock and bank accounts of the petitioner have been attached since November 2018, the petitioner would require some time to dispose of the stock before making such payments. It was, accordingly, submitted that the petitioner would start making payments as soon as the goods are disposed of and by the end of 31.01.2019, a sum of Rs.1,50,00,000/- would be paid. Thereafter, the petitioner would continue to pay Rs.1,50,00,000/- each month for a period of about eight months till the entire amount estimated by the respondents is paid. It was submitted that in light of the offer made by the petitioner, the provisional attachment of the stock and bank accounts of the petitioner may be lifted and the petitioner may be permitted to dispose of the stock.
3. On the other hand, Mr. Utkarsh Sharma, learned Assistant Government Pleader, has submitted that the petitioner may be called upon to furnish some security towards the estimated amount or may be called upon to furnish an undertaking before this Court.
4. In light of the above, it appears that the offer made by the petitioner is quite reasonable inasmuch as despite the fact that at present, there are no assessed dues, the petitioner has shown readiness and willingness to start depositing the amounts towards the amount estimated in the show cause notice. However, at the same time, the petitioner is required to give an undertaking to this effect inasmuch as the provisional attachment of the stock and bank accounts would be lifted with immediate effect whereas, the payment will be made by 31.01.2019.
5. Under the circumstances, by way of ad-interim relief, the impugned orders of attachment (Annexures C, D and E to the petition) are hereby stayed subject to the petitioner commencing to make payments as soon as part of the stock are disposed of and paying a total amount of Rs.1,50,00,000/- [Rupees one crore and fifty lakhs only] by 01.2019 and continuing to deposit a sum of Rs.1,50,00,000/- [Rupees one Crore and Fifty Lakhs only] each month till the entire estimated amount is paid. The authorized representative of the petitioner shall also file an undertaking to this effect before this Court within a period of one week from today.
6. Stand over to 07.03.2019. Direct service is permitted.”
7.00. Two orders passed by the Co-ordinate Bench gives more than fair idea as regards the dispute between the parties.
8.00. The Undertaking filed by the writ applicant pursuant to the orders passed by this Court, referred to above, reads thus :-
“UNDERTAKING
I, Ashish C. Patel, Director of Cengress Tiles Limited / petitioner herein having its Registered and Corporate Office situated at D/401, Ganesh Meridian, Opposite Gujarat High Court, Sola, S.G. Highway, Ahmedabad, do hereby solely affirm and state on oath as under:-
1. I undertake on behalf of the petitioner company to deposit Rs.1,50,00,000/- (Rupees One Crore & Fifty Lakh only) every month being Rs.1,00,00,000/- (Rupees One Crore Only) approximately for the current running month GST that would be payable and Rs.50,00,000/- (Rupees Fifty Lakh only) towards the outstanding GST dues which are yet to be assessed. I undertake to continue to deposit the amount as stated by me hereinabove till the outstanding of the GST dues of the petitioner company are paid up entirely.
2. I crave leave of this Hon’ble Court to add, amend, alter, remove, delete, rescind or modify any or all contentions or averments stated hereinabove.
Solemnly affirmed at Ahmedabad on this 29th day of December, 2018.”
9.00. Mr.Bharda, the learned counsel appearing for the writ applicant vehemently submitted that the action on the part of the authorities in the passing orders of provisional attachment of the stock and Bank Accounts under section 83 of the Central Goods and Service Tax Act, 2017 (for short “the Act”) is absolutely illegal and contrary to the scheme of the Act.
9.01. Mr.Bharda, the learned counsel invited our attention to section 46 of the Act. Section 46 reads thus :-
“Section 46. Where a registered person fails to furnish a return under section 39 or section 44 or section 45, a notice shall be issued requiring him to furnish such return within fifteen days in such form and manner as may be prescribed.”
9.02. Thereafter, our attention was invited to section 62 of the Act. Section 62 reads thus:-
“Section 62. (1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgement taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.
(2) Where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue.”
9.03. Thereafter, our attention was invited to section 83. Section 83 reads thus:-
“Section 83. (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 subsection (1).”
9.04. According to Mr.Bharda, the learned counsel for the petitioner, the action under section 83 could not have preceded the action under sections 46 and 62 of the Act. To put in other words, the argument proceeds on the footing that section 83 could have been invoked provided any proceedings under section 62 of the Act were pending on the date of the order of provisional attachment. According to the learned counsel for the petitioner, no notice under section 46 was issued at the relevant point of time when the order of provisional attachment was passed. In such circumstances, referred to above, the learned counsel for the petitioner prays that the impugned orders of provisional attachment deserve to be quashed and set aside.
10.00. On the other-hand, Ms.Maithili Mehta, the learned AGP has vehemently opposed this petition. She submitted that no error much less an error of law could be said to have been committed by the authorities concerned in passing the impugned orders of provisional attachment. According to Ms.Mehta, when the order for provisional attachment came to be passed, the same should be construed as the initiation of the proceedings under section 62 itself. In such circumstances, referred to above, Ms.Mehta, submitted that there being no merit in this writ application, the same be rejected.
11.00. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the authority committed any error in passing the impugned orders of provisional attachment of goods and Bank Accounts under section 83 of the Act?
We have referred to the relevant provisions of the Act i.e. Sections 46, 62 and 83. The scheme of the Act needs to be understood.
11.01. Section 46 referred to above, is with regard to notice to return defaulter. Plain reading of section 46 would indicate that if a registered person fails to furnish a Return under section 39 or section 44 or section 45, a Notice would be issued requiring him to furnish such Return within a period of 15 days in such form and manner as it has been prescribed.
11.02. Section 62 clarifies that if a registered person, to whom a Notice under section 46 has been served, fails to furnish the Return, the proper officer may, thereafter proceed to assess the tax liability of such person to the best of his judgement taking into account all the material available with him and issue the Assessment Order within a period of five years from the date specified under section 44 for furnishing of the Annual Return for the financial year to which the tax not paid relates.
11.03. According to the scheme of the Act, section 83 would come into play only after the necessary action is taken under section 62 of the Act, referred to above. The language of section 83 is plain and simple. Section 83 makes it clear that during the pendency of any proceedings under section 62, if the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue he may, by order in writing, attach provisionally any property including the Bank Account belonging to the taxable person.
11.04. The facts of this case are quite clear. It appears that much before the notice under section 46 came to be issued or rather, much before the assessment could be undertaken under section 62 of the Act, the authority straightway proceeded to pass orders of provisional attachment of the goods as well as two Bank Accounts, referred to above. Such action, in our opinion, cannot be said to be in accordance with law.
11.05. In such circumstances, referred to above, we are of the view that the impugned orders of provisional attachment of the goods as well as the two Bank Accounts deserve to be quashed and the same are hereby quashed and set aside.
At this stage, Ms.Mehta, the learned AGP appearing for the respondents – authorities clarifies that the proceedings under section 62 have already been initiated in accordance with law and they are in progress and the liability of the writ applicant shall be assessed in such proceedings in accordance with law.
Mr.Bharda, the learned counsel for the writ applicant submits that in view of the undertaking filed by his client on oath, his client will continue to deposit Rs.1.50 Crore every month, out of which, Rs.1 Crore (Rupees One Crore only) would be for the current running month’s tax liability towards GST and Rs.50 Lac (Rupees Fifty Lac only) would be towards the outstanding dues of the GST of the writ applicant.
We request the authority concerned to expeditiously finalize the proceedings in accordance with law.
The concerned respondent authority shall act accordingly.
Rule is made absolute.
