C/SCA/188/2022 JUDGMENT DATED: 27/01/2022

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 188 of 2022

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE J.B.PARDIWALA

and

HONOURABLE MS. JUSTICE NISHA M. THAKORE

==========================================================

1Whether Reporters of Local Papers may be allowed to

see the judgment ?

YES

2To be referred to the Reporter or not ? YES

3Whether their Lordships wish to see the fair copy of

the judgment ?

NO

4Whether this case involves a substantial question of

law as to the interpretation of the Constitution of India

or any order made thereunder ?

NO

==========================================================

M/S UTKARSH ISPAT LLP

Versus

STATE OF GUJARAT

==========================================================

Appearance:

MR.AVINASH PODDAR(9761) for the Petitioner(s) No. 1

for the Respondent(s) No. 1

MR UTKARSH SHARMA, AGP for the Respondents Nos.1,2,3

MS MOHINI BHAVSAR ADVOCATE WITH MR BHARAT JANI(352) for the

Respondent(s) No. 4

NOTICE SERVED BY DS for the Respondent(s) No. 1,2,3

==========================================================

CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA

and

HONOURABLE MS. JUSTICE NISHA M. THAKORE

Date : 27/01/2022

ORAL JUDGMENT

(PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE)

1 By this writ application under Article 226 of the Constitution of

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India, the writ applicant, a registered partnership firm, through one of

its partners, has prayed for the following reliefs:

“a) To quash and set aside the following orders of provisional

attachment of properties in FORM GST DRC-22 dated 25.11.2021,

26.11.2021 and 27.11.2021 issued by Respondent No.3 as the same

being dehors the provisions of section 83 of the CGST Act, 2017:

(i)Form GST DRC 22 for attachment of Factory & Shed Dated

25/11/2021;

(ii) Form GST DRC 22 for attachment of Plant & machinery

including 66 KVA Substation Dated 25/11/2021;

(iii) Form GST DRC 22 for attachment of stock lying at factory

premises Dated 25/11/2021;

(iv) Form GST DRC 22 for attachment of Bank Current Accounts and

FDs Dated 25/11/20 21;

(v) Form GST DRC 22 for attachment of Sundry Debtors (Utkarsh

Bars Pvt. Ltd.) Dated 26/11/2021;

(vi) Form GST DRC 22 for attachment of immovable property of Mr.

Niraj Jaydev Arya dated 27.11.2021;

(b)To issue a writ of mandamus or any other appropriate writ,

order or direction, directing the Respondent No.4 to allow the

petitioner to utilize its drawing power and allow the petitioner

to conduct business operations on the ground that the risk of

respondent no.4 is sufficiently covered and secured;

c) To issue a writ of mandamus or any other appropriate writ,

order or direction, as an ad-interim relief, to release the

provisionally attached stock and the debtors so as to enable the

petitioner to run his business smoothly and other ad-interim

relief as the Court deems fit;

d) To issue order(s), direction(s), writ(s) or any other relief(s)) as

this Hon'ble Court deems fit and proper in the facts and

circumstances of the case and in the interest of justice;

e) To award Costs of and incidental to this application be paid by

the Respondents.”

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2 The facts giving rise to this writ application may be summarized as

under:

3 The writ applicant is a limited liability partnership firm and is

engaged in the business of procuring various type of M.S. Scrap used for

the manufacturing of the TMT bars. The writ applicant is duly registered

under the Goods and Services Tax Act. Its principal place of business is

at Rajkot.

4 On 19

th

November 2021, the officials of the GST Department

undertook search proceedings at the registered premises of the writ

applicant and also at the residential premises of one of the partners

namely Niraj Jaydev Arya under Sub-section (2) of Section 67 of the

Central Goods and Services Tax Act, 2017 [for short, “the Act, 2017”].

The search proceedings were undertaken on the allegation that the writ

applicant has availed Input Tax Credit on the basis of fake invoices

issued by fictitious firms without any movement of goods by the said

fictitious firms for the period of May 2019 till the date of the search

proceedings.

5 It appears that during the pendency of the search proceedings, the

respondent No.3 passed an order provisionally attaching multiple

properties like the factory premises, plant and machinery and bank

accounts including the fixed deposits. The respondent No.3 issued

multiple Form GST DRC – 22 in relation to the attachment of the

aforesaid properties. The multiple Form GST DRC – 22 came to be issued

by the respondent No.3 in exercise of powers under Section 83 of the

CGST Act, 2017.

6 The details of the properties which have been provisionally

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attached are as under:

Sr.

No.

Details of PropertyProperty NameApprox. Value

(Rs.)

Total Approx.

Value (Rs.)

