GST: Allahabad HC Imposes Cost of Rs. 50,000 on Dept for Arbitrary Attachment without Tangible Material [Read Order]

In a significant ruling, the Allahabad High Court has imposed a cost of Rs. 50,000 on the GST department for the provisional attachment without quoting tangible material in violation of section 83 of the Central Goods and Services Tax Act, 2017.

The petitioner, Mr. Varun Gupta, is a proprietor of M/s. S G Plastic Industries, B-19 Roop Nagar Industrial Area, Loni, Ghaziabad, engaged in manufacturing of plastic granules and its compounding. The petitioner submitted that without the initiation of proceedings under section 74 of the CGST Act, 2017, the bank account of the petitioner was attached under Section 83 of the CGST Act, 2017.The petitioner filed the petition to challenge the attachment of the bank account wherein the same was allowed on the ground that no proceeding under Section 74 of CGST was pending as on the date of attachment. The petitioner argued that, as per order, proceedings under Sections 67 and 74 had been launched against him. However, respondents admitted before that "no proceedings under Sections 74 of the CGST Act, 2017 have yet been initiated.

Justice Surya Prakash Kesarwani observed that “a plane reading of Section 83 of the CGST Act leaves no manner of doubt that firstly, there is necessity of the formation of opinion by the Commissioner; secondly, the opinion must be formed before ordering a provisional attachment; thirdly, the opinion must indicate that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourthly, the order must be in writing for the attachment of any property of the taxable person; and fifthly, observance of the Rules by the Commissioner in regard to the manner of attachment.”

“Each of these components of Section 83 are integral to a valid exercise of power. The statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. The expression "it is necessary so to do" clearly evidences an intent of the legislature that an attachment is authorized not merely because it is expedient to do so but because it is necessary to do so in order to protect interest of the government revenue. The word “necessary” postulates that the interest of the revenue can be protected only by a provisional attachment without which the interest of the revenue would stand defeated. Thus, a more stringent requirement than a mere expediency, has been provided in Section 83,” the Court said.

Imposing a cost of Rs. 50,000 on the department, the Court held that “the exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. This necessarily requires existence of tangible material before the Commissioner so as to enable him to form his opinion for provisional attachment of the property of an assessee/person including bank account, which may indicates a live link to the necessity to order a provisional attachment to protect the interest of the Government Revenue. Each of the aforenoted ingredients of Section 83 must be strictly applied and complied before a provisional attachment on the property of an assesses can be made. In the impugned provisional attachment order there is absence of the aforesaid ingredients of Section 83. Therefore, the impugned order having been passed by the respondent No.2 by arbitrarily exercising his power, can not be sustained. Therefore, it deserves to be quashed.”

To Read the full text of the Order CLICK HERE

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