The Hon’ble High Court of Madras vide its order dated 16^th February 2022 in the matter of M/s Sree Meenashi Industries Vs. The Additional Chief Secretary/Commissioner of Commercial Tax, Chennai & others in W.P.Nos.3079 & 3083 of 2022 And W.M.P.Nos.3238, 3240, 3246 of 2022, held that the order for provisional attachment of the bank accounts of the petitioners in absence of tangible material for forming such opinion to provisionally attach the current account of the petitioners, exercising the powers under Section 83, shall not stand legal scrutiny and is liable to set aside.

The Petitioners filed the present writ petitions challenging the order dated 20.12.2021 of the respondents for provisionally attaching their current accounts with their respective banks and directing the banks not to allow any debit on behalf of the petitioners from said accounts.

Facts: –

• That as the issue involved in both the matters is same, both the matters were taken up for hearing at the same time.
• That the petitioners are engaged in business and duly registered under Tamil Nadu Goods and Service Tax, 2017.
• That a search under Section 67 of the TNGST was conducted on 24.02.2021 at the premises of the petitioners and according to the revenue, incriminating documents were found showing tax evasion on the part of the petitioners.
• That during the pendency of proceedings under Section 67 for search and seizure, an order dated 20.12.2021 was passed by the respondents invoking Section 83 of the TNGST whereby, the current accounts of the petitioners were provisionally attached and freezed. As per the said order, directions were given to the respective banks of the petitioners, not to allow any debit on behalf of the petitioners from the said accounts.
• That in pursuance of the said order of provisional attachment dated 20.12.2021, the petitioners received a communication dated 30.12.2021 from their respective banks informing that their current account numbers have been freezed and no debit transaction would be allowed till the provisional attachment is lifted by the said authority. Hence, the petitioners being aggrieved filed these petitions.

Petitioners’ Submissions: –

• It was submitted on the behalf of the petitioners that there is no doubt that the respondents are empowered for making an order of provisional attachment of moveable and immoveable properties, including the bank accounts of the assessee under Section 83 of the TNGST Act. However, in the present case there is no material or reason to form an opinion that unless the bank accounts of the petitioners are not attached, the interest of the Revenue cannot be protected.  In absence of any such reasons specifically stated in the order of provisional attachment under Section 83, that order shall not stand legal scrutiny as well as the said communication dated 30.12.2021, issued by the bank authorities.
• That relying on the decision of Supreme Court in M/s.Radha Krishnan Industries Vs. State of Himachal Pradesh & Ors. in Civil Appeal No. 1155 of 2021, it was submitted that the Hon’ble Supreme Court under the heading ‘Summary of findings’ has given detailed mandatory guidelines for invoking Section 83. It was submitted that as per the judgment, the provisional attachment of the property of a taxable person is draconian in nature and the conditions for the valid exercise of the power, must be strictly fulfilled.
• That reliance was placed further on the directions of the Hon’ble Supreme Court in the said judgment that ‘before ordering the provisional attachment, the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, and therefore, it is necessary to do so for protecting the interest of the Government.’ That the said mandatory guidelines, as held by Hon’ble Supreme Court, have not been followed in the present matter.
• It was submitted that taking reference of the said case of Radhakrishnan Industries, this court while rendering the decision in the matter of M/s. Mutharamman & Co. vs. The Principal Additional Director General, Directorate General of GST Intelligence (DGGI), Chennai and others dated 05.10.2021, set aside the provisional attachment order under Section 83 of the Act and given ‘six weeks’ time to the respondents to complete the assessment.
• It was informed that said decision in M/s. Mutharamman & Co, was challenged before the Hon’ble Division Bench of this Court, which while confirming the order of the writ Court, only modified the time limit prescribed by the learned Judge of the writ Court of six weeks, by giving a modification that a show cause notice shall be given by the Revenue to the assessee in these cases within a period of four weeks and the assessee was directed to file an objection.
• It was submitted that in view of the above judgments, as no reason with regard to formation of an opinion, to proceed with provisional attachment under Section 83 of the Act, has been stated. Thus, the order of provisional attachment would not stand legal scrutiny as well as the consequential communication dated 30.12.2021 could not be enforced.

Respondents’ Submissions: –

• On the other hand, it was submitted on the behalf of the respondents that in this case search is followed by proceedings under Section 83, and as per the input supplied to the Commissioner of Commercial Tax, it became expedient to invoke Section 83 and freeze bank accounts of the petitioners, to save/protect the interest of the revenue.
• That on what basis, an opinion has been formed, need not to be revealed under Section 83 of the Act. Further under what circumstances the said judgment of Hon’ble Supreme Court in Radha Krishnan Industries, was passed, has to be looked into.
• It was contended that the petitioner ought not to have come in writ directly before High Court and should have availed remedy available under Rule 159(5) of filing the objections within seven days of the ‘Provisional Attachment of property’. The Commissioner after affording an opportunity of hearing to a taxable person, filing the objections, may order to release the property in FORM GST DRC 23.  However, if such an application is rejected by the Commissioner, then the petitioner can come before the Hon’ble Court by way of Writ.
• Therefore, it was contended on the behalf of the respondents that the petitioners approached the Hon’ble High Court without filing application under Rule 159(5), thus on this ground the writ petition is liable to be rejected as the guidelines given by the Hon’ble Supreme Court in Radha Krishnan Case, may not be applicable to the facts of the present case.