1.Factory Building & Shed

(Mortgaged with Bank

authorities)

Building 4,31,9446,17,90,195

Factory Shed6,10,56,605

Gate 3,01,646

2.Plant & Machinery

(Mortgaged with Bank

authorities)

Water Tank 54,55,40620,18,99,799

Workshop 3,94,750

30 M.T. Induction

Furnace

4,31,46,808

Auxiliary Machine2,47,51,541

CCM Continuous

Casting Machine

3,21,86,674

Conveyor 17,35,648

DG Set 24,66,061

Metal Handling

Equipment

50,75,317

Overhead Crane5,16,65,763

PCU 1,33,57,507

Pilvrior Machine50,000

Q & A Equipment23,92,073

Scrap Handling10,45,000

Scrap Processing

Equipment

37,11,000

Slag Crusher Machine45,07,229

Water Circular Circuit75,10,845

Water Treatment

Plant

17,33,850

Weigh Bridge7,14,327

3.66KVA Substation

(Mortgaged with Bank

authorities)

66KVA Substation including

Transformer & Capacition Bank

4,88,06,680

4.Stock Lying At Factory

Premises Plot No.718 &

719, GIDC, Bamanbore,

Village : Bamanbore

(Mortgaged with Bank

authorities)

Raw Material of Waste and Scrap

including Remelting Scrap,

SilicoMngenize, Sponze, Store &

Consumable

1,91,41,848

5.Bank Current A/CBank Current A/C with SBI

No.39683832171

1,92,617

Bank Current A/C with Kalupur

Commercial Bank - 5720100141

1,18,374

Bank Current A/C with Axis Bank No.-

91700077787324

58,017

6.FD with Kalupur

Commercial Bank

(Mortgaged with Bank

authorities)

5795100000142

(Mortgaged)

12,85,76012,70,15,036

5795100000143

(Mortgaged)

25,70,000

57951000001441,15,71,840

579510000014558,59,546

5795100000164

(Mortgaged)

58,59,546

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5795100000589

(Mortgaged)

36,05,838

579510000076025,48,813

579540000076125,48,812

579540000076350,96,960

579540000076450,96,959

579540000076550,96,294

579540000076650,96,295

579540000076750,95,630

579540000076850,95,631

579540000077150,94,965

579540000077290,94,966

579540000077550,92,970

5795400000814

(Mortgaged)

16,71,684

5795400000815

(Mortgaged)

25,07,527

057CF10000366527,25,000

057CF10000368228,00,000

057CF10000369296,75,000

057CF10000379110,100,000

057CF1000037961,58,25,000

TOTAL AMOUNT OF ATTACHMENT 45,90,22,566

7 Being aggrieved by the aforesaid action on the part of the

respondent No.3, the writ applicant is here before this Court with the

present writ application.

8 We have heard Mr. Avinash Poddar, the learned counsel

appearing for the writ applicant, Mr. Utkarsh Sharma, the learned A.G.P.

appearing for the State respondents and Ms. Mohini Bhavsar, the

learned advocate for Mr. Bharat Jani, the learned advocate appearing for

the respondent Bank.

9 We propose to focus on three issues : (i) Form GST DRC – 22 for

attachment of the stock lying at the factory premises dated 25

th

November 2021, (ii) Form GST DRC – 22 for the attachment of sundry

debtors (M/s. Utkarsh Bars Private Limited) dated 26

th

November 2021

and (iii) Form GST DRC – 22 for attachment of immovable property

personally owned by Shri Niraj Jaydev Arya (one of the partners) dated

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27

th

November 2021.

10The first question that falls for our consideration is whether the

respondent No.3 could have provisionally attached the property owned

by Shri Niraj Jaydev Arya (one of the partners of the LLP) in exercise of

power under Section 83 of the Act, 2017.

11In the aforesaid context, we must look into the order passed by

the Assistant Commissioner dated 20

th

December 2021, which reads

thus:

“4.6In respect of Property of Partner attached

Here, in the case Utkarsh Ispat LLP is partnership firm and Niraj

Jaidev Arya is the main person who is looking after the operation of the

firm and is in charge commercial and administration activity of the firm

Being Main partner and in charge of commercial and administration

activity, Niraj Jaidev Arya, has caused hug revenue loss to the

Government exchequer By causing to avail ineligible input ta credit on

such fake purchase transactions, He, in order to avail input tax credit,

has caused to receive fake purchase invoices in the books of accounts of

the firm violation of the provisions of the Gujarat Goods and Services

Tax Act, 2017 and the rules made thereunder and thereby evaded tax

to defrauding the Government of tax revenue. It is also to state that

Niraj Jaidev Arya is the person who is responsible to execute this huge

scam of showing fake purchase transactions in the books accounts of

Utkarsh Ispat LLP and thereby availing ineligible input tax credit and all

retained the benefits arising out of such offence. Total liabilities of the

M/s. Utkam Ispat LLP till the date of search completed is amounting to

Rs.68,91,70,54 Whereas total property attached of firm is

55,30,22,566/- which is not sufficient cover government revenue.

