It has been seen by one and all mostly the practitioners who are there in the practice from the era of General Sales Tax, Central Excise Act and Customs Act and the Service Tax which first came in 1994, the provisional attachment being there in the relevant statute.
The General Sales Tax Act or the Value Added Tax Act has a provision with respect to provisional attachment which speaks that a provisional attachment may be issued by the officer concerned with the approval of the Commissioner when the proceedings of assessment under the relevant sections are in pendency. The proceedings under the relevant sections are different under the different States enactments.
So far as the Central Excise Act is concerned, Section 11(DDA) deals with provisional attachment to protect revenue in certain cases which speaks of that the Central Excise Officer may attach provisionally for the purpose of protecting the revenue with the prior approval of the Principal Commissioner of Central Excise or Commissioner of Central Excise during the pendency of assessment / adjudication proceedings also specifies the period as 6 months which can be extended by the concerned Commissioners which however shall not exceed a period of two years and this section also speaks of the settlement commission.
Similarly the Customs Act 1961 also comprises of a similar provision i.e. section 28(BA) which is akin to the Central Excise Act except for the officer concerned. So also the Service Tax has also a similar provision i.e. section 73(c) to be invoked by an officer who is acting as service tax officer.
The Income Tax Act also has a section for provisional attachment which speaks of about attaching a property before passing any assessment order and this section is section 281 (1) (B) and its speaks of the assessing officer who may get the approval by the Chief Commissioner or Commissioner as the case may be.
All these sections either under the General Sales Tax Act or under the Value Added Tax law or under the Central Acts i.e. Central Excise Act, Customs Act, Service Tax Act or the Income Tax Acts are very clear and they speak of one thing that the officer has to get permission from the superior authority i.e. the Principal Commissioner or Chief Commissioner with reference to Central Acts and the State Commissioner with reference to the State Acts.
For this purpose, I would like to analyze what is meant by property as defined in the above sections. The word “property” has been defined to mean any property belonging to any person having custody or control of it, or having any proprietary right therein or interest, or having a charge on it. Property means property of a tangible nature, whether real, including money and including wild creatures which have been tamed or are ordinarily kept in captivity, and any other wild creatures or their carcasses if, but only have been reduced into possession which has not been lost or abandoned or are in the course of being reduced into possession, but not including mushrooms growing wild or any land or flowers, fruit or foliage of a plant growing wild on any land. I have borrowed this definition from HALSBURY, 4th Edn. Vol. 11, Para 1309, Pg. 703. The definition thus amply is clear that property includes money as well as bank accounts and hence the attachment with regard to the bank accounts or the money in hand should be treated as property.
Now let us come to section 83 of the Goods and Services Tax Act 2017 prior to amendment which speaks as follows:
“Section 83. Provisional attachment to protect revenue in certain cases:-
(1) Where during the pendency of any proceedings under section 63 or section 63 or section 64 or section 67 or section 73 or section 74, 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 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).”
This section is clear enough to provide that during the pendency of any proceedings under section 62 or 63 or 64 or section 67 or section 73 or section 74 if the “Commissioner is of the opinion for the purpose of protecting the interest of government revenue” he may by order in writing attach any property of the assessee and every such provisional attachment shall cease to have effect after the expiry of one year from the date of order made under sub section (1).
So this section is crystal clear to enlighten that not the adjudicating authority but Commissioner has to pass an order to provisionally attach if he is of the opinion that the interest of Government revenue would be at Stake. There are some judgements of different High Courts and to quote some are the Kolkata High Court as held in Amazonite Steel Pvt Ltd., vs. Union of India that it is incorrect on the authorities after the expiry of one year to attach the bank account which has been attached provisionally or by issuing a fresh order on provisional attachment, provided the issue of fresh order requires a fresh review.
The Gujarat High Court in the case of Pranit Hem Desai vs. Additional Director General and Ors without entering into any other controversy had observed that the writ petitions were filed on the short the ground that during the period between July 2017 and May 2019 total ITC availed by the writ Petitioner is less than the tax paid and it appears that the interest of Government revenue is not at stake and therefore the provisional attachment of Bank account was held to be illegal and the Hon’ble High Court has set aside the provisional attachment.
