2024(08)LCX0506

Om Prakash Gupta

Versus

Pr. Additional Director General DGGI & Ors

W.P.(C) 11000/2024 decided on 08-08-2024

IN THE HIGH COURT OF DELHI AT NEW DELHI

W.P.(C) 11000/2024, CM Nos.45398/2024 & 45400/2024

OM PRAKASH GUPTA                     .....Petitioner
    Through:     Mr. Ramesh Singh, Sr. Adv. with Mr.
                      Sumit K. Batra, Mr. Manish Khurana,
                      Ms. Priyanka Jindal & Mr. Nanya,
                      Advs.

                Versus

PR. ADDITIONAL DIRECTOR GENERAL
DGGI & ORS.                             .....Respondents
    Through:     Ms. Monica Benjamin & Ms. Naincy
                    Jain, Advs.

CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE SACHIN DATTA

ORDER
08.08.2024

CM No.45399/2024(for exemption)

1. Exemption is allowed, subject to all just exception.

2. The application is disposed of.

W.P.(C) 11000/2024

3. The petitioner has filed the present petition, inter alia, impugning the order dated 28.05.2024 (hereafter the impugned order) passed by the Commissioner under Section 83 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act) provisionally attaching the petitioner’s bank Account No.915020013765104.

4. Mr. Ramesh Singh, learned senior counsel appearing for the petitioner has founded his challenge to the impugned order, essentially, on two fronts. First, he submits that the impugned order has been passed without the respondents initiating any other proceedings and the same is impermissible. He contends that although the summons under Section 70 of the CGST Act were issued but the same was posted after the impugned order was passed. Therefore, no proceedings could have been stated to have commenced on the date of the impugned order.

5. Second, he submits that the impugned order does not comply with the necessary conditions as specified under Section 83(1) of the CGST Act. He submits that one of the necessary conditions to be complied with is that the Commissioner must form an opinion that it is necessary to provisionally attach the property including the bank account in the interest of the Government revenue. He also submits that the same would entail forming an opinion that if the bank accounts were not attached, the interest of the revenue could not be protected. He referred to the Circular (Circular No. CBEC20/16/05/2021-GST/359) dated 23.02.2021 issued by the Central Board of Indirect Taxes & Customs (hereafter CBIC) and drew the attention of this Court to Clause 3.1.3 of the said Circular. The said clause 3.1.3 of the Circular dated 23.02.2021, is set out below:

“3.1.3 For forming an opinion under section 83, it is important that Commissioner must exercise due diligence and duly consider as well as carefully examine all the facts of the case, including the nature of offence, amount of revenue involved established nature of business and extent of investment in capital assets and reasons to believe that the taxable person, against whom the proceedings referred in section 83 are pending, may dispose of or remove the property, if not attached provisionally.”

6. He contended that the impugned order is bereft of any reasoning, which would suggest that the Commissioner has undertaken the exercise of examining the extent of investment in capital of the petitioner to conclude that if the bank accounts were not frozen, the interest of the revenue would not be protected. He further contended that it was necessary for the Commissioner to spell out the reasons for issuing the impugned order. According to him, it is necessary that the impugned order expressly records the reasons to believe as well as the tangible material on the basis of which such belief is formed.

7. We find no merit in the aforesaid contentions. The fact that the summons under Section 70 of the CGST Act was posted immediately after the date of the impugned order does not mean that the proceedings were not commenced prior to transmission of the summons. The summons is dated 20.05.2024 and thus was issued prior to the impugned order.

8. It is relevant to refer to Section 83 of the CGST Act. The same is set out below:

“83. Provisional attachment to protect revenue in certain cases.-

(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).”

9. A plain reading of Section 83(1) of the CGST Act indicates that an order of provisional attachment can be passed where proceedings have commenced under Chapter XII, Chapter XIV or Chapter XV of the CGST Act. Chapter XIV of the CGST Act includes Section 67 to Section 72 of the CGST Act. It is apparent that the summons has been issued under Section 70 of the CGST Act – which falls under Chapter XIV of the CGST Act prior to passing the impugned order.

