The Hon’ble High Court of Gujarat vide its order dated 19.10.2022 in the matter of Conceptial Trade Vs. State Of Gujarat in R/Special Civil Application No. 7687 of 2022, set aside the attachment notice issued for provisionally attaching the bank account of the assessee, for the reason that there was no proceeding pending against the assessee under Section 62, 63, 64, 67 Or Section 73 Or Section 74 at the time of attachment under Section 83 of Act.

The Petitioner filed the Special Civil Application before the Hon’ble High Court under Article 226 of the Constitution praying for setting aside the attachment notice dated 06.01.2022 issued under Section 83 of the CGST Act, 2017 by the Assistant Commissioner of State Tax, Unit 16, Ahmedabad.  Further it was prayed to de-freeze bank account no. 10077040495 in IDFC First Bank, Kandivli (West), Mumbai, standing in the name of the petitioner and also to set aside the summons dated 21.02.2022 issued under Section 70(1) of the CGST Act.

Facts of the Case: –

• The petitioner is engaged in the business of trading of products such as garments, footwear, leather accessories is located and carries business at Mumbai.
• The petitioner wanted to purchase certain goods from One M/s Raja Traders situated at Ahmedabad and for that purpose the petitioner paid an amount of approximately Rs. 20 lakhs as advance. However, the said goods were never received nor advance amount paid to M/s Raja Traders was returned.
• That the Assistant Commissioner of Sales Tax, Unit -16, Ahmedabad issued a provisional attachment order dated 06.01.2022 in Form GST DRC -22 under Section 83 of the CGST Act and Gujarat Goods and Service Tax Act, 2017 read with rule 159(1) of the CGST rules addressed to Branch Manager, IDFC First Bank, Kandivali (West) branch, whereby the bank account of the petitioner was ordered to be attached. It was alleged in the said notice that M/s. Raja Traders and its syndicate availed GST refund fraudulently and that there was no transaction of sale or purchase with the petitioner though an amount was transferred by M/s. Raja Traders in the bank account of the petitioner with an intention to defraud the Government revenue.  Thereafter, the respondent authority on the same grounds as mentioned in the provisional attachment order dated 06.01.2022, issued summons dated 21.01.2022 under Section 70(1) of the CGST and GGST Act, 2017 upon the petitioner to appear in person before him.  Aggrieved of the action of respondents, the petitioner has moved the present writ application.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that the impugned notice is without jurisdiction as the petitioner operates from Mumbai, Maharashtra. Further referring to Section 83, it was submitted that provisional attachment is permitted when proceedings under either of the Sections 62, 63, 64, 67 or sections 73 or 74 is pending.
• Reliance was placed on the decision of the Hon’ble Court in Pranit Desai vs. Additional Director General, DGGI [2019 (30) GSTL 396 (Guj.)], to submit that for Provisional attachment, there must be some material on record, to indicate that the assessment officer had formed an opinion on such basis. Reliance was also placed on the decision of Valerius Industries v. Union of India [2019 (30) GSTL 15 (Guj)].
• Besides, reference was made to the decision of the Hon’ble Court in Pranit Desai vs. Additional Director General, DGGI [2019 (30) GSTL 396 (Guj.)] to submit that for provisional attachment, there must be some material on record, to indicate that the assessment officer had formed an opinion on such basis. Another decision of Jai Ambey Filament Pvt. Ltd. vs. Union of India [2021(44) GSTL 41 (Guj)] was referred, wherein it was held that ‘the subjective satisfaction needed for exercise of powers under section 83 should not be based on imaginary grounds but there must be available credible opinion that attachment was necessary’.

Respondent's Submissions: –

• It was submitted on the behalf of the respondents that it came to the knowledge of the respondent authority that certain persons had created bogus companies and firms in the name of their relatives and they appointed themselves as directors and fraud was practised in respect of refund amount of Rs. 29 crores. Various companies were referred which according to the respondents were engaged in such fraud and availing the credit and that they were not carrying out any business activities.
• That the search operation of M/s Raja Traders was carried out on 28.12.2021 to 31.12.2021 and various irregularities and illegal activities were highlighted including that no books of accounts were found at the registered office of M/s. Raja Traders and that the proprietor thereof was not known to anybody, its registration was also cancelled. Further it came to the knowledge from the bank account of the M/s Raja Traders that it had received an amount of Rs.19,95,000/- from one Profusion Traders Pvt. Ltd. on 22.12.2011 at its Induslnd Bank Account and Rs. 20,00,000/- was transferred on the same day in the IDFC Bank account of the petitioner.  Thus, on the basis of such facts a notice was issued under section 83 and action of freezing the bank account of the petitioner was taken.

Held: –

• The Hon’ble Court after considering the submissions made, fact of the case and law applicable, found that it appears that the contention of the petitioner that amount was paid by the petitioner to M/s. Raja Traders for purchase of goods are contrary to the facts recorded in the impugned order dated 06.01.2022 issued under section 83 of the CGST Act.  Further the petitioner came to know about the impugned order when the petitioner was informed by its bank.
• It is to be noted that the M/s Raja Traders is situated at Ahmedabad and is registered under the CGST Act and proceedings under Section 67(2) of the CGST Act, have been initiated against it to determine the tax or any other amount due from it. The respondent authority received the information the GST number was used for bogus billing activity without actual movement of goods as well as to generate and transfer the amount in violation of the provisions of CGST Act and the petitioner was found to be a part of the syndicate who claimed and availed GST refund fraudulently without any business transaction like sale/purchase by transferring the amount in the bank account.
• Thereafter, the Hon’ble Court referring to the law stated in Section 83, found that under this section power is available to provisionally attach the property including the bank account which can be exercised by the competent authority to protect the interest of the Government revenue. However, this section can be invoked only when there is any proceeding pending under Sections 62, 63, 64, 67, 73 or 74 of the Act.  And if the proceedings under aforesaid sections are pending, the power under section 83 may be exercised.
• The Hon’ble Court referring to the decision of Hon’ble Supreme Court on the issue in the matter of Radha Krishan Industries vs. State of HP [(2021) 6 SCC 771], found that said decision was prior to 01.01.2022 when Section 83 was amended, however, after the amendment there was no change as to requirement of pendency of proceedings under any of the aforesaid sections, for invocation and exercising powers under Section 83(1) of the Act. Therefore, the ratio of the said decision that ‘there must be pendency of proceedings’, would be applicable to post amended section also.
• It was found by the Hon’ble Court that the pendency of the proceedings is therefore sine qua non for exercise of powers of provisional attachment. However, earlier section 83 could be invoked only during pendency of certain proceedings, now it can be invoked ‘after initiating proceedings under the Chapters mentioned therein.’ The fundamental requirement remains valid that there must be proceeding pending before the section could be invoked and provisional attachment could be acted upon.
• That in the instant matter there was no proceeding pending at the time of issuance of impugned notice dated 06.01.2022. The summons under Section 70(1) issued in the matter were issued only on 21.01.2022.  Thus, the very invocation of the powers and issuance of order dated 06.01.2022 was in absence of any proceeding initiated and the same could not have been exercised.  The impugned order provisionally attaching the bank account of the petitioner is illegal and, on this ground only, is liable to be set aside.

The Hon’ble Court with the above findings allowed the writ petition in part by setting aside the impugned attachment order dated 06.01.2022, issued by the respondent authority.  The respondent authorities may continue to proceed further pursuant to the summons dated 21.01.2022 and are at liberty to consider imposing the provisional attachment under section 83 of the CGST Act in accordance with law.