01.06.2024: Power under Section 83 to attach property is stringent and requires strict compliance with statutory conditions: Bombay High Court

The Bombay High Court in the case of PATIL CONSTRUCTION & INFRASTRUCTURE LTD. vide WRIT PETITION NO. 6278 OF 2024 WITH WRIT PETITION NO. 6279 OF 2024 WRIT PETITION NO. 6280 OF 2024 dated 02.05.2024, has stated that the exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that “it is necessary so to do” for the purpose of protecting the interest of the Government revenue. Power under Section 83 to attach property is stringent and requires strict compliance with statutory conditions. This judgment reinforces the importance of adhering to statutory requirements and procedural fairness when exercising provisional attachment powers under tax laws

Facts of the Case:  The petitioners filed writ petitions seeking to quash attachment orders issued by GST authorities. The attachment order referenced a provisional liability determined by an investigation, stating that the petitioner failed to discharge this liability and was likely to default in paying ultimate tax, interest, and penalty.

Legal Provisions of Section 83 of the CGST Act, 2017: Section 83 of the MGST Act allows the Commissioner to provisionally attach property, including bank accounts, to protect government revenue if deemed necessary. The power to order provisional attachment is stringent and can only be exercised if the Commissioner forms an opinion based on tangible material that such an attachment is necessary.

The Petitioner referred judgment of Supreme Court in the case of M/s Radha Krishan Industries Vs. State of Himachal Pradesh & Ors. where in Court laid down the stringent requirements for exercising the power under Section 83. This includes (1) Formation of opinion by the Commissioner that attachment is necessary (2) Opinion must be based on tangible material indicating the assessee is likely to defeat the demand (3) The necessity to protect government revenue must be proportionate and justified. 

Held that :- The Court held as under:

  • The impugned orders lacked material evidence to justify the necessity of the attachment to protect government revenue.
  • There was non-application of mind by the Joint Commissioner, failing to adhere to the stringent requirements laid down by the Supreme Court in the Radha Krishan Industries case.
  • The petitioners were not provided an opportunity to be heard, violating procedural safeguards under Rule 159(5) of the CGST Rules.
  • The court quashed the attachment orders in FORM GST DRC-22 and the order under Section 83 dated April 5, 2024
  • The court clarified that the GST Authorities could issue a fresh provisional attachment order by strictly following the requirements set out by the Supreme Court.

The complete judgment can be read at 2024 Taxo.online 990

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