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Kaish Impex Private Limited vs. UOI (Bombay High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: January 17, 2020 (Date of pronouncement)
DATE: January 25, 2020 (Date of publication)
AY: -
FILE: Click here to download the file in pdf format
CITATION:
S. 83 CGST Act: Power to provisionally attach bank accounts is a drastic power. Considering the consequences that ensue from provisional attachment of bank accounts, the power is not to be routinely exercised. S. 83 confers power on the authorities to provisionally attach bank accounts to safeguard Govt revenue but the same is within well-defined ambit. Only upon contingencies provided therein that the power u/s 83 can be exercised. This power is to be used in only limited circumstances and it is not an omnibus power. If proceedings are launched against one taxable person, bank account of another taxable person cannot be provisionally attached merely based on the summons issued u/s 70 to him.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3145 OF 2019
Kaish Impex Private Limited
(Through its Director – Deepak Kumar
Goyal), 201, 2nd floor, Makers Chamber-5,
Nariman Point, Mumbai, Maharashtra
400 021 .. Petitioner
Versus
1. The Union of India, through the
Secretary, Department of Legal Affairs,
Ministry of Law & Justice, Branch
Secretariat, Aaykar Bhavan, Marine
Lines, Mumbai.
2. The Principal Chief Commissioner
CGST & Central Excise, 115, New
Central Excise Bldg., M.K.Road,
Churchgate, Mumbai.
3. Assistant Commissioner of CGST
Range (IV), 110, Ganges Ink, Building,
L.B.S.Marg, Vikhroli (West), Mumbai-
400 083.
4. Additional Director General,
Directorate General of GST
Intelligence, Bhopal Zonal Unit,
4th Floor, ChinarrIncube Business Centre,
Hoshangabad Road, Bhopal .. Respondents
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Ms.Anjali Jha Manish a/w Mr.Priyadarshi Manish a/w Mr.Sagar
Kasar, for the Petitioner.
Mr.Pradeep S.Jetly a/w Mr.J.B.Mishra, for the Respondents.
CORAM : NITIN JAMDAR &
M.S.KARNIK , JJ.
Date : 17 January 2020.
Oral Judgment : (Per Nitin Jamdar, J.)
Rule. Rule made returnable forthwith. Respondents
waive service. Taken up for final disposal.
2. The Petitioner has challenged the action of the
authorities under the Central Goods and Service Tax, Mumbai of
attaching the Petitioner’s bank account in State Bank of India.
3. The Petitioner-Kaish Impex Private Limited is a
Company incorporated under the Companies Act, 1956. The
Petitioner Company is engaged in the export of perfumes and
compound fragrance oil. The Petitioner is registered under the
Goods and Service Tax Act, 2017 ( the ‘Act’). The Petitioner, in
pursuant of its activity of export, had carried out various transactions
with different entities.
4. The Respondent-Authorities under the Act initiated an
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inquiry against an export firm in Delhi – M/s.Maps Global. The
Respondent-authorities suspected that M/s.Maps Global was
involved in fraudulent availing of Input Tax Credit, and this Input
Tax Credit was utilised for payment of export goods, and later a
refund was sought. The Respondent-authorities scrutinized 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. The Respondent-authorities suspected
these transactions were fictitious and no material was supplied to
M/s.Maps Global. Further, according to Respondent-authorities
M/s.Balajee Enterprises transferred an amount of Rs.1,63,00,000/- to
the account of the Petitioner on 17 October 2019.
5. The Directorate General of GST Intelligence issued a
summons to the Petitioner on 22 October 2019 to attend on 5
November 2019, referring to inquiry against M/s.Maps Global. The
summons stated that the authorities had reason to believe that the
Petitioner had facts and documents material for the inquiry. The
Petitioner was summoned under section 70 of the CGST Act to give
evidence and produce documents in the office of the Directorate
General of GST Intelligence. 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. Accordingly, the Bank Manager
4 6 WP 3145-2019 Or-Ord.e.doc
was directed that no debit be allowed to be made from the said
account or any other account operated by the Petitioner. The
Petitioner received a communication from the State Bank of India on
5 November 2019 regarding attachment by the Respondent-
Authorities. Challenging this action of attachment under Section 83
of the Act, the Petitioner has moved the present Petition.
6. We have heard Ms.Anjali Jha Manish, learned Counsel
appearing for the Petitioner and Mr.Pradeep Jetly, learned Counsel
for Respondents.
7. Ms. Manish, learned Counsel for the Petitioner
contended as follows. The action of the Respondent-authorities is
beyond the power conferred under section 83 of the Act. Only if all
parameters laid down in this Section are satisfied that the action of
attaching a bank account can be taken. 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. No proceedings have been initiated
or pending against the Petitioner under these Sections. Only a
summons under section 70 of the Act was issued to the Petitioner.
Section 70 is not referred to in section 83 of the Act. The action of
provisional attachment is regulated under Rule 159(1) of the CGST
Rules and a format provided for the issuance of such notice.