The Punjab and Haryana High Court in the case of UFB India Global Education vs. Union of India held that the effect of section 83 shall come to an end as soon as proceedings pending in any of the provisions in section 63 or section 64 or section 67 or section 73 or 74 are completed and the property or bank account of taxable person cannot remain attached under order passed under section 83.
The Gujarat High Court in the case of Kushal Ltd vs. Union of India has held that the sine qua non for exercise of powers under section 83 is that proceedings should be pending under section 62 or section 63 or section 64 or section 67 or 73 or section 74. When the GST authorities conducted a search under section 67 upon assessee and thereafter the provisional attachment under section 83 has been issued, as, on the date when the orders of provisional attachment came to be made, the basic requirement for exercise of powers under section 83 of the GST Act was not satisfied. Therefore the provisional attachment of bank account cannot sustained.
The Delhi High Court in the case of Proex Fashion Pvt Ltd. vs. Government of India and Ors held that the order attaching the bank account giving reference to section 71 is without authority as section 71 is not at all recorded in the provision. Similarly the Gujarat High Court in the case of Kanal Enterprises vs. State of Gujarat [2020 (9) TMI 879-Gujarat High Court] held that there is no power vested in the authorities to invoke the provisions of Section 83 during the pendency of proceedings under section 71 (1) of the Act.
The Hon’ble Supreme Court has also held in the case of M/s. Radha Krishna Industries vs. State of Himachal Pradesh and Ors which case went from the High Court of Himachal Pradesh in which the Hon’ble Supreme Court has held the provisional attachment order was passed before the proceedings against the appellants were initiated under section 74 of the Himachal Pradesh GST Act and section 83 of Himachal Pradesh GST Act requires that there must be pendency of proceedings under section 62 assessment of non filers of returns or section 63 assessment of unregistered persons or section 64 similar assessment in certain special cases or section 67 power of inspection of search and seizure or section 73 determination of tax in no fraud cases or section 74 determination of tax in fraud cases, against taxable person whose property is sought to be attached. The Hon’ble Supreme Court has also held that While conditioning the exercise of the power on the formation of an opinion by the Commissioner that “for the purpose of protecting the interest of the government revenue, it is necessary so to do”, it is evident that 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. Therefore the High Court was clearly in error to direct the assessee to file an appeal as section 107(1) does not refer to section 83 and has rendered the judgement in favour of the assessee.
The Central Government after scanting a very bad taste has thought it fit to amend section 83 which speaks as under:
Amendment to section 83:-
In Section 83 of the Central Goods and Services Tax Act, for sub-section (l), the following sub-section shall be substituted, namely :-
“(l) 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 (lA) of section 122, in such manner as may be prescribed”.
And this particular amendment was done prior to the judgement by the Hon’ble Supreme Court.
The difference between old section and the amended provision is instead of sections 62 or 63 or 64 or 67 or 73 or 74, the Central Government has incorporated Chapter 12, Chapter 14 or Chapter 15 to include all the provisions falling under the respective Chapters, probably the Central Government contemplated the amendment before the decision of Hon’ble Supreme Court, to this section as expedient and accordingly brought it into force through Finance Act 2021. The amended section has also included taxable person or any person specified in section (lA) of Section 122 and it is crystal clear that the amended provision includes all the provisions pertaining to the filing of returns, inspection, search and seizure and also the assessment in section 83 and the net result is that this a drastic provision to hit the belt of business and registered person.
The reason for the Central Government to amend section 83 is that no person should hoodwink the Government revenue, the pre condition i.e. the Commissioner should be satisfied that the person or the assessee’s action would cause loss of revenue to the State and the other condition is that the Commissioner has to give the order in writing and it shall have the effect of one year.
