Facts of the Case

The petitioner, M/s Unique Enterprises, a proprietary concern dealing in iron, metal and scrap, challenged provisional attachment orders dated 03.11.2022 and 04.11.2022 issued under Section 83 of the APGST Act, 2017 against its bank and third-party customers (respondents 4 to 10). An inspection under Section 67(1) had found the petitioner's declared business premises non-operational, with the alleged landlord stating no rental agreement existed and the uploaded rental agreement being potentially forged. Verification of e-way bill data revealed that not a single vehicle used for claimed inward/outward movement had passed through relevant toll gates, and that the petitioner had passed on Input Tax Credit of Rs.1.90 crore while claiming ITC of Rs.1.10 crore from a supplier who had not filed GSTR-3B or paid tax — indicating, prima facie, bogus ITC claimed on fake invoices without actual receipt of goods.

Issues Involved

  1. Whether a provisional attachment order issued by a Deputy Commissioner, pursuant to delegation of the Chief Commissioner's power under Section 83, is valid.
  2. Whether provisional attachment initiated before completion of the intimation/notice process under Section 74(5)/Rule 142(1A) is premature and illegal.
  3. Whether the attachment orders record sufficient reasons and tangible material to satisfy the guidelines laid down by the Supreme Court for exercising this draconian power.

Petitioner's Arguments

  • The petitioner argued that the attachment orders were issued even before any proceedings under Section 74 were launched, and even before the 30-day period under Section 74(8) to pay tax following the DRC-01A intimation had expired, making the action premature.
  • It was contended that under Section 83, only the "Commissioner" (or "Chief Commissioner" under the APGST Act) can issue a provisional attachment order, and since the attachment here was issued by the Deputy Commissioner, it was without authority.
  • It was further argued that the attachment order was bereft of any reasons beyond a bare reference to Section 83.

Respondent's Arguments

  • The Revenue contended the writ was not maintainable given the alternative appellate remedy, and that inspection revealed the petitioner's registered premises were non-operational with a possibly forged rental agreement, that e-way bill verification showed no genuine movement of goods through toll gates, and that the petitioner had claimed and passed on fake ITC running into crores.
  • It was submitted that the Chief Commissioner had validly delegated his Section 83 powers to the Deputy Commissioner by proceedings dated 03.11.2022 under Section 5(3) read with Section 167 of the APGST Act, and that the attachment was a last-resort measure to protect Government revenue.

Court Order / Findings

  • The Court held that the Chief Commissioner's delegation of Section 83 powers to the Deputy Commissioner, made under Section 5(3) read with Section 167 of the APGST Act, was valid, rejecting the petitioner's jurisdictional challenge.
  • Applying the guidelines laid down by the Supreme Court in Radhakrishan Industries — that the power of provisional attachment is draconian and must be exercised only where the Commissioner has formed an opinion, based on