Bombay High Court quashes GST bank
account attachment, demands stricter compliance with legal standards
By Yogesh Verma (CS/LLB) / 2 min read / GST Caselaw
Case Title:
Patil Construction & Infrastructure Ltd. vs. The Commissioner of State Tax
& Ors.
Case No.: Writ Petition No. 6278 of 2024
(with related cases WP Nos. 6279 and 6280 of 2024)
Date of Order: 2nd May
2024
Court: High Court of
Judicature at Bombay
Judges: Hon'ble Mr.
Justice B. P. Colabawalla and Hon'ble Mr. Justice Somasekhar Sundaresan
Facts of the Case:
Patil Construction & Infrastructure Ltd. (the
petitioner) filed a writ petition challenging the provisional attachment of its
bank accounts by the GST authorities. The attachment was made through an order
in FORM GST DRC-22 dated 5th April 2024, under Section 83 of the Maharashtra
Goods and Services Tax (MGST) Act, 2017, read with the Central Goods and
Services Tax (CGST) Act, 2017, and Rule 159 of the CGST Rules.
The GST authorities alleged that the petitioner had failed
to discharge its tax liabilities without any valid justification. Therefore,
the Joint Commissioner of State Tax-II, Pune Division, believed that there was
a strong likelihood that the petitioner would default in paying the ultimate tax,
interest, and penalties that may arise after the completion of the ongoing
assessment proceedings. This led to the provisional attachment of all the
petitioner’s bank accounts to secure the interests of government revenue.
Submission by the Petitioner:
1.
Challenging
the Legality of the Attachment:
The petitioner argued that the impugned attachment order lacked any substantive
material to justify the need for provisional attachment under Section 83. It
contended that the attachment order did not meet the statutory requirements,
particularly the necessity of proving that such an attachment was essential for
protecting government revenue. The petitioner emphasized that Section 83 could
only be invoked when there was credible evidence that the taxpayer was likely
to defeat the government's revenue claims.
2.
Citing
Precedents:
The petitioner relied on the Supreme Court’s ruling in Radha Krishan
Industries vs. State of Himachal Pradesh & Ors. (2021), which held that
provisional attachment under Section 83 is a draconian power that must be used
with extreme caution. The petitioner argued that the Commissioner must base
such an attachment on tangible material that establishes a real risk to
government revenue. In this case, the petitioner contended that no such
material or justification had been presented.
Submission by the Respondent:
1.
Necessity
of Provisional Attachment:
The respondent, represented by Additional Government Pleader Ms. S.D. Vyas, defended
the attachment, arguing that it was necessary to protect government revenue.
The respondent maintained that the petitioner’s failure to discharge its tax
liabilities, coupled with the ongoing investigation, justified the use of
Section 83 to prevent any attempt by the petitioner to evade payment.
Court's Findings and Judgment:
1.
Review of
the Provisional Attachment:
The court carefully examined the attachment order issued by the GST
authorities. It found that the order did not provide adequate material to
substantiate the claim that provisional attachment was necessary to protect
government revenue. The court noted that Section 83 can only be invoked when
the Commissioner forms an opinion based on credible material that the taxpayer
is likely to defeat the demand. In this case, the court found that the
attachment order was bereft of any such evidence.
2.
Application
of Radha Krishan Industries Judgment:
Referring to the Supreme Court's ruling in Radha Krishan Industries, the
court reiterated that provisional attachment under Section 83 is a drastic
measure, and its exercise must be strictly regulated. The attachment of bank
accounts or other assets should only occur if the Commissioner is satisfied
that it is essential to secure government revenue. The court emphasized that
the Commissioner’s opinion must be based on tangible and objective material.
The court found that the GST authorities had failed to meet this standard in
the present case.
3.
Quashing
of the Attachment Orders:
In light of the lack of material justification, the court quashed the
provisional attachment orders dated 5th April 2024 (in FORM GST DRC-22) and the
underlying order issued under Section 83 of the MGST Act. The court concluded
that the impugned orders were illegal and did not conform to the statutory
requirements.
4.
Liberty to
Issue Fresh Orders:
The court clarified that this judgment did not preclude the GST authorities
from issuing a fresh provisional attachment order if they complied with the
legal requirements laid down in the Radha Krishan Industries case. The
authorities were instructed to ensure that any future attachment orders are
backed by substantial material and are necessary to protect government revenue.
Conclusion:
The High Court of Bombay allowed the writ petition, quashing
the provisional attachment of the petitioner’s bank accounts. The court ruled
that the attachment order lacked the necessary justification under Section 83
and did not meet the statutory requirements for protecting government revenue.
The authorities were granted the liberty to issue a fresh attachment order if
they could substantiate the need for such action with tangible material
evidence.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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