Assessee's contention that Firm is LLP and property partner cannot be

provisionally attached is not tenable as attachment made is in t with

provisions of the law.

CHAPTER XVI contains provision Liability to pay in certain cases.

Section and 137 of the CGST Act, 2017 are the sections that discuss

liabilities of Partner case of recovery of taxes, interests and penalties for

offences. It is to be noted these sections have override effects over other

law related to LLP and LLP's Part Provisions of Section 90 and section

137 of GST Act is as below

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90. Liability of partners of firm to pay tax.

Notwithstanding any contract to the contrary and any other law

for the being in force, where any firm is liable to pay any tax,

interest or penalty under Act the firm and each of the partners of

the firm shall, jointly and severally, be or such payment:

Provided that where any partner retires from the firm, he or the

firm, shall intimate the date of retirement of the said partner to

the Commissioner by a notice in that behalf in writing and such

partner shall be liable to pay tax, interest or penalty due up to

the date of his retirement whether determined or not, on that

date:

Provided further that if no such intimation is given within one

month from the date of retirement, the liability of such partner

under the first proviso shall continue until the date on which

such intimation is received by the Commissioner.

Explanation to chapter XVI provides that Explanation. For the

purposes of this Chapter;-

(i) a "Limited Liability Partnership formed and registered under

the provisions of the Limited Liability Partnership Act, 2008 shall

also be considered as a firm.

(ii) "court" means the District Court, High Court or Supreme

Court.

137. Offences by companies.

(1) Where an offence committed by a person under this Act is a

company, every person who, at the time the offence was

committed was in charge of, and was responsible to the company

for the conduct of business of the company, as well as the

company, shall be deemed to be guilty of the offence and shall

be liable to be proceeded against and punished accordingly.

(2) Notwithstanding anything contained in sub-section (1),

where an offence under this Act has been committed by a

company and it is proved that the offence has been committed

with the consent or connivance of, or is attributable to any

negligence on the part of any director, manager, secretary or

other officer of the company, such director, manager, secretary

or other officer shall also be deemed to be guilty of that offence

and shall be liable to be proceeded against and punished

accordingly.

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(3) Where an offence under this Act has been committed by a

taxable person being a partnership firm or a Limited Liability

Partnership or a Hindu Undivided Family or a trust, the partner

or karta or managing trustee shall be deemed to be guilty of that

offence and shall be liable to be proceeded against and punished

accordingly and the provisions of sub-section (2) shall, mutatis

mutandis apply such persons.

(4) Nothing contained in this section shall render any such

person liable to any punishment provided in this Act, if he proves

that the offence was committed without his knowledge or that

he had exercised all due diligence to prevent the commission of

such offence.

Explanation.- For the purposes of this section,-(i) "company"

means a body corporate and includes a firm or other association

of individuals; and (ii) "director", in relation to a firm, means a

partner in the firm.

Provisional attachment of Immovable Property of partner is

made in tune with provision and is inevitable to secure

government revenue.”

12Thus, from the aforesaid, what we have been able to understand is

that the respondent No.3 took the aid of Sections 90 and 137 resply of

the Act.

13It appears that there is a reason why the respondent No.3 took the

aid of Sections 90 and 137 respectively of the Act.

14Section 90 fixes the liability of partners of a firm to pay tax.

Section 90 provides that in a case where any firm is liable to pay any tax,

interest or penalty under the Act, the firm and each of the partners of

the firm shall jointly and severally be liable for such payment.

15Section 137 is with respect to the offences by company. Sub-

section (3) of Section 137 of the Act provides that where an offence

under the Act has been committed by a taxable person being a

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partnership firm or a limited liable partnership or a Hindu Undivided

Family or a Trust, the partner or Karta or Managing Trustee would be

deemed to be guilty of such offence and would be liable to be proceeded

against and punished accordingly.

16Section 83 of the Act reads thus:

“83. 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 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).

17The plain reading of Section 83 referred to above makes it clear

that the property or properties which can be provisionally attached

should belong to a “taxable person”.

18Who is a taxable person? The term “taxable person” is defined

under Section 2(107) of the Act. The same reads thus:

“2. In this Act, unless the context otherwise requires,––

(107) “taxable person” means a person who is registered or liable to be

registered under section 22 or section 24;”

19Thus, a taxable person is a person who is registered or liable to be

registered under Section 22 or Section 24 of the Act. Section 22 of the

Act reads thus:

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“22. Persons liable for registration - (1) Every supplier shall be liable to

be registered under this Act in the State or Union territory, other than

special category States, from where he makes a taxable supply of goods

or services or both, if his aggregate turnover in a financial year exceeds

twenty lakh rupees: Provided that where such person makes taxable

supplies of goods or services or both from any of the special category

States, he shall be liable to be registered if his aggregate turnover in a

financial year exceeds ten lakh rupees.

