Facts of the Case

The petitioner, Swati Enterprise, had its bank account and shop properties provisionally attached by the department vide Form GST DRC-22 dated 24.07.2020 (Annexure-B), invoking Section 83 of the Gujarat/Central Goods and Services Tax Act, 2017, to protect the interest of revenue. A show cause notice in Form GST DRC-01 dated 24.08.2020 was issued demanding Rs.16,21,853/- with interest and penalty. The petitioner requested copies of documents relied upon in the show cause notice, but these were never furnished. The adjudicating authority nevertheless proceeded to pass a final order in Form GST MOV-07 (Order No.186 dated 06.05.2021, along with Form GST DRC-07) without granting any opportunity of personal hearing. Two connected writ applications, SCA No.1521 of 2021 and SCA No.1530 of 2021, were filed challenging the DRC-22 attachment and the MOV-07 order, with SCA No.1521 of 2021 treated as the lead matter. During the pendency of the petitions, interim orders were passed directing valuation of the attached properties; the valuation report showed the properties worth Rs.15,57,833/- against a tax liability of Rs.17,54,106/-, following which the bank account attachment was lifted as interim relief.

Issues Involved

  1. Whether continued provisional attachment of the bank account was warranted once the attached properties substantially secured the revenue's interest.
  2. Whether the final order passed in Form GST MOV-07, without furnishing relied-upon documents or granting personal hearing, was sustainable.

Petitioner's Arguments

  • With the shops already provisionally attached and valued at about Rs.15 lakhs, there was no need to additionally attach the bank account, which crippled the petitioner's ability to pay employees and run the business.
  • Despite objections raised under Rule 159(5) of the CGST Rules, no opportunity of hearing was ever given before the final order in MOV-07 was passed.
  • Documents relied upon in the show cause notice, though specifically requested, were never furnished to the petitioner.

Respondent's Arguments

  • The valuation of the attached properties had not been carried out but the department undertook to complete it and lift the attachment if the value of the properties adequately covered the tax liability.
  • The learned Assistant Government Pleader did not seriously resist the lifting of the bank account attachment once the valuation report was placed on record.
  • On the MOV-07 challenge, the department's counsel submitted that the matter may be remitted to the authority concerned for fresh consideration.

Court Order/Findings

  • By way of interim relief, the Court lifted the provisional attachment of the bank account, noting that the substantial tax liability already stood protected by the attachment of the shop property valued at about Rs.15 lakhs.
  • On final hearing, the Court found that the documents demanded by the petitioner were never furnished and no opportunity of hearing was granted before the impugned MOV-07 order was passed.
  • The impugned order in Form GST MOV-07 was quashed and set aside, and the matter remitted to the authority concerned for fresh adjudication.
  • The authority was directed to furnish all relied-upon documents at the earliest; the petitioner was to file a reply thereafter, and the authority was to grant a personal hearing before passing a fresh speaking order on merits, the entire exercise to be completed within two months.
  • For the same reasons, the connected SCA No.1530 of 2021 was also allowed.

Important Clarification

  • A final adjudication order culminating a Section 83 attachment-linked demand proceeding cannot be sustained if passed without furnishing the documents relied upon in the show cause notice and without granting a personal hearing — this is a clear violation of natural justice.
  • Where other attached assets already sufficiently secure the government's revenue interest, continued attachment of a bank account, which cripples day-to-day business operations, is not justified and may be lifted even at the interim stage.

Sections Involved

  • Section 83, CGST/GGST Act, 2017 – provisional attachment of property, including bank accounts, to protect revenue.
  • Rule 159(5), CGST Rules, 2017 – provides for objections to be filed against a provisional attachment.
  • Form GST DRC-01, DRC-07, DRC-22 and MOV-07 – prescribed forms for show cause notice, summary of demand order, provisional attachment order, and detention/penalty order respectively.

Decision – In Favour of

The decision is in favour of the Assessee, though disposed of with directions rather than a final finding on merits — the MOV-07 order was quashed and the matter remitted for fresh adjudication after complying with natural justice.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: High Court of Gujarat at Ahmedabad
  • Case No.: R/Special Civil Application No. 1521 of 2021 with R/Special Civil Application No. 1530 of 2021
  • Coram: Hon'ble Mr. Justice J.B. Pardiwala and Hon'ble Ms. Justice Nisha M. Thakore
  • Date of Order: 30 March 2022

Link to Download the Order

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