Assuming for the sake of argument if proceedings are initiated against
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M/s.Maps Global under these sections, provisional attachment can be
of the bank accounts of M/s.Maps Global, and not of Petitioner.
Even according to the Respondents, the amount transferred by
M/s.Maps Global to M/s.Balajee Enterprises was on 12 June 2019
and 19 June 2019 and if it was allegedly transferred by M/s.Balajee
Enterprises to the Petitioner on 17 October 2019, then during this
period M/s.Balajee Enterprises could have entered into various other
transactions. The statements made by the Petitioner have been
corroborated by M/s.Balajee Enterprises. Accordingly to it is prayed
that the impugned order be quashed.
8. Mr.Jetly opposing the Petition submitted as follows. The
power of provisional attachment is conferred to protect interests of
Revenue, and this was a fit case where this power had to be exercised.
Investigation is in progress. Money trail is traced from M/s.Maps
Global to the Petitioner and inquiry is underway. Action is taken
against M/s.Maps Global under section 67 which referred to under
section 83 of the Act. The language of section 83 indicates that
during the pendency of any proceedings (in this case under section
67 of the Act) if a summons is issued under section 70 to further the
inquiry to other taxable persons provisional attachment of bank
account of other taxable persons also is permissible and
contemplated. He submitted that thus the Petition be dismissed.
9. Under the scheme of Act, levy and collection of tax are
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provided for in Chapter III, Assessment is under Chapter XII and
Inspection, Search, Seizure and Arrest are dealt with under Chapter
XIV. Chapter XV which deals with Demand and Recovery. This
chapter provides for provisional attachment under section 83.
Section 83, under which the power is exercised reads thus :-
‘Provisional attachment to protect revenue in
certain cases. — (1) Where during the pendency of
any proceedings under section 62 or section 63 or
section 64 or section 67 or section 73 or section 74,
the Commissioner is of the opinion that to protect 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 in such manner as may be
prescribed’.
Therefore, during the pendency of any proceedings under section 62,
63, 64, 67, 73 and 74, the Commissioner can provisionally attach any
property including bank account belonging to the taxable person. For
this purpose the Commissioner has to form an opinion that it is
necessary to do so for protecting the interest of the government
Revenue. These steps have to be taken in such manner as prescribed.
Rule 159(1) of CGST Rules, 2017 deals with provisional attachment
of property. This Rule reads thus :-
(1) Where the Commissioner decides to attach any
property, including bank account in accordance with
the provisions of section 83, he shall pass an order in
FORM GST DRC-22 to that effect mentioning
therein, the details of property which is attached.
7 6 WP 3145-2019 Or-Ord.e.doc
Rule 159(1) states that when the Commissioner decides to attach any
property including the bank account, he shall pass an order in form
GST DRC-22. Various forms have been appended to the GST Rules
2017. Form GST DRC-22 lays down the format in which the order
has to be issued provisionally attaching the property and the
communication thereof to the financial institution. The form is
reproduced hereinbelow for ready reference.
FORM GST DRC – 22
[See rule 159(1)]
Date:
Reference No.:
To
——————Name
___________ Address
(Bank/Post Office/Financial Institution/Immovable
property registering authority)
Provisional attachment of property under section 83
It is to inform that M/s.———————– (name)
having principal place of business at ————–
(address) bearing registration number as —————
(GSTIN/ID), PAN ———- is a registered taxable
person under the <> Act. Proceedings
have been launched against the aforesaid taxable
person under section <<-------- →> of the said Act to
determine the tax or any other amount due from the
said person. As per information available with the
department, it has come to my notice that the said
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person has a –
<> account
in your << bank/ post office/ financial institution >>
having account no. << A/c no. >>;
or
property located at << property ID & location >>.
In order to protect the interests of revenue and in
exercise of the powers conferred under section 83 of
the Act, I ———————- (name)———————
(designation), hereby provisionally attach the aforesaid
account / property.
No debit shall be allowed to be made from the said
account or any other account operated by the aforesaid
person on the same PAN without the prior permission
of this department.
or
The property mentioned above shall not be allowed to
be disposed of without the prior permission of this
department.
Signature
Name
Designation
Copy to –
The form of the order shows that it is to be addressed to the taxable
person. The Sections under which the proceedings are launched
against such a taxable person are to be referred and then a direction is
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to be issued for not allowing any debit.
10. Section 83 of the Act refers to the pendency of
proceeding under Section 62, 63, 64, 67, 73 and 74. Section 63
deals with the assessment of unregistered persons. Section 64 is
regarding a summary assessment in respect of certain special cases.
Section 67 falls in Chapter XIV and refers to the power of inspection,
search and seizure. Section 73 is in Chapter XV wherein it deals
with the determination of tax not paid or short paid or erroneously
refunded or wrongly availed, utilised for any reason other than fraud
or any willful mis-statement made on suppression of facts. Section 70
confers power on the proper officer to summon any person whose
attendance he considers necessary to give evidence or to produce
documents or any other thing in any inquiry. Such inquiry is
deemed to be a judicial proceeding under Indian Penal Code.