(2) Every person who, on the day immediately preceding the appointed

day, is registered or holds a licence under an existing law, shall be

liable to be registered under this Act with effect from the appointed

day.

(3) Where a business carried on by a taxable person registered under

this Act is transferred, whether on account of succession or otherwise,

to another person as a going concern, the transferee or the successor, as

the case may be, shall be liable to be registered with effect from the

date of such transfer or succession.

(4) Notwithstanding anything contained in sub-sections (1) and (3), in

a case of transfer pursuant to sanction of a scheme or an arrangement

for amalgamation or, as the case may be, demerger of two or more

companies pursuant to an order of a High Court, Tribunal or otherwise,

the transferee shall be liable to be registered, with effect from the date

on which the Registrar of Companies issues a certificate of

incorporation giving effect to such order of the High Court or Tribunal.

Explanation.––For the purposes of this section,––

(i) the expression “aggregate turnover” shall include all supplies made

by the taxable person, whether on his own account or made on behalf

of all his principals;

(ii) the supply of goods, after completion of job work, by a registered

job worker shall be treated as the supply of goods by the principal

referred to in section 143, and the value of such goods shall not be

included in the aggregate turnover of the registered job worker;

(iii) the expression “special category States” shall mean the States as

specified in sub-clause (g) of clause (4) of article 279A of the

Constitution.”

20Section 24 of the Act reads thus:

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“24. Compulsory registration in certain cases.- Notwithstanding

anything contained in sub-section (1) of section 22, the following

categories of persons shall be required to be registered under this Act,––

(i) persons making any inter-State taxable supply;

(ii) casual taxable persons making taxable supply;

(iii) persons who are required to pay tax under reverse charge;

(iv) person who are required to pay tax under sub-section (5) of section

9;

(v) non-resident taxable persons making taxable supply;

(vi) persons who are required to deduct tax under section 51, whether

or not separately registered under this Act;

(vii) persons who make taxable supply of goods or services or both on

behalf of other taxable persons whether as an agent or otherwise;

(viii) Input Service Distributor, whether or not separately registered

under this Act;

(ix) persons who supply goods or services or both, other than supplies

specified under sub-section (5) of section 9, through such electronic

commerce operator who is required to collect tax at source under

section 52;

(x) every electronic commerce operator;

(xi) every person supplying online information and database access or

retrieval services from a place outside India to a person in India, other

than a registered person; and (xii) such other person or class of persons

as may be notified by the Government on the recommendations of the

Council.”

21The term “person” has been defined under Section 2(84) of the

Act. It reads thus:

“2. In this Act, unless the context otherwise requires,––

(84) “person” includes—

(a) an individual;

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(b) a Hindu Undivided Family;

(c) a company;

(d) a firm;

(e) a Limited Liability Partnership;

(f) an association of persons or a body of individuals, whether

incorporated or not, in India or outside India;

(g) any corporation established by or under any Central Act,

State Act or Provincial Act or a Government company as defined

in clause (45) of section 2 of the Companies Act, 2013;

(h) any body corporate incorporated by or under the laws of a

country outside India;

(i) a co-operative society registered under any law relating to co-

operative societies;

(j) a local authority;

(k) Central Government or a State Government;

(l) society as defined under the Societies Registration Act, 1860;

(m) trust; and

(n) every artificial juridical person, not falling within any of the

above;”

22The respondent No.3, having realized that it is only the property

belonging to a taxable person that can be provisionally attached under

Section 83 of the Act and the partner of an LLP not being a taxable

person in the case on hand, thought fit to take the aid of Section 90 and

Section 137 resply of the Act for the purpose of provisionally attaching a

property owned by the partner of the LLP.

23The moot question is whether Section 90 of the Act has any

application to the case on hand.

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24Section 90 of the Act is nothing, but the very same principle of

law, as enunciated under Section 25 of the Partnership Act. Section 25

of the Partnership Act reads thus:

“25. Liability of a partner for acts of the firm.—Every partner is liable,

jointly with all the other partners and also severally, for all acts of the

firm done while he is a partner.”

25In the case of Her Highness Maharcmi Mandalsa Devi vs. H.

Ramnarain Private Ltd. reported in 65 B.L.R. 31, it has been laid down

by the Supreme Court that a partnership firm is to be treated as a

corporate body only for the purpose of Order XXX of the Code of Civil

Procedure. The legal fiction created by Order XXX cannot be carried too

far. The partnership firm has no legal entity. The persons, who are

individually called partners, are collectively called a firm, and the name

under which their business is carried on is called the firm name.

Therefore, a suit against the firm is really a suit against all the partners

of the firm, and therefore, a decree passed in such a suit is in effect a

decree against all the partners though it may in form be against the firm.

This decision of the Supreme Court merely lays down as a principle of

law that a partnership is not a legal entity distinct from its partners. A

firm and its partners are, therefore, interchangeable firm. If, therefore, a

partnership firm incurs any liability, it is the liability of all the partners.

