Case Law Details

Case Name : Formative Tex Fab Vs State of Gujarat (Gujarat High Court)
Appeal Number : R/Special Civil Application No. 13559 of 2021
Date of Judgement/Order : 21/10/2021
Related Assessment Year :

Formative Tex Fab Through Its Partner Ratan Kumar Saraf Vs State of Gujarat (Gujarat High Court)

HC held that continuing the attachment after completion of one year is violative of provisions of Section 83 of the CGST / GGST Act, 2017. HC held that State cannot insist on continuing with something which is impermissible under the law.

HC disposes petition with the word of caution to the GST Department that the statutory provision needs to be complied with very strictly and stringently. There must not be any requirement for the Taxpayers to approach this Court for compliance of the provisions of law. If there are statutory remedies available, they may take recourse to, however, the State cannot insist on continuing with something which is impermissible under the law.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. This writ petition is preferred under Article 226 of the Constitution of India seeking direction against respondent No.4 to release the provisional attachment of the property as under Section 83 of the Central Goods and Services Tax Act (hereinafter be referred to as the “CGST Act”) on the ground that continuing the attachment after completion of one year is violative and dehors the provisions of Section 83 of the CGST / GGST with the following prayers:-

a) to direct the respondent no. 04 to release the provisional attachment of the property as the period of one year as prescribed in Sub-Section (2) of Section 83 has been elapsed from the date of provisional attachment u/s 83 of the CGST Act or GGST Act vide From GST DRC-22.

b) To issue order(s), direction(s), writ(s) or any other relief(s) as this Hon’ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice;  

c) To award costs and incidental to this application be paid by the Respondents.

2. This Court on 22.09.2021 issued the urgent notice and affidavit-in-reply has been filed by the Assistant Commissioner of State Tax -1, who has denied all the allegations made in the petition. According to him, the issue in question pertains to the A.Y. 2017-2018 and 2018-2019 and the provisions of the Goods and Service Tax Act, 2017 (hereinafter be referred to as the “GST Act”) would prevail by the respondent-authority under Section 74 of the GST Act on 06.09.2021 and has issued DRC-7.

2.1 It is contended in the affidavit that the respondent – authority has lifted the bank attachment on 29.01.2021 and necessary steps had been initiated to issue of DRC-23 which pertains to lifting of the attachment for immovable property as the statutory period prescribed in Section 83 has already elapsed. It is further his say that DRC-7 is appealable and the petitioner is at liberty to prefer appeal under Section 107 of the GST Act. It is contended that he has allegedly carried out billing transaction without actual movement of the goods. The authority has also investigated the transaction of the petitioner with Shivani Trends Private Limited and Vaidehi Trends Private Limited which are under the cloud. There are various disputed questions of facts which the Court may not adjudicate. It is further contended that the dues of the petitioner – firm is to the tune of Rs.1.85 Crore and noting the provisions of Section 90 of the GST Act, the authority has considered the petitioner’s liability.

Provisional attachment after expiry of one year breaches Section 83 provisions of CGST Act

2.2 The respondent – authority has contended in the affidavit- in-reply especially in para-9 which reads as under:-

“9. I say and submit that, the authorities hereby request for bank guarantee as the amount of tax dues are huge and legally the petitioner considering the provision of section 90 becomes liable but merely because DRC-7 is issued, the authorities would not be in position to attach the property of the petitioner and hence, the petitioner furnish a bank guarantee if the Hon’ble Court deem fit and appropriate.”

3. We have heard learned advocate Mr.Avinash Poddar for the petitioner and learned Assistant Government Pleader Ms.Maithili Mehta for the respondent – State.

4. The aggrieved petitioner is before the Court for continuation of the provisional attachment of the property. The provisional attachment order passed by the respondents whereby the petitioner’s bank account before expiry of the mandatory period of one year prescribed under Sub Section (2) of Section 83 of the CGST Act.

5. The petitioner is partnership firm duly registered under the GST Act having principal place at Surat. It is engaged in manufacturing various knitted fabrics and majorly deals in exports. The summons had been issued under Section 70 by respondent No.4 on 30.06.2020 where the attachment was sought upto 02.07.2020.