11. The order of provisional attachment of the Petitioner’s
bank account is placed on record by the Respondents by way of
affidavit in reply. It reads as under :-
‘To,
The Bank Manager,
State Bank of India,
Alamal House, Jamnalal Bajaj Marg,
Nariman Point, Mumbai (MH) 400021.
Provisional attachment of property under
section 83.
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It is to inform that M/s. Kaish Impex Pvt. Ltd.
Having principal place of business at 201, 2nd Floor,
MAKER CHAMBER 5, NARIMAN POINT,
MUMBAI – 400 021 having registration number
27AAGCK9660D1ZC and PAN AAGCK9660D is a
registered taxable person under the SGST/CGST
Act. Proceedings have been launched against the
aforesaid taxable person under section 67 & 70 of the
said Act to determine the tax or any other amount
due from the said person. As per information
available with the department, it has come to my
notice that the said person has a current account in
your bank having account no.38530527339.
In order to protect the interests of revenue and in
exercise of the powers conferred under section 83 of
the Act, Ajay Kumar Pandey, Additional Director
General hereby provisionally attach the aforesaid
account / property.
No debit shall be allowed to be made from the said
account or any other account operated by the
aforesaid person on the same PAN without the prior
permission of this department.
Further, it is also requested to inform the
aforementioned Tax Payer about the same after debit
freezing their bank account.’
(emphasis supplied)
This order refers to Petitioner as a registered taxable person. It then
refers to proceedings having been launched against the Petitioner as
aforesaid taxable person under section 67 & 70 of the Act. Thereafter
the authorities have proceeded to issue the order.
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12. The impugned order dated 22 October 2019 proceeds
on the assertion that proceedings have been launched against the
Petitioner under section 67 section 70 of the Act. As far as section
67, i.e. search is concerned, it is an uncontroverted position that no
proceedings have been initiated against the Petitioner under section
67 of the Act. On the date of provisional attachment of the bank
account, only a summons under of the Act was issued to the
Petitioner. Section 70 is not mentioned in Section 83 of the Act. No
proceedings were pending against the Petitioner under section 62,
63, 64, 73 and 74 of the Act. Thus the Petitioner contends that
power under section 83 could not have been invoked against the
Petitioner.
13. 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, since a summons is
issued to the Petitioner in pursuant to the inquiry initiated against
M/s.Maps Global under section 67 of the Act, by the issuance of
summons the proceedings get extended to the Petitioner also.
14. The analysis of section 83 of the Act will show that such
interpretation is not permissible and not contemplated by the
legislature. Section 83 read with Rule 159(1), and the form GST
DRC-22, lay down a scheme as to how provisional attachment in
certain cases is to be levied. Section 83 though uses the phrase
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‘pendency of any proceedings’, the proceedings are referable to
section 62, 63, 64, 67, 73 and 74 of the Act and none other. The
bank account of the taxable person can be attached against whom the
proceedings under the sections mentioned above are initiated.
Section 83 does not provide for an automatic extension to any other
taxable person from an inquiry specifically launched against a taxable
person under these provisions. 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 specifies the particulars of a registered taxable person
and which proceedings have been launched against the aforesaid
taxable person indicating a nexus between the proceedings to be
initiated against a taxable person and provisional attachment of bank
account of such taxable person.
15. Power to provisionally attach bank accounts is a drastic
power. Considering the consequences that ensue from provisional
attachment of bank accounts, the Courts have repeatedly emphasized
that this power is not to be routinely exercised. Under Section 83,
the legislature has no doubt conferred power on the authorities to
provisionally attach bank accounts to safeguard government revenue,
but the same is within well-defined ambit. Only upon contingencies
provided therein that the power under section 83 can be exercised.
13 6 WP 3145-2019 Or-Ord.e.doc
This power is to be used in only limited circumstances and it is not an
omnibus power.
16. It is therefore not possible to accept the submission of the
Respondents that even though specified proceedings have been
launched against one taxable person, bank account of another taxable
person can be provisionally attached merely based on the summons
issued under section 70 to him.
17. In view of our discussion as above, we hold that the order
dated 22 October 2019 provisionally attaching the bank account of
the Petitioner was without jurisdiction and is liable to be quashed and
set aside.
18. The Petitioner also advanced various contentions to
demonstrate how the Petitioner is not involved in the money trail or
is not guilty of the offences under the Act. We do not have to go into
that question because of our conclusion of the absence of power with
the Authorities to provisional attach the bank account of the
Petitioner in the facts.
19. The Petition succeeds. Rule is made absolute in terms of
prayer clause Para 21(i), (ii) and (iii) of the provisional attachment on
the bank account specified in the prayers clause stands lifted. The
concerned bank authorities will act upon the same. All parties to act
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on the authenticated copy of the order.
20. At this stage, Mr. Jetly, the learned Counsel for the
Respondents prays that this direction is stayed for some period. The
mandate we have issued will come into effect two weeks after the
order is uploaded on the server of this Court.
M.S.KARNIK, J. NITIN JAMDAR, J.

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