The Bombay High Court has held that no provisional attachment under Section 83 of the CGST Act can be made in absence of any specific proceedings pending against such taxable persons.
In the recent case i.e. Kaish Impex Private Limited v. Union of India and ors., The Petitioner- Kaish Impex Private Limited is a Company engaged in the export of perfumes and compound fragrance oil. The Petitioner, in pursuant of its activity of export, had carried out various transactions with different entities. The dispute arose when the respondents initiated an inquiry against an export firm namely M/s Maps Global. The Respondent-authorities suspected that M/s Maps Global was involved in fraudulent availing of Input Tax Credit (ITC), and this Input Tax Credit (ITC) was utilized for payment of export goods. On scrutinizing the bank account of M/s.Maps Global and noticed that an amount of Rs.28,50,000/- was transferred to one M/s.Balajee Enterprises, on 19 June 2019 and 12 July 2019 without any supply of material. Further, the Respondents have allegedly found that M/s. Balajee Enterprises transferred an amount of Rs.1,63,00,000/- to the account of the Petitioner on 17 October 2019. Consequently, the Directorate General of GST Intelligence issued a summons under section 70 of the CGST Act, 2017 to the Petitioner for inquiry against M/s.Maps Global. On the same day, the Directorate General issued a communication to the State Bank of India informing the Bank Manager of proceedings being initiated against the Petitioner and a provisional attachment of bank account is necessary under section 83 of the CGST Act. The Petitioner received a communication from the State Bank of India on 5 November 2019 regarding attachment by the Respondents.
The Petitioner has filed this writ petition challenging this action of attachment under section 83 of the Act by the Respondents.
The Petitioner contended that the action of the Respondents is beyond the power conferred under section 83 of the Act. The contingencies in which an order of provisional attachment can be made are enumerated in section 83 namely, the pendency of proceedings under section 62, 63, 64, 67, 73 and 74 of the Act. However, there were no proceedings initiated or pending against the Petitioner under these sections. Further, the amount transferred by M/s.Maps Global to M/s.Balajee Enterprises which was allegedly transferred by M/s.Balajee Enterprises to the Petitioner on 17 October 2019, it is certain that during this period M/s.Balajee Enterprises could have entered into various other transactions.
Whereas the primary defence of the Respondents is that even if section 62, 63, 64, 67, 73 and 74 mentioned in section 83 of the Act are not referable to the case of the Petitioner, but a summons issued to the Petitioner in pursuant to the inquiry initiated against M/s.Maps Global under section 67 of the Act, is enough to extend its applicability to the Petitioner.
The bench comprising of Justice Nitin Jamdar and Justice M.S. Karnik has observed that Section 83 read with section 159(2) and the form GST DRC-22 show that a proceeding has to be initiated against a specific taxable person, an opinion has to be formed that to protect the interest of Revenue an order of provisional attachment is necessary. The format of the order, i.e. the form GST DRC-22 also indicates that there must be a nexus between the proceedings to be initiated against a taxable person and provisional attachment of bank account of such taxable person. Further, the power to provisionally attach bank accounts is a drastic power and that must be used in the limited circumstances. It is therefore not allowed to make provisional attachment in the absence of any specific proceedings.
Thus it has been held that the order for provisionally attaching the bank account of the Petitioner was without jurisdiction and is liable to be quashed and set aside.
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