6. It is the grievance of the petitioner that on 23.06.2020, respondent No.4 issued notice in the form of GST DRC-01A without considering the reply of the petitioner.

7. On 24.07.2020, vide Form GST DRC-22, respondent No.4 has provisionally attached the two properties namely factory premises and residential premises of the petitioner situated at B­2/28, Hojiwala Industrial Estate, Sachin, Palsana Road, Surat and M-81, Someshwar Enclave, Vesu, Surat respectively. The factory premises is already mortgaged with the Kotak Bank and the residential premise is also mortgaged with Axis Bank. They are not owned by the firm but, owned by Mr.Ratanlalkumar Saraf and Lata Ratanlal Saraf which is property of the partners and not of the firm.

8. The petitioner approached this Court by way of Special Civil Application No.9527 of 2020 praying to quash and set aside the GST DRC-01A and the order of the provisional attachment in the form of GST DRC-22 dated 24.07.2020.

The Court vide order dated 20.08.2020 quashed and set aside the Form GST DRC-01A dated 23.07.2020 and directed respondent No.4 to initiate fresh proceedings. However, the Court did not disturb the order of provisional attachment passed on 24.07.2020. It is further grievance of the petitioner that respondent No.4 had been directed to initiate fresh proceedings which should have issued in the form of GST DRC-01A instead he chose to issue notice in the form of GST DRC-01A. On 25.08.2020, the summons has been issued under Section 70 of the GST Act where certain documents have been called for. The petitioner again approached this Court by way of Special Civil Application No.11299 of 2020 aggrieved by the action of respondent No.4 regarding issuance of the notice in the form of GST DRC-01. This, according to the petitioner, was contradictory to the order passed in Special Civil Application No.9527 of 2020. The fresh Form of GST DRC-01A was issued on 08.09.2020 during the pendency of the proceedings.

10. This Court, on 16.09.2020, directed respondent No.4 to look into the representation dated 26.08.2020 and take a decision within a period of 15 days. The bank account of the petitioner has been maintained at the Kotak Bank, where provisionally cash credit account, current account and fixed deposits had been attached. The petitioner approached this Court by way of Special Civil Application No.14059 of 2020. In the third round of litigation, this Court had quashed and set aside the Form GST DRC-22 dated 23.09.2020.

11. It appears that there is challenge to the order of the assessment which has been passed without filing any appeal on the ground that the order is cryptic and challenge is made on the ground of non-reasoned order. The Court is not rightly concerned with the same as the separate petition had been preferred.

12. The short question raised before this Court in the petition, is continuation of the attachment beyond the period of one year in contravention of the provisions of Sub Section (2) of Section 83 of the CGST Act. It is not in dispute that the petition has been preferred on 23.09.2021 and the provisional attachment order had continued where the Assistant Commissioner of Sales Tax had directed to restore provisionally attached property under Section 83 of the CGST Act. The order speaks thus:-

“Restoration of Provisionally attached property under Section 83

Please refer to the attachment of property: M-81, SOMESHWARA ENCLAVE, VESU, SURAT. Attached vide above referred order to safeguard the interest of revenue in the proceedings launched against the person. As DRC – 07 order has been issued dated 06-09­2021 and tax liability is determined; therefore, provisional attachment on the property of dealer should be lifted. Therefore, the said property may be restored to the person concerned.”

13. As the cause is no longer surviving and the provisional attachment made does not survive any longer by virtue of the order dated 23.09.2021, the petition is being disposed of with the word of caution to the respondents that the statutory provision needs to be complied with very strictly and stringently. There must not be any requirement for the parties to approach this Court for compliance of the provisions of law. If there are statutory remedies available, they may take recourse to, however, the State cannot insist on continuing with something which is impermissible under the law.

14. Despite repeated inquiries from the petitioner, learned advocate for the petitioner chooses not to insist for any amount of cost and, therefore, the Court has resisted in imposing cost in this matter which otherwise is a fit case requiring imposition of the cost. Petition is accordingly disposed of.

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