HC affirms provisional attachment of Bank Account of person involved in availing Fake ITC of Rs.2.09 Cr [Read Order]

The Calcutta High Court in the matter M/s Arramva Corporation Vs. The Additional Director General has affirmed provisional attachment of Bank Account of person involved in availing Fake ITC of Rs.2.09 Crore.

Petitioner has filed this writ petition challenging the impugned order of provisional attachment of the Bank account of petitioner No.1/partnership firm, dated March 22, 2023, under Section 83 of the CGST Act, 2017 passed by the respondent no. 1/the Additional Director General, DGGI, Guwahati, being bank account (Bank A/c No. 50200052826471) maintained with the respondent no. 6 (HDFC Bank Ltd., Kolkata).

Facts involved in this case, in brief is that the Petitioner no. 1 is a partnership firm and petitioner no. 2 and 3 are its partners and petitioner no. 1 is a Registered Taxable Person assessed under the GST, West Bengal (Kolkata having GST No. 19ABHFA3628C1ZO). The Petitioner no. 1 [PAN No. ABHFA3628C] has its principal place of business in Kolkata and is having a Bank account maintained in Kolkata with HDFC Bank at 11, Dr. U.N. Brahmachari Street Branch, Kolkata.

Petitioners have challenged the impugned action and order of provisional attachment under Section 83 of the CGST Act mainly on the ground that the condition precedent to initiate proceeding under Chapter XII, XIV and XV of the GST Act is absent in the present case and that no notice/proceeding was ever initiated and/or is pending under the said chapters in term of Section 83 (1) of CGST Act at the time of taking such coercive action of freezing of bank account of Petitioner No. 1 and submits that the power to order provisional attachment under Section 83 of the Act can only be exercised sparingly and in exceptional circumstances and cannot be used as a tool for witch-hunt expedition and on the basis of presumptions and assumptions and conjectures and surmises.

Petitioner submits that writ petition before this Hon’ble Court under Article 226 of the Constitution of India challenging the impugned order of provisional attachment, is maintainable, by relying on the Hon’ble Supreme Court’s judgment in the case of Radha Krishnan Industries –Vs- State of Himachal Pradesh & Ors. (2021) 6 SCC 771 and submitting that the Hon’ble Supreme Court in the case of Radha Krishan Industries (supra) specifically dealt and construed the contour and ambit of Section 83 of the GST Act. Wherein it was held that the power to order a provisional attachment of the property of a taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of power must be strictly fulfilled.

Respondents submit that from the investigation of the aforesaid firms including petitioner/ M/s. Arramva Corporation it revealed that all those firms are being actually operated by Shri Ashok Kumar Jain and the said fact has been admitted by Shri Ashok Kumar Jain. The petitioners being M/s. Arramva Corporation was found to have availed ineligible ITC amounting to Rs.57,45,619 on the strength of invoices without actual receipt of any goods from the fake/non-existent firms. The petitioners were found to have issued ineligible ITC of Rs.1,51,93,800 without any actual supply of goods. Therefore the total amount involved in both availing and passing on fake input credit is Rs.2,09,39,419.

Respondents submit that the amount of Rs. 57,45,619 was passed on two non-existent firms namely M/s. Majestum Sales Pvt. Ltd. and M/s. Nakul Enterprise which were operated and managed by Shri Anand Saraf who admitted such fact and was arrested.

Respondents submit that the fraudulent Input Tax Credit amounting to Rs. 1,51,93,800 was passed on to M/s. A.B. Infra Pvt. Ltd. through 78 invoices without concomitant supply of goods by the petitioner. The said fact has been established through RFID based E-way Bills analytics and which has also been admitted by M/s. BAC Infra Pvt. Ltd. during the course of investigation. The said ineligible availment of fake ITC by the petitioners was circulated through alert notice dated 07.09.2022.

Respondents submit that the officers of DGGI having been Pan India jurisdiction have found the operation of Syndicate of fake Firms and as such the DGGI, Guwahati Zonal Unit initiated action from Guwahati. No separate permission is required by the officers of DGGI for investigation against Tax Payers outside their zone as provided under Notification no. 14/2017-Central Tax dated 01.07.2017 and guidelines dated 17.05.2018 as well as clarification dated 22.06.2020 and as per Section 6(1) of CGST Act, 2017 the officers of DGGI, Guwahati Zonal Unit being Central Officers have jurisdiction over any state taxpayer.

Respondents submit that the formation of an opinion by the Additional Director General, Directorate General of Goods and Services Tax Intelligence, Guwahati appointed under Section 3(d) of the CGST Act for initiation of action under Section 83(1) was based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue which could not have been done without ordering a provisional attachment. Before going to attachment of the petitioner’s bank account the concerned authority has found that the petitioner is very much involved in the case of availing ITC without actual receipt of any goods from the fake/non-existent firms as well as issued ineligible ITC without any actual supply of goods as such it is opined for attachment of the bank account.

Respondents submit that in terms of Section 83 of the Act where after the initiation of any proceedings under Chapter XII, XIV and XV of the CGST Act 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 (1A) of Section 122 of the Act, in such manner as may be prescribed.

Respondents submit that as the documents and the records pertaining to the petitioner’s company were found during the search and inspection which reveals availment of ineligible input tax credit by the petitioners, thereby in terms of Section 83 of the Act, the respondent authority has proceeded to provisionally attach the bank account of the petitioner for the interest of the revenue. The respondent authorities are also entitled to attach the bank account of the petitioner in terms of Section 122 (1A) of the CGST Act which is covered under Section 83 of the said Act.

Respondents submit that in terms of Notification dated 01.07.20017 as well as guidelines dated 07.05.2018 and clarification dated 22.06.2020 which clearly provides the jurisdiction upon the respondent authorities to take action and as such attachment of the bank account is legal and valid and within jurisdiction.

Respondents submit that the Form GST DRC-22 has been issued in accordance with law and as per proforma prescribed in law. In terms of the said prescribed proforma the said attachment order has been issued which will be evident from the attachment order dated 22.03.2023 which is as per first paragraph of the said proforma of Form GST DRC-22.

ORDER

Considering the submission of the parties and relevant provisions of law under CGST Act and Rules, 2017, relevant circulars and notifications and the judgments cited by the parties I am of the considered view that so far as objection of the respondents with regard to maintainability of the writ petition before this Court on the ground of lack of territorial jurisdiction is concerned, is not sustainable since cause of action is a bundle of fact and in the facts and circumstances of the present case I am of the considered view that part of cause of action arose within the territorial jurisdiction of this Court since
petitioner’s bank account in Kolkata was attached though may it be by an authority in Guwahati and in view of the fact that petitioner is a registered person in Kolkata and as such writ petition before this Court against the impugned order passed by the authority at Guwahati is maintainable.

So far as challenge by the petitioner the legality and validity of the impugned order of provisional attachment under Section 83 of the Act on the ground of non pendency or initiation of any proceeding against the petitioner is concerned I am of the considered view on reading conjointly Section 1(2), Section 6(1), Section 83, Section 122(1) and Section 122 (1A), Clause (i), (ii), (vii) and (ix) thereunder and judgments referred above, relevant circulars and notification and taking into consideration materials found against the petitioners during investigation, CGST Guwahati authority’s action of attaching the bank account of the petitioner provisionally and the impugned order to this effect is very much legal, valid and within jurisdiction and is not liable to be interfered by this writ Court.

Accordingly this Writ Petition being WPA No. 19463 of 2023 is dismissed. No order as to costs.

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