Now coming to the present position let us visualize how the leakage of the revenue legitimately payable to the Government would be prevented or tightly stitched. We are witnessing cases with regard to improper use of ITC, though the GST Act is an advantageous to the dealers nevertheless certain anti social elements are found taking undue advantage of the Act itself. The burden of paying the taxes would always be on the consumer as this is the indirect tax system and the advantage is taken by some of the assessees or persons who are meddling with the provisions of the Act and who are raising fake invoices and claiming ITC though the GST Act and section 83 are draconian in nature but I feel that section 83 is harsh as it speaks of any property including bank account but does not specify any amount or the amount as felt by the officer to have evaded.
If section 83 is worded in such a manner and passion that the attachment of bank accounts should be limited to the concerned amount, found to have been avoided or taking advantage of the provisions of the GST Act causing loss to the Government revenue, then it ought to have been a more systematic provision.
Of course, it is difficult for one to assess what would be the amount that a person would have hoodwinked but at the same time if a genuine person is harassed by attaching the bank account, then such person would be deprived of his livelihood and also be deprived of to any business activities. This is how I feel that the provision is harsh in nature which is violative of articles 14, 19(1)(g) and 21 of Constitution of India.
Another interesting fact is that the section refers to a period of one year and if the Government feels that one year provisionally attaching the bank account or any other property would save the entire issues. But I have seen number of cases where the investigation, search and seizure etc., runs for years together and this provision is advantageous and also disadvantageous in a way that if the bank account of a person is attached and that persons somehow manages and closes his eyes for a period of one year, then according to this provision, the bank account has to necessarily be lifted from the provisional attachment so also in the case of any other property. The only complementary avenue to this is that another provisional attachment notice may be given before expiry of the first provisional attachment notice but I feel that without there being anything in the section, the implementation of section 83 would leave neither here nor there after expiry of one year.
There is a lacuna in this section according to me and may be it is advantageous to the persons whose property are attached to come out of this. The amount proposed to provisional attachments has to specified and assessments on the person who are trying to cause loss to the government revenue should done within a period of one year and where the assessment has not been done in one year, then an extension by fresh notice may be issued and probably that may be the whole idea behind framing this section. But, for the above cited situations I am of the strong opinion that the provisional attachment should be there which has been there from several years onwards only to sustain the legality and not to frustrate.
I would like to quote a case in which I have appeared before the Andhra Pradesh High Court where a provisional attachment was ordered pursuant to issuance of show cause notice and have challenged the provisional attachment and the Hon’ble High Court while disposing of the writ petition has directed that the Petitioner shall deposit the amounts received from the educational institutions received through account payee cheques also communicating to the Commercial Tax Officer and the Petitioner should deposit the account payee cheques in terms of the affidavits with the Axis Banks within a period of one week, the assessment order should be communicated to the Petitioner and such should be informed to the bank and the Commercial Tax Officer should communicate the assessment order immediately after he has passed to the Petitioner and inform the respondent bank and set aside the impugned order garnishee notice. The Petitioner has received the cheque from the educational institutions and has deposited the same in another bank other than the one which was specified by the Hon’ble Court and has withdrawn the money and the department has filed a contempt which was in favour of the department which went to the Hon’ble Supreme Court and the Hon’ble Supreme Court has dismissed the appeal and ultimately the Petitioner has to remit to the department concerned. This in the case of M/S. HARE RAM CORPORATION, KRISHNA DIST. vs. PRL. SECY., REV. CTII DEPT & 2 ORS. in W.P. No. 41273/2015 and this is the first case of provisional attachment in which I have appeared and the Petitioner has betrayed not only me but also the department and the Hon’ble High Court and I have given up Vakalat and someone has appeared in the contempt case.
The reason for mentioning the above case is to bring to the notice of the beloved members of example of using advantage of the situations which cannot be predicted by anyone of us. There are certain people who would try to hoodwink the government revenue that is legitimately payable to the government but tried as to not be paid.
So in my humble opinion the provisional attachment shall prevail there, of course with certain modifications which I have specified and if those modifications are carried out to the provision, I feel that the section would be advantageous to the revenue and also to the dealers / assessees.
Hope I have thrown much light in this article with analysis of the section and if any suggestions are there, I welcome them as it would definitely enhance my legal knowledge.
|| Jai Hind||