[Ref: In the matter of Pranit Hem Desai vs Additional Director General on 28th August, 2019 before DB of Gujarat High Court]
It is submitted that for the purpose of passing an order of provisional attachment under Section 83 of the Act, the pendency of the proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74 is a must. In the absence of any such pending proceeding, there cannot be any order of provisional attachment under Section 83 of the CGST Act, 2017.
The DB of Gujarat High Court in Pranit Hem Desai vs Additional Director General on 28th August, 2019 observed that power u/s 83 should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.
In the aforesaid matter, the Court ordered that ‘all the six writ applications succeed and are hereby allowed. The orders of provisional attachment of the bank accounts of the writ applicants are hereby quashed and set aside.’
Facts in the aforesaid matter:-
The Petitioner submitted that for the purpose of passing an order of provisional attachment under Section 83 of the Act, it was earlier shown that the proceedings under Section 74 of the Act had been initiated and those were pending. According to the petitioner, the same was altogether not correct. It was submitted that as soon as it was brought to the respondent that no proceedings under Section 74 had been initiated, and therefore, there could not have been any provisional attachment under Section 83 of the Act instead of passing an appropriate order lifting the provisional attachment, the respondent went to the extent of correcting its mistake by issuing a corrigendum. By issuing a corrigendum, the respondent clarified that instead of Section 74, Section 67 should be read. According to petitioner, this is not permissible in law. To put it in other words, such corrigendum is not tenable in law.
The second submission of the Petitioner is that it is only the Commissioner who can pass an order of provisional attachment under Section 83 of the Act. In the case at hand, the impugned order of provisional attachment under Section 83 has been passed by the Additional Director General DGGI AZU, Ahmedabad.
The Petitioner further submitted that even if the corrigendum is held to be legal and valid, no proceedings under Section 67 of the Act were pending as on the date the order of provisional attachment under Section 83 of the Act came to be passed. Petitioner tried to develop this argument further by submitting that no goods were seized from the premises of the writ applicants. The proceedings under Section 67 of the Act could be said to be pending only if the goods are seized from the premises of the writ applicants.
The Petitioner, in the last, submitted that Section 83 of the Act can be invoked for the purpose of passing a provisional attachment provided the Commissioner is subjectively satisfied on the basis of the materials on record that it is necessary to do so to protect the interest of the government revenue. Therefore, the subjective satisfaction that the interest of the government revenue needs to be protected is of prime importance. Petitioner submitted that having regard to the materials on record, the interest of the government revenue could be said to be completely secured.
The Respondent submitted that there is no merit in the submission canvassed on behalf of the writ applicant for the mistake earlier committed by the respondent could not have been corrected by way of a corrigendum. It is further submitted that having realized that the proceedings under Section 67 of the Act were pending and not under Section 74, the corrigendum was immediately issued. No fault can be found with such a corrigendum. It is also further submitted that the respondent is equal in rank with the Commissioner, and therefore, it cannot be argued that the Additional Director General DGGI AZU had no authority to invoke Section 83 of the Act. The third submission of Ms. Mehta is that cogent reasons have been assigned by the respondent No.1 in the order overruling the objections dated 30th April 2019.
Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that Hon’ble Court has considered is whether the respondent was justified in invoking Section 83 of the Act for the purpose of passing an order of attachment of the bank accounts. Accordingly, the DB of Gujarat High Court in the said matter observed in the Para No. 28 & 29 as under-
“28. Section 83 of the State GST Act empowers the Assessing Authority to make a provisional attachment of any property of the assessee during the pendency of any proceeding for the assessment or reassessment of any turnover, even though there is no demand outstanding against the assessee, if he is of the opinion that it is necessary to do so to protect the interest of the revenue. This provision has been made, in our opinion, in order to protect the interest of the revenue in cases where the raising of demand is likely to take time because of the investigations and there is apprehension that the assessee may default the ultimate collection of the demand. In other words, Section 83 gives a power to be exercised during the pendency of any proceeding for assessment or reassessment, so that the assessee may not fritter away or secrete his resources out of the reach of the Commercial Tax department when the assessment or reassessment is completed. The expression “for the purpose of protecting the interest of the revenue” occurring in Section 83 of the Act is very wide in its meaning. Further, the orders of provisional attachment must be in writing. There must be some material on record to indicate that the Assessing Authority had formed an opinion on the basis thereof that it was necessary to attach the property in order to protect the interest of the revenue. The provisional attachment provided under section 83 is more like an attachment before judgment under the Code of Civil Procedure. It is a liability on the property. However, the power conferred upon the Assessing Authority under Section 83 is very drastic, far reaching power and that power has to be used sparingly and only on substantive weighty grounds and for valid reasons. To ensure that this power is not misused, no safeguards have been provided in the Section 83. One thing is clear that this power should be exercised by the Authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and circumspection. It should not be exercised unless there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of his property with a view to thwarting the ultimate collection of the demand. Moreover, attachment should be made of the properties and to the extent it is required to achieve the above object. It should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.
29. The Bombay High Court in Gandhi Trading v. Asst. CIT 3 reported in (1999) 239 ITR 337 Bom. has opined that the attachment should be made, as far as possible, of the immovable properties if that can protect the Revenue. The attachment of bank accounts and trading assets should be resorted to only as a last resort because, the attachment of the bank accounts of the assessee would paralyse the functions and business of the assessee. The Authority, therefore, should exercise the power conferred upon him under Section 83 of the Act with circumspection and fairly and reasonably. No hard and fast rule can be laid down as to how and under what circumstances the power under Section 83 can be invoked by the Authority. The discretion conferred on the Authority shall be brought to bear having regard to the facts and circumstances of each case. It is not permissible for the Authority to equate the provisional attachment envisaged under Section 83 of the Act with attachment in the course of the recovery proceedings.
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