26Section 25 of the Partnership Act, 1932 referred to above provides

that every partner is liable, jointly with all the other partners and also

severally, for all acts of the firm done while he is a partner. It is,

therefore, clear that the liability of a partnership is the joint and several

liability of all its partners.

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27Thus, what Section 90 of the Act, 2017 conveys is the very same

principle as enunciated under Section 25 of the Partnership Act. In

future, as and when the liability of the LLP as a taxable person is

determined and fixed, such liability would be joint and several liability

of all its partners. In the case on hand, the respondent No.3 committed a

serious error in invoking Section 90 of the Act for the purpose of

provisionally attaching a property owned by a person of the LLP under

Section 83 of the Act. There are two reasons why we say so. First, a

partner of an LLP is not a taxable person. It is the LLP i.e. the

partnership firm who is a “taxable person”. The liability of the firm is yet

to be determined. There has been no assessment so far as the liability of

the firm is concerned. The day such liability is determined and fixed, it is

open for the department to proceed not only against the firm as a

taxable person, but also against individual partner of the firm.

28Section 137 of the Act has absolutely no application. Section 137

is a provision which fixes the vicarious liability of the partners in the

event any offence is committed by a firm.

29Sub-section (84) of Section 2 of the Act, 2017 defines the term

“person” to include an individual, a Hindu Undivided Family, a

company, a firm, a limited liability partnership, etc. Therefore, the Act

recognizes a firm as a dealer and as a person. The legislature having

treated an LLP as a taxable entity, distinct from the individual partners

constituting it, it was not open for the respondent No.3 to provisionally

attach the immovable property owned by a partner of the firm.

30In the aforesaid context, a reference is made of the decision of the

Supreme Court in the case of Kapurchand Shrimal vs. Tax Recovery

Officer, Hyderabad and others [AIR 1969 SC 682] wherein the Supreme

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Court has held as under:

“5. The scheme of the Income-tax Act, 1961, is to treat the assessee

failing to pay the tax due within the period prescribed a defaulter. The

Income-tax Officer may, where the assessee is found to be in default,

issue a certificate for recovery and forward it to the Tax Recovery

Officer specifying the amount of arrears due from the assessee. The

amount due may be recovered by resort to any one or more of the four

modes prescribed by Sec. 222 of the Act. If the defaulter fails to comply

with a notice issued by the Tax Recovery Officer requiring the defaulter

to pay the amount within fifteen days from the date of the service of the

notice, proceedings for recovery may be taken against the assessee for

recovery of the tax. But under the scheme of the Act and the Rules, the

assessee alone may be treated in default. The Act and the Rules

contemplate that the notice for payment of the tax arrears may be

issued against the assessee, and proceedings for recovery of the tax may

be taken against the assessee alone. Under the Income-tax Act, 1961, a

Hindu Undivided Family is a distinct taxable entity, apart from the

individual members who constitute that family. Section 4 of the

Income-tax Act charges to tax for any assessment year the total income

of the previous year of every person and 'person' is defined in Section 2

(31) as including- (i) an individual, (ii) a Hindu undivided family, (iii)

a company, (iv) a firm, (v) an association of persons or a body of

individuals, whether incorporated or not, (vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the

preceding sub-clauses. The Legislature having treated a Hindu

undivided family as a taxable entity distinct from the individual

members constituting it, and proceedings for assessment and recovery

tax having been taken against the Hindu undivided family, it was not

open to the Tax Recovery Officer to initiate proceeding against the

manager of the Hindu undivided family for his arrest and detention. It

is true that if properties of the family, movable and immovable, are to

be attached proceedings may be started against the Hindu undivided

family and the manager represents the family in proceedings before the

Tax Recovery Officer. But by the clearest implication of the statute the

assessee alone may be deemed to be in default for non-payment of tax,

and liability to arrest and detention on failure to pay the tax due is also

incurred by the assessee alone. The manager by virtue of his status is

competent to represent the Hindu undivided family, but on that

account he cannot for the purpose of Section 222 of the Act of 1961 be

deemed to be the assessee when the assessment is made against the

Hindu undivided family and certificate for recovery is issued against the

family.”

31Having regard to the principle enunciated in the above decision as

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well as in the light of the above discussion, this Court is of the view that

the respondent No.3 was wholly unjustified in provisionally attaching a

personal property owned by a partner of the firm under Section 83 of

the Act, 2017.

32In the aforesaid context, we may refer to and rely upon a Division

Bench decision of the Bombay High Court in the case of Kaish Impex

Private Limited vs. Union and others [Writ Petition No.3145 of 2019

decided on 17

th

January 2020], wherein the question that fell for the

consideration of the Bombay High Court was whether the authority

could have proceeded to provisionally attach the property owned by a

person to whom just a summons under Section 70 of the Act was issued.