Held: –

• The Hon’ble Court after considering the submissions from the both sides, facts of the case & law applicable observed that the simple language used in Section 83 of TNGST states ‘that if the Commissioner is of an opinion that, for the purpose of protecting the interest of the revenue, he can invoke Section 83 to attach the property provisionally including the bank account of the assessee.’
• Further said Section 83 was interpreted by Hon’ble Supreme Court in the matter of Radha Krishnan Industries (supra) and mandatory guidelines were fixed. That as per the findings of the Hon’ble Supreme Court, Clauses (iv), (v), (vii) and (x) are more relevant for the present case.  In Clause (iv), the Court says that, the power to order a provisional attachment of the property of the taxable person including a bank account is a draconian in nature. Therefore, the conditions, which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled. In clause (v), Before ordering a provisional attachment, the Commissioner must form an opinion on the basis of tangible material, that the assessee is likely to defeat the demand, if any, and that therefore it is necessary so to do for the purpose of protecting the interest of the Government Revenue. In clause (vii), the Court says that the formation of an opinion of the Commissioner under Section 83(1) must be based on the tangible material, bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the Government Revenue. In clause (x), the Court says that, the Commissioner is duty to bound to deal with the objection to the attachment by passing a reasoned order, which must be communicated to the taxable person, whose property is attached.
• It was found that if the above stated clause (iv) is applied to the present case, then without hesitation, it can be concluded that the criterion fixed by the Hon’ble Supreme Court has not been followed while passing the order under Section 83.
• The impugned order merely states that ‘in order to protect the interest of the Revenue and in exercise of the powers conferred under Section 83 of the TNGST Act, I Thiru.K.Phanindra Reddy, I.A.S, Additional Chief Secretary / Commissioner of State Taxes, Chennai – 600 005 hereby provisionally attach the aforesaid account.’ However, on what basis the opinion was formed to invoke Section 83 and what are the tangible material available before him, all these aspects have not been even indicated in the order of provisional attachment.
• It was found that ‘This kind of exercise of power under Section 83, which, in the words of the Hon'ble Supreme Court, is a draconian one, cannot be approved as it does not meet the requirement of fair play and strict adherence of the provisions of the Act as interpreted by the Hon'ble Supreme Court in the judgment cited supra in Radhakrishnan case.
• Further the said decision of Radhakrishnan was relied on by this court in M/s. Mutharamman & Co., case (cited supra) and the provisional attachment order under Section 83 was set aside. However, on appeal being preferred against the said order, the Hon’ble Division Bench only modified the time limit prescribed by the learned judge to complete the assessment.
• It is copious clear from the above that the Commissioner, while exercising powers under Section 83, has to form an opinion based on the tangible material before invoking provisional attachment, and the same must be mentioned in the order itself, to atleast ensure the assessee that the provisions of the Act as interpreted by the Hon’ble Supreme Court have not been violated.
• The Hon’ble Court, as stated above, held that there is no hesitation that the respondents has not followed the mandatory guidelines issued by the Hon'ble Supreme Court in the said judgment in Radhakrishnan Case (cited supra) followed by orders passed by the writ court as referred to above while passing order under Section 83 dated 20.12.2021, making a provisional attachment of the Bank Account of the petitioners in these cases.
• It was found that the arguments made on behalf of the respondents are not maintainable as the petitioner before approaching this Court, filed an application under Rule 159(5) which has not been considered so far. Therefore, on that ground the writ petitions cannot be rejected as non-maintainable.
• It was held that if in these kinds of cases, the Commissioner exercising the powers under Section 83, willing to invoke provisional attachment and passes an order without following the guidelines fixed by Hon’ble Supreme Court in the paragraph 72 of the decision in Radha Krishnan Case, that order can be construed as passed against the dictum of Hon’ble Supreme Court and therefore, on this ground only, those orders can be interfered with by law Courts.
• It was further held that if the assessee without filing an application under Rule 159(5), approaches the High Court to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution, this Court may not entertain the same on the ground of non-exhausting the alternate efficacious remedy available under the Statute.
• The Hon’ble High Court with the above findings held that the impugned order of provisional attachment dated 20.12.2021, shall not stand in legal scrutiny and is liable to be set aside. Further the consequential order informing the petitioner by the Bank authorities dated 30.12.2021 is also set aside.  However, it would be open for the Revenue to invoke Section 83 once again, if they have reasons with tangible materials and records to form an opinion that in the interest of Revenue, such an invocation of Section 83 is required.

 

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