Facts of the Case

The petitioner, M/s National Scrap Traders, approached the Gujarat High Court challenging the provisional attachment of its bank accounts by the State tax authorities. The petitioner sought a writ of mandamus or other appropriate directions requiring the respondents to withdraw the attachment imposed upon its bank accounts under Section 83 of the CGST Act.

The challenge concerned, inter alia, the provisional attachment order dated 13 July 2022, stated to have been passed by Respondent No. 2, the Assistant Commissioner of State Tax, Unit-34, Palanpur, Gujarat. The petitioner also challenged the attachment of its current bank accounts maintained with AU Small Finance Bank and Dhanlaxmi Bank through FORM GST DRC-22. The petition referred to amounts of Rs. 38,15,438/- and Rs. 7,93,098/- in connection with the impugned action.

The petitioner further sought stay of the operation and implementation of the relevant orders and attachment proceedings and questioned the legality and jurisdictional basis of the action taken by the respondent authorities.

Issues Involved

The principal issues arising from the petition were:

  1. Whether the provisional attachment of the petitioner’s bank accounts under Section 83 of the CGST Act was legally sustainable.
  2. Whether the impugned provisional attachment could be challenged on the ground that the statutory preconditions for invoking Section 83 had allegedly not been satisfied.
  3. Whether the respondent authority had acted without recording the requisite subjective satisfaction or reasons before initiating provisional attachment proceedings.
  4. Whether the impugned action violated the principles of natural justice on account of the alleged absence of a proper opportunity of hearing.
  5. Whether the action was contrary to or inconsistent with the provisions referred to by the petitioner, namely Sections 75, 78, 79 and 83 of the CGST Act.
  6. Whether any substantive controversy survived for adjudication after the State had lifted the attachment.

Petitioner’s Arguments

The petitioner’s case, as reflected in the prayers and submissions recorded in the order, was that the bank attachment should be withdrawn and the provisional attachment orders should be quashed and set aside.

The petitioner alleged that the respondent authority’s action was in gross violation of the principles of natural justice, contending that no proper opportunity of hearing had been granted. The petitioner specifically referred to Sections 75, 78, 79 and 83 of the CGST Act in support of its challenge.

The petitioner further asserted that the action was without jurisdiction, alleging that no subjective satisfaction or reasons had been recorded before initiating provisional attachment proceedings under Section 83, even though such satisfaction was claimed to be a precondition for exercise of that power.

However, at the hearing, learned counsel appearing for the petitioner informed the Court that the State had lifted the attachment. Since the petition had challenged that very attachment, counsel submitted that nothing further survived and sought permission to withdraw the petition.

Respondent’s Arguments

The order records the appearance of the learned Assistant Government Pleader for the State. However, it does not record any detailed substantive counter-arguments on the merits on behalf of the respondents.

The decisive factual development before the Court was that the attachment had already been lifted by the State. Consequently, the controversy forming the subject matter of the petition ceased to survive for adjudication. It would therefore be inappropriate to attribute any additional merits-based argument to the respondents beyond what is expressly recorded in the order.

Court Order / Findings

The Gujarat High Court recorded the submission of the petitioner’s counsel that the attachment had been lifted by the State.

The Court noted, in effect, that the challenge in the petition was directed against the very attachment that had already been lifted. Therefore, according to the petitioner’s submission, nothing survived in the petition.

The petitioner sought permission to withdraw the proceedings. The High Court granted the requested permission and ordered:

“The present petition stands disposed of as withdrawn.”

Accordingly, the petition was not decided on the merits of the legality or validity of the provisional attachment under Section 83 of the CGST Act.

Important Clarification

This order is significant primarily for its procedural outcome and should not be read as a substantive judicial determination on the scope or validity of provisional attachment under Section 83 of the CGST Act.

The High Court did not expressly adjudicate whether:

  • the provisional attachment was lawful or unlawful;
  • the statutory requirements of Section 83 had been fulfilled;
  • subjective satisfaction had been properly recorded;
  • reasons were mandatory or adequately recorded in the particular case;
  • the principles of natural justice had been violated; or
  • the respondent authority had acted without jurisdiction.

These matters were raised through the petitioner’s challenge, but no merits-based determination became necessary because the State had already lifted the attachment and the petitioner chose to withdraw the petition. The disposal as withdrawn therefore should not be treated as a precedent deciding the substantive legality of Section 83 attachment proceedings.

Sections Involved

Section 83 of the CGST Act, 2017: Principal provision involved. The petition challenged the provisional attachment of bank accounts purportedly made under this provision.

Section 75 of the CGST Act, 2017: Referred to by the petitioner while alleging violation of statutory procedure and principles of natural justice.

Section 78 of the CGST Act, 2017: Referred to in the petitioner’s challenge to the respondent authority’s action.

Section 79 of the CGST Act, 2017: Also referred to by the petitioner in questioning the legality of the coercive action.

FORM GST DRC-22: The petition specifically challenged the provisional attachment of the bank accounts communicated through this form.

Link to Download the Order

https://mytaxexpert.co.in/uploads/1783321611_1061compressed.pdf

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