Judgement on Order passed u/s 83 of GST Act

Petitioner: Amazonite steel Pvt Ltd, Corandum Impex Pvt Ltd, Cuprite Marketing Pvt Ltd

Respondents: Union of India

Authority: Calcutta High Court

Date: 4th March 2020

Case: On 5th June 2018, the Additional Director General, Directorate General of GST Intelligence (ADGGI) passed an Order provisionally attaching the Current Bank Account of the petitioner u/s 83 of the CGST Act, 2017 through Form DRC-02. After more than a year on 19th July, 2019 the petitioner made a representation before the ADGGI requesting to de-freeze the Bank account. Several representations were made to ADGGI and Bank but there was no response from their end. Thereafter on 31st October 2019, the Principal Additional Director General, Directorate General of GST Intelligence (PDGGI) passed a fresh provisional order directing the Bank to provisionally attach the said current account of the petitioner.

Core Issue:

1. Whether the PDGGI and ADGGI are competent to pass orders under Section 83 of the CGST Act, 2017?

2. Whether an order passed under Section 83 of the CGST Act, 2017, remains valid after the expiry of one year from the date of the order?

3. Whether the authorities can issue fresh order of provisional attachment/multiple orders under Section 83 of the CGST Act, 2017?

Court’s Observation:

1. Section 2(24) defining Commissioner, Section 3 on Officers under this Act and Section 5 Powers of Officers were referred to.

2. The Court observed that the authorities have acted in a blatantly highhanded and illegal manner by keeping the provisional attachments in a state of continuance for the period from 5th June, 2019 till 31st October, 2019. Section 83(2) is crystal clear that the provisional attachment shall cease upon expiry of one year.

3. It was therefore incumbent on the authorities to either release the provisional attachment by informing the bank or by issuing a fresh order of provisional attachment, if the law so allowed. Failure to do so is obloquy and reprehensible. This is clearly in violation of the petitioners’ rights for carrying on business under Article 19(1) of the Constitution of India and under Article 300A of the Constitution of India wherein the petitioners have been deprived of their property without authority of law.

4. Section 83 has to be read with Sections 67 and 74 and Rule 159. As is evident from Section 74, the time limit for issue of show cause notice is 4.5 years, while the adjudication is required to be completed within 5 years. The question that arises is whether the Legislature would have intended to allow the investigation to be continued for a period of 4.5 years but only allowed protection to the government revenue for a period of one year?

5. Section 83(2) provides for a period for cessation of the provisional attachment. This provision does not in any manner prevent the authorities to issue a fresh order of provisional attachment if the requirements under Section 83(1) are met. The period of one year has been provided only to bring about a balance between the rights of the assessee and the interest of the Revenue.

Judgement:

1. The PDGGI and ADGGI are competent to pass orders under Section 83 of the CGST Act, 2017.

2. The actions of the respondent authorities in continuing with the provisional attachment beyond the period of one year and without informing the bank that the provisional attachment seizes to operate after a period of one year is an act that is reprehensible and absolutely contrary to law. The respondent authorities are directed to pay costs of Rs. 5 lakhs to each of the three petitioners.

3. After the expiry of the time period, where the appropriate authority is of the opinion that such an attachment is further required to protect the interest of Revenue, it may issue a fresh order upon compliance of the formalities in Section 83(1).