10. There is no cavil with the proposition that before making an order under Section 83(1) of the CGST Act, the Commissioner must necessarily form an opinion that such an order is necessary to protect the interest of the Government revenue. Further, the said opinion must be based on tangible material.

11. The Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh: (2021) 6 SCC 771 had in the context of provisions of Section 83 of the CGST Act concluded as under:

“76. For the above reasons, we hold and conclude that:

76.1. The Joint Commissioner while ordering a provisional attachment under section 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected under Section 5(3) and an appeal against the order of provisional attachment was not available under Section 107(1).

76.2. The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable.

76.3. The High Court has erred in dismissing the writ petition on the ground that it was not maintainable.

76.4. The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled.

76.5. 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. 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.

76.6. The expression “necessary so to do for protecting the government revenue” implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment.

76.7. The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue.

76.8. In the facts of the present case, there was a clear nonapplication of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal.

76.9. Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards:

(a) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and

(b) An opportunity of being heard.

There has been a breach of the mandatory requirement of Rule 159(5) and the Commissioner was clearly misconceived in law in coming into conclusion that he had a discretion on whether or not to grant an opportunity of being heard.

76.10. The Commissioner is duty-bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attached.

76.11. A final order having been passed under Section 74(9), the proceedings under Section 74 are no longer pending as a result of which the provisional attachment must come to an end.

76.12. The appellant having filed an appeal against the order under section 74(9), the provisions of sub-sections (6) and (7) of Section 107 will come into operation in regard to the payment of the tax and stay on the recovery of the balance as stipulated in those provisions, pending the disposal of the appeal.”

12. There is no requirement that the material on the basis of which the Commissioner has formed an opinion must be included in an order passed under Section 83(1) of the CGST Act. Thus, the contention that the impugned order is vitiated as it does not include all such material is unmerited.

13. It is also contended by Mr. Ramesh Singh that it is not for the petitioner to seek the reasons for passing an order of provisional attachment from the Commissioner as it was incumbent on the Commissioner to indicate all reasons for forming an opinion as required under Section 83(1) of the CGST Act, to the taxpayer. This contention is also without any basis. Whilst, it is necessary that the Commissioner must base its opinion on tangible material that it is necessary to pass an order of provisional attachment of a taxpayer’s assets, and the Commissioner must record its reasons; it is not necessary that the same must be communicated to the taxpayer without the taxpayer asking for the same.

14. In the present case, the impugned order records that the investigation has revealed that the petitioner had made suspicious and fraudulent payments to certain bank accounts and wrongfully availed and passed Input Tax Credit (hereafter ITC) to the extent of Rs.87,54,083/-. The Show Cause Notice dated 20.06.2024 sets out in detail the allegations regarding wrongful availment of the ITC. It is alleged that the petitioner had availed of the ITC from two suppliers namely M/s Brighton Sales Inc. & M/s Caretech System. According to the department, the said suppliers were found to be non-existent. The petitioner allegedly availed of the ITC amount to Rs.87,54,083/- during the relevant period from the said suppliers. The petitioner thus has the knowledge of the allegations that he was required to meet.

15. In view of the above, we find no ground to interfere with the impugned order attaching the petitioner’s bank account. The petitioner is at liberty to seek further reasons from the Commissioner if the petitioner so desires. The petitioner is also at liberty to file objections under Rule 159(5) of the Central Goods and Services Tax Rules, 2017. Needless to state that if the same is filed, the concerned Commissioner shall decide the same in accordance with law.

16. The petitioner has also challenged the issuance of the Show Cause Notice dated 20.06.2024 under Section 74 of the CGST Act on the ground that he had received the intimation dated 05.06.2024 only one day prior to the Show Cause Notice and had replied to the same. However, the same was not considered.

17. Issue notice limited to the said extent.

18. The learned counsel for the respondents accepts notice.

19. Reply, if any, be filed within a period of four weeks from date. Rejoinder, if any thereto, be filed before the next date of hearing.

20. List on 22.10.2024.

VIBHU BAKHRU, J

SACHIN DATTA, J

AUGUST 08, 2024