In the said case, on the date of the provisional attachment of the bank

account, only a summons under the Act was issued to the petitioner i.e.

Kaish Impex Pvt Ltd. The Bombay High Court took notice of the fact that

Section 70 has not been mentioned in Section 83 of the Act. The Bombay

High Court also took notice of the fact that no proceedings were pending

against the petitioner therein under Sections 62, 63, 64, 73 and 74

respectively of the Act. In such circumstances, it was contended on

behalf of the petitioner therein that the power under Section 83 could

not have been invoked against the petitioner. The Bombay High Court

proceeded to hold as under:

“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

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cases is to be levied. Section 83 though uses the phrase '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. 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.”

33It appears that the respondent No.3 also overlooked the guidelines

issued by the Central Board of Indirect Taxes and Customs dated 23

rd

February 2021 for the provisional attachment of property under Section

83 of the Act. We may remind the respondent No.3 of what has been

stated in Clause 3.4.3, which reads thus:

“It may be noted that the provisional attachment can be made only of

the property belonging to the taxable person, against whom the

proceedings mentioned under Section 83 of the Act are pending.”

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34We now proceed to consider whether the respondent No.3 was

justified in provisionally attaching the stock lying at the factory premises

and the attachment of sundry debtors.

35Before we proceed to consider the aforesaid, we must try to

understand the scope and applicability of Section 83 of the Act.

36In the aforesaid context, we must look into a very pronouncement

of the Supreme Court in the case of M/s. Radha Krishan Industries vs.

State of Himachal Pradesh and others [Civil Appeal No.1155 of 2021

decided on 20

th

April 2021]. Justice Dr. Dhananjaya Y. Chandrachud,

speaking for the Bench, laid down the following proposition:

72 For the above reasons, we hold and conclude that

(i) The Joint Commissioner while ordering a provisional attachment

under section 83 was acting as a delegate of the Commissioner in

pursuance of the delegation effected under Section 5(3) and an appeal

against the order of provisional attachment was not available under

Section 107 (1);

(ii) The writ petition before the High Court under Article 226 of the

Constitution challenging the order of provisional attachment was

maintainable;

(iii) The High Court has erred in dismissing the writ petition on the

ground that it was not maintainable;

(iv) The power to order a provisional attachment of the property of the

taxable person including a bank account is draconian in nature and the

conditions which are prescribed by the statute for a valid exercise of the

power must be strictly fulfilled;

(v) The exercise of the power for ordering a provisional attachment

must be preceded by the formation of an opinion by the Commissioner

that it is necessary so to do for the purpose of protecting the interest of

the government revenue. Before ordering a provisional attachment the

Commissioner must form an opinion on the basis of tangible material

that the assessee is likely to defeat the demand, if any, and that

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therefore, it is necessary so to do for the purpose of protecting the

interest of the government revenue.

(vi) The expression “necessary so to do for protecting the government

revenue” implicates that the interests of the government revenue

cannot be protected without ordering a provisional attachment;

(vii) The formation of an opinion by the Commissioner under Section

83(1) must be based on tangible material bearing on the necessity of

ordering a provisional attachment for the purpose of protecting the

interest of the government revenue;”

37It would be apposite at this stage to also look into the guidelines

issued by the Central Board of Indirect Taxes and Customs, Government

of India dated 23

rd

February 2021 for provisional attachment of property

under Section 83 of the Act, 2017. We quote the guidelines as under:

“CBEC-20/16/05-2021-GST/359

Government of India

Ministry of Finance

Department of Revenue

Central Board of Indirect Taxes and Customs

GST Policy Wing

*****

New Delhi, dated 23

rd

February , 2021

To,

The Principal Chief Commissioners/

Chief Commissioners/

Principal Commissioners /

Commissioners of Central Tax (All)

The Principal Director (Generals/Director Generals (All)

Madam / Sir,

Subject: Guidelines for provisional attachment of property under

section 83 of the CGST Act, 2017-Reg.

I am directed to refer to the section 83 of the Central Goods and

Services Tax Act, 2017 (hereinafter referred to as "the Act"). This

section provides for provisional attachment of property for the purpose

of protecting the interest of revenue during the pendency of any

proceeding under section 62 or section 63 or section 64 or section 67 or

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section 73 or section 74 of the Act.

2. Doubts have been raised by the field formations on various issues

pertaining to provisional attachment of property under the provisions of

section 83 of the Act read with rule 159 of Central Goods and Services

Tax Rules, 2017 (hereinafter referred to as the "CGST Rules"). Besides,

in a number of cases, Hon'ble Courts have also made observations on

the modalities of implementation of provisions of section 83 of the Act

by the tax officers. In view of the same, the following guidelines are

hereby issued with respect to the exercise of power under section 83 of

the Act.

3.1 Grounds for provisional attachment of property

3.1.1 Section 83 of the Act is reproduced hereunder.

"83. 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 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).

3.1.2 Perusal of the above provision of the law suggests that the

followings grounds must exist for resorting to provisional attachment of

property under the provisions of section 83 of the Act.

(i) There must be pendency of a proceeding against a taxable

person under the sections mentioned in section 83 of the Act;

(ii) The Commissioner must have formed the opinion that

provisional attachment of the property belonging to the taxable

person is necessary for the purpose of protecting the interest of

the Government revenue.

3.1.3 For forming an opinion under section 83, it is important that

Commissioner must exercise due diligence and duly consider as well as

carefully examine all the facts of the case, including the nature of

offence, amount of revenue involved, established nature of business and

extent of investment in capital assets and reasons to believe that the

taxable person, against whom the proceedings referred in section 83

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are pending, may dispose of or remove the property, if not attached

provisionally.

3.1.4 The basis, on which, Commissioner has formed such an opinion,

should be duly recorded on file.

3.1.5 It is reiterated that the power of provisional attachment must not

be exercised in a routine/mechanical manner and careful examination

of all the facts of the case is important to determine whether the case(s)

is fit for exercising power under section 83. The collective evidence.

based on the proceedings/ enquiry conducted in the case, must indicate

that prima-facie a case has been made out against the taxpayer, before

going ahead with any provisional attachment. The remedy of

attachment being, by its very nature, extraordinary, has to be resorted

to with utmost circumspection and with maximum care and caution.

3.2 Procedure for provisional attachment of property

3.2.1 In case, the Commissioner forms an opinion to attach any

property, including bank account. of the taxable person in terms of

section 83, he should duly record on file the basis, on which he has

formed such an opinion. He should, thereafter, pass an order in FORM

GST DRC-22 with proper Document Identification Number (DIN)

mentioning therein the details of property being attached.

3.2.2A copy of the order of attachment should be sent to the

concerned Revenue Authority or Transport Authority or Bank or the

relevant Authority to place encumbrance on the said movable or

immovable property. The property, thus attached, shall be removed

only on the written instructions from the Commissioner.

3.2.3 A copy of such attachment order shall be provided to the said

taxable person as early as possible so that objections, if any, to the said

attachment can be made by the taxable person within the time period

prescribed under rule 159 of the CGST Rules. If such objection is filed

by the taxable person, Commissioner should provide an opportunity of

being heard to the person filing the objection. After considering the

facts presented by the person in his written objection as well as during

the personal hearing, if any, the Commissioner should form a reasoned

view whether the property is still required to be continued to be

attached or not, and pass an order in writing to this effect. In case, the

Commissioner is satisfied that the property was or is no longer liable for

attachment, he may release such property by issuing an order in FORM

GST DRC-23.

3.2.4 Even in cases where objection is not filed within the time

prescribed under Rule 159(5) of CGST Rules, the Commissioner may

take the grounds mentioned in the said objection/representation on

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record and pass a reasoned order. Where the Commissioner is satisfied

that the property was or is no longer liable for attachment, he may

release such property by issuing an order in FORM GST DRC-23,

3.2.5 Each such provisional attachment shall cease to have effect after

the expiry of a period of one year from the date of the order of

attachment.

3.2.6 If the provisionally attached property is of perishable/hazardous

nature, then such property shall be released to the taxable person by

issuing order in FORM GST DRC-23, after taxable person pays an

amount equivalent to the market price of such property or the amount

that is or may become payable by the taxable person, whichever is

lower, and submits proof of payment. In case the taxable person fails to

pay the said amount, then the said property of perishable/hazardous

nature may be disposed of and the amount recovered from such

disposal of property shall be adjustable against the tax, interest,

penalty, fee or any other amount payable by the taxable person.

Further, the sale proceeds thus obtained must be deposited in the

nearest Government Treasury or branch of any nationalised bank in

fixed deposit and the receipt thereof must be retained for record, so

that the same can be adjusted against the amount determined to be

recoverable from the said taxable person.

3.3 Cases fit for provisional attachment of property

3.3.1 As mentioned above, the remedy of attachment being, by its very

nature, extraordinary. needs to be resorted to with utmost

circumspection and with maximum care and caution. It normally

should not be invoked in cases of technical nature and should be

resorted to mainly in cases where there is an evasion of tax or where

wrongful input tax credit is availed or utilized or wrongfully passed on.

While the specific facts of the case need to be examined in detail before

forming an opinion in the matter, the following are some of type of

cases, where provisional attachment can be considered to be resorted

to, subject to specific facts of the case:

Where taxable person has:

a. supplied any goods or services or both without issue of any

invoice, in violation of the provisions of the Act or the rules

made there under, with an intention to evade tax; or

b. issued any invoice or bill without supply of goods or services

or both in violation of the provisions of the Act, or the rules

made there under; or

c. availed input tax credit using the invoice or bill referred to in

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clause (b) or

fraudulently availed input tax credit without any invoice or bill,

or

d. collected any amount as tax but has failed to pay the same to

the Government beyond a period of three months from the date

on which such payment becomes due; or

e. fraudulently obtained refund; or

f. passed on input tax credit fraudulently to the recipients but

has not paid the commensurate tax

3.3.2 The above list is illustrative only and not exhaustive. The

Commissioner, may examine the specific facts of the case and take a

reasoned view in the matter.

3.4 Types of property that can be attached

3.4.1 It should be ensured that the value of property attached

provisionally is not excessive. The provisional attachment of property

shall be to the extent it is required to protect the interest of revenue,

that is to say, the value of attached property should be as near as

possible to the estimated amount of pending revenue against such

person,

3.4.2 More than one property may be attached in case value of one

property is not sufficient to cover the estimated amount of pending

revenue against such person. Further, different properties of the

taxpayer can be attached at different points of time subject to the

conditions specified in section 83 of the Act.

3.4.3 It may be noted that the provisional attachment can be made only

of the property belonging to the taxable person, against whom the

proceedings mentioned under section 83 of the Act are pending.

3.4.4 Movable property should normally be attached only if the

immovable property, available for attachment, is not sufficient to

protect the interests of revenue.

3.4.5 As far as possible, it should also be ensured that such attachment

does not hamper normal business activities of the taxable person. This

would mean that raw materials and inputs required for production or

finished goods should not normally be attached by the Department.

3.4.6 In cases where the movable property, including bank account,

belonging to taxable person has been attached, such movable property

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may be released if taxable person offers, in lieu of movable property,

any other immovable property which is sufficient to protect the interesa

of revenue. Such immovable property should be of value not less than

the tax amount in dispute. It should also be free from any subsisting

charge, liens, mortgages or encumbrances, property tax fully paid up to

date and not involved in any legal dispute. The taxable person must

produce the original title deeds and other necessary information

relating to the property, for the satisfaction of the concerned officer.

3.5 Attachment Period

3.5.1 Every provisional attachment shall cease to have effect after the

expiry of a period of one year from the date of the provisional

attachment order.

3.5.2 Besides, the provisional attachment order shall also cease to have

effect if an order in FORM GST DRC-23 for release of such property is

made by the Commissioner.

3.6 Investigation and Adjudication

As the provisional attachment of property is resorted to protect the

interests of the revenue and may also affect the working capital of the

taxable person, it may be endeavored that in all such cases, the

investigation and adjudication are completed at the earliest, well within

the period of attachment, so that the due liability of tax as well as

interest, penalty etc. arising upon adjudication can be recovered from

the said taxable person and the purpose of attachment is achieved.

3.7 Share in property

Where the property to be provisionally attached consists of the share or

interest of the concerned taxable person in property belonging to him

and another as co-owners, the provisional attachment shall be made by

order to the concerned person prohibiting him from transferring the

share or interest or charging it in any way.

3.8 Property exempt from attachment

All such property as is by the Code of Civil Procedure, 1908 (5 of

1908), exempted from attachment and sale for execution of a Decree of

a Civil Court shall be exempt from provisional attachment

4. It may be noted that an amendment to section 83 has been proposed

in Finance Bill 2021. However, such proposed amendment shall come

into effect only from a date to be notified in future. The present

guidelines, which are based on the existing provisions of section 83 of

the Act, shall stand modified according to the amended provisions of

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section 83, once the said amendment comes into effect.

5.Difficulty, if any, in the implementation of the above guidelines

may please be brought to the notice of the Board.

Sd/-

(Sanjay Mangal)

Commissioner (GST)”

38What is relevant for our purpose is clause 3.4.5 of the guidelines

referred to above. It says that as far as possible, the authority should

ensure that the attachment does not hamper the normal activities of the

taxable person. It has been clarified that the raw materials and input

required for the production or finished goods should not normally be

attached by the department.

39In the case on hand, we do not approve the provisional

attachment of the goods, stock and receivables, more particularly, when

the entire stock and receivables have been pledged and a floating charge

has been created in favour of the Kalupur Commercial Bank Limited for

the purpose of availing the cash credit facility with the provisional

attachment of the goods, stock and receivables the entire business will

come to a standstill.

40In view of the aforesaid, this writ application succeeds in part. The

Form GST DRC – 22 for attachment of the stock lying at the factory

premises dated 25

th

November 2021, the Form GST DRC – 22 for

attachment of the sundry debtors (M/s. Utkarsh Bars Private Limited)

dated 26

th

November 2021 and the GST DRC – 22 for attachment of the

immovable property of Shri Niraj Jaydev Arya (one of the partners of the

firm) dated 27

th

November 2021 are hereby quashed and set aside. All

other properties shall remain under provisional attachment in

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accordance with law.

41With the aforesaid, this writ application is disposed of.

(J. B. PARDIWALA, J)

(NISHA M. THAKORE,J)

CHANDRESH

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