PROVISIONAL ATTACHMENT UNDER GST- DOCTRINE OF PROPORTIONALITY
Shubham Budhiraja[1]
|
WHETHER WRIT PETITION MAINTAINABLE AGAINST ORDER OF
PROVISIONAL ATTACHMENT |
YES, if
order is without application of mind or against principle of natural justice
or without jurisdiction |
|
WHETHER ORDER OF PROVISIONAL
ATTACHMENT CAN BE USED TO GET SPEEDY RECOVERY OF STATE REVENUE? |
NO, Provisional attachment is based on Proportionality doctrine |
The GST Fraud case initiated against GM Power-tech for issuances of fake invoices to various companies including M/S Radha Krishnan (Appellant). The joint commissioner thereafter in exercise of its delegate powers issued Notice under Section 83 for provisional attachment of bank account of appellant which was challenged by appellant before HC in Writ petition which was dismissed due to availability of alternative remedy in GST Act. The Supreme Court held that exercise of power by Joint Commissioner under Section 83 provisional attachment was in violation to provisions of law and against principles of Order 38 Rule 5 and without application of mind and thus Writ was maintainable. Hence, HC committed error in law in refusing the Writ
CONCLUSION
(I)
Order 38 Rule 5 CPC provides for provision of
Attachment before Judgment
(II)
Section 83 of CGST Act, 2017 are on same
principle provides for Provisional attachment of any property of assesse by
commissioner for protecting interest of Govt. Revenue
(III)
Section 83 is based on Proportionality
doctrine – “ for the purpose of,
necessity to do so”
(IV)
Provisional attachment is based on test of
Tangible Material
(V)
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
(VI)
The Opinion to passes order for Provisional
attachment has to be on basis of material on record and based on
proportionality doctrine
(VII)
Mere for expediency in revenue recover is not a
ground for which provisional attachment to be passed
(VIII)
Provisional attachment is draconian in nature
(IX)
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
(X)
Since power to provisional attachment is
delegated to Joint commissioner under Section 5(3), hence there is no appeal
available to Appellate authority under Section 107(1) because joint
commissioner is not performing functions of commissioner but of delegate.
Hence, Writ petition was maintainable
(XI)
Even where alternative remedy is available, writ
can be maintainable where
(a)
Matter involved is of Fundamental rights
(b)
Matter involved is of Natural Justice,
non-application of mind
(c)
Matter involved absence of jurisdiction / excess
of jurisdiction
WRIT PETITION UNDER ARTICLE 226 & EXCEPTION
TO RULE OF ALTERNATE REMEDY
|
Case name |
Relevant Remarks |
|
Assistant Commissioner (CT)
LTU, Kakinada and others v Glaxo Smith Kline Consumer Health Care Limited,
AIR 2020 SC 2819 |
There are certain exceptions to
the “rule of
alternate remedy” include
where, -
the statutory authority has not acted in
accordance with the provisions of the law or -
acted in defiance of the fundamental
principles of judicial procedure; or -
has resorted to invoke provisions, which are repealed;
or -
where an order has been passed in violation of
the principles of natural justice |
|
Whirlpool Corporation v
Registrar of Trademarks, Mumbai, (1998) 8 SCC 1 |
Rule of alternative remedy not to operate
as a bar in at least three
contingencies, namely, where the writ petition has been filed for the -
Enforcement of any of the Fundamental Rights or -
There has been a violation of the principle of natural
justice or -
Order or proceedings are wholly without jurisdiction or -
the vires of an Act is challenged |
(I)
The power under Article 226 of the Constitution
to issue writs can be exercised not only for the enforcement of fundamental
rights, but for any other purpose as well
(II)
The High Court has the discretion not to
entertain a writ petition. One of the restrictions placed on the power of the
High Court is where an effective alternate remedy is available to the aggrieved
person
(III)
Exceptions to the rule of alternate remedy arise
where
(a)
the writ petition has been filed for the
enforcement of a fundamental right protected by Part III of the Constitution
(b)
there has been a violation of the principles of
natural justice
(c)
order or proceedings are wholly without
jurisdiction;
(d)
the vires of a legislation is challenged
(IV)
An alternate remedy by itself does not divest
the High Court of its powers under Article 226 of the Constitution in an
appropriate case though ordinarily, a writ petition should not be entertained
when an efficacious alternate remedy is provided by law
(V)
When a
right is created by a statute, which itself prescribes the remedy or procedure
for enforcing the right or liability, resort must be had to that particular
statutory remedy before invoking the discretionary remedy under Article 226 of
the Constitution. This rule of exhaustion of statutory remedies is a rule of
policy, convenience and discretion; and
(VI)
In cases where there are disputed questions of
fact, the High Court may decide to decline jurisdiction in a writ petition.
However, if the High Court is objectively of the view that the nature of the
controversy requires the exercise of its writ jurisdiction, such a view would
not readily be interfered with.
