Court Quashes provisional attachment of Bank account made without issuance of FORM DRC-01A

The petitioner is a private limited company engaged in the business of trading in coal. It is also having valid registration number under the Act.

During the period between 2018-19, the petitioner company had purchased Iron and Steel Waste Scrap from M/s.Arsh Enterprise, which has having valid GST registration at the time of purchase of goods. The goods worth Rs.37,31,420/- had been purchased where the value of goods was of Rs.31,53,746/- and the GST was Rs.5,67,674/-. The goods purchased from M/s.Arsh Enterprise also had been sold by the petitioner to various other purchasers and the sale proceeds were received in his Bank account. The GST registration of M/s.Arsh Enterprise had been cancelled on 31.10.2020.

2.5 On 04.01.2022 summons under section 70 of the Act was issued to the petitioner where he was called upon by the respondent No.2 to remain present for recording of statement and production of sales and purchase registers. The summons is silent regarding specific subject matter about the inquiry. The Director of the petitioner was unable to attend on specific date, the request of adjournment was made on 11.01.2022.

2.6 A detailed letter was addressed to the respondent No.2 as no new date was given on 11.02.2022 submitting all documents. The petitioner again served with a letter from respondent No.2 being the letter dated 10.03.2022 calling upon the petitioner to submit details of freehold immovable property, property card, index copy, etc. The respondent failed to indicate any live link with the document sought as well as with the inquiry which the summons under section 70 of the Act was issued.

It is averred by the petitioner that respondent No.2 had taken extreme coercive steps, whereby his entire business came to a grinding halt by attaching the Bank account without any pending proceedings. With communication on 18.05.2022, FORM GST DRC-22 was issued on the Bank under section 83 of the Act.

On 21.05.2022, request was made by the petitioner to the respondent No.2 to release the Bank account, however, till date the Bank account is not released.

Comments of High Court:

Powers exercise under section 83 of the Act are serious and harsh in nature

Undoubtedly, the powers exercise under section 83 of the Act are serious and harsh in nature. This Court in Special Civil Application No.2787 of 2022 in case of Arya Metacast (supra) had an occasion to deal with the very issue of attachment under section 83 of the Act of the Bank account. The Court also had an occasion to consider the Circular issued by the CBES to hold that sparingly the powers of section 83 of provisional attachment needs to be taken recourse of. It should not use as a tool to harass the assessee nor should it be used in any manner that it may have irresistible detrimental effect on the business of the assessee.

Powers of attaching provisionally the property including the Bank account belonging to the taxable person Harsh

The powers are given to the Commissioner, when it is of the opinion that for protecting the interest of the Government Revenue, there is a need for attaching provisionally the property including the Bank account belonging to the taxable person. However, this being a very harsh powers, the recourse is to be made sporadically and consciously for which the detailed guidelines have been issued by the CBEC itself and the same has already been considered by this Court in case of Arya Metacast Pvt. Ltd. (supra). The Court having noticed that the provisional attachment of the property of taxable person including the Bank account being a prepounion step the conditions which are prescribed under the statute for a valid exercise of the power must be strictly fulfilled.

Provisional attachment should not hamper normal business activities of the taxable person

In the given set of circumstances, it can be thus noticed that the proper officer is always required to ensure that there are action of the provisional attachment may not hamper normal business activities of the taxable person. Of course, the summons had been issued against the petitioner after getting the inquiry made against M/s.Arsh Enterprise, the procedure that had been required to be followed as per the Circular and also on issuance of FORM DRC-01A had not been done before the provisional attachment of the Bank account had been made. There is no explanation as to why the FORM DRC-01A has been issued on 18.01.2023 could not have been done if, it was for ascertaining the preliminary details and for protecting the revenue.

The Bench of Honourable Ms. Justice Sonia Gokani And Honourable Mr. Justice Sandeep N. Bhatt Quashed the provisional attachment of the Bank account made without issuance of FORM DRC-01A

Court Quashes the Attachment Order

Noticing, however, the gravity of the matter, when there is a direction for attachment of the Bank account, the Court needs to interfere following the decision of Arya Metacast Pvt. Ltd. (supra) and also various decisions which have been referred to in that decision itself. The guidelines issued by the Circular of CBEC on 23.02.2021 also make it amply clear that the remedy of attachment being by itself very extra ordinary needs to be resorted to with at most circumspection and maximum care and caution, which in the instant case appear to have been missing and hence, that order needs to be quashed and set aside. At the same time being aware of the inquiry which has been made against M/s.Arsh Enterprise and the purchase having been made by the present petitioner in 2018-19 from M/s.Arsh Enterprise for the goods worth Rs.37,21,420/-.However, striking the balance in wake of the details which have come on record of M/s.Arsh Enterprise it would be apt to release the Bank account by directing the Bank to not permit the petitioner to operate so far as the tax amount of Rs.3,95,568/- for the year 2018-19 and tax amount of Rs.1,72,104/- for the year 2019-20.

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