ATTACHMENT BEFORE JUDGMENT & PROVISIONAL
ATTACHMENT
|
Case
name |
Relevant
Remarks |
|
Raman Tech Process Engg Co and
Anr v Solanki Traders 2008(1) R.C.R.(Civil) 195
|
The power under Order 38, Rule 5 Civil
Procedure Code is a drastic and extraordinary power. Such
power should not be exercised mechanically or merely for the asking. It
should be used sparingly and strictly in accordance with the Rule. The
purpose of Order 38, Rule 5 not to convert an unsecured debt into a secured
debt. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5
as a leverage for coercing the defendant to settle the suit claim should be
discouraged |
|
Valerius
Industries v Union of India, 2019 (30) GSTL 15 (Gujarat) |
-
The power under Section 83 of the Act for
provisional attachment should be exercised only if there is sufficient material on
record to justify the satisfaction that the assessee is about
to dispose of wholly or any part of his/her property with a view to thwarting
the ultimate collection of demand and in order to achieve the said objective,
the attachment should be of the properties and to that extent, it is required
to achieve this objective.
-
The power under Section 83 of the Act should neither be used
as a tool to harass the assessee nor should it be used in a
manner which may have an irreversible detrimental effect on the business of
the assessee.
-
The attachment of bank account and trading assets should be resorted to only as a last
resort or measure. The
provisional attachment under Section 83 of the Act should not be equated with
the attachment in the course of the recovery proceedings. |
|
Jai
Ambey Filament Pvt Ltd v Union of India, 2021 (44) GSTL 41 (Gujarat) |
Subjective satisfaction as
to the need for provisional attachment must be based on credible information that the attachment is necessary. The opinion cannot be formed
based on “imaginary
grounds, wishful thinking, howsoever laudable that may be.” |
|
Patran
Steel Rolling Mill v Assistant Commissioner of State Tax Unit 2, 2019 (20)
GSTL 732 (Gujarat) |
Two instances in which provisional
attachment would be apposite, these being where the -
assessee is a ‘fly by night operator’ and -
If the assessee will not be able to pay its dues after
assessment. |
|
Proex
Fashion Private Limited v Government of India, WP(C) 11245 of 2020 dated 6
January 2021 |
Conditions for
the invocation of Section 83 of
the SGST Act: i) Order should be passed by
Commissioner; ii) Proceeding under Section 62
or 63 or 64 or 67 or 73 or 74 should be pending iii) Commissioner must form an
opinion; iv) Order should be passed to
protect interest of revenue; v) It must be necessary to
attach property. |
|
UFV
India Global Education v Union of India, 2020 (43) GSTL 472 |
Pendency of proceedings under
the sections mentioned in Section 83 viz. Sections 62 or 63 or 64 or 67 or 73
or 74 is the sine qua non for an order of provisional attachment to be issued under
Section 83. |
|
Kaish
Impex Private Limited v Union of India, (2020) 6 AIR Bom R 122 |
Taxable account of the taxable
person can be attached against whom the proceedings under the sections 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 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 |
|
Vishwanath
Realtor v State of Gujarat, Special Civil No. 7210 of 2015, decided on 29
April 2015 |
Satisfaction must be on some tangible material on objective facts with the Commissioner. In a
given case, on the basis of the past conduct of the dealer and on the basis
of some reliable information that the dealer is likely to defeat the claim of
the Revenue in case any order is passed against the dealer under the VAT Act
and/or the dealer is likely to sale his properties and/or sale and/or dispose
of the properties and in case after the conclusion of the
assessment/reassessment proceedings, if there is any tax liability, the
Revenue may not be in a position to recover the amount thereafter, in such a
case only, however, on formation of subjective satisfaction/opinion, the
Commissioner may exercise the powers under Section 45 of the VAT Act. |
SECTION 83 & ITS CONDITIONS
(i)
The power to order a provisional attachment is entrusted during
the pendency of proceedings under any one of six specified provisions:
Sections 62, 63, 64, 67, 73 or 74. In other words, it is when a proceeding
under any of these provisions is pending that a provisional attachment can be
ordered
(ii)
The power to order a provisional attachment has
been vested by
the legislature in the Commissioner
(iii)
Before exercising the power, the Commissioner
must be “of
the opinion that for the purpose of protecting the
interest of the government revenue, it is necessary so to do”
(iv)
The order for attachment must be in writing
(v)
The provisional attachment which is contemplated
is of any
property including a bank account belonging to the taxable
person; and
A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make preemptive strikes on the property of the assessee, merely because property is available for being attached. 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.
PROPORTIONALITY
& SECTION 83
The expressions in Section 83
give regard to both the purpose and necessity of provisional
attachment implicate the doctrine of proportionality. Proportionality mandates
the existence of a proximate or live link between the need for the attachment
and the purpose which it is intended to secure. It also postulates the maintenance of a
proportion between the nature and extent of the attachment and
the purpose which is sought to be served by ordering it.
Moreover, the words embodied in
Section 83(1) would leave no manner of doubt that while ordering a provisional
attachment the Commissioner must in the formation of the opinion act on the basis of
tangible material on the basis of which the formation of opinion
is based in regard to the existence of the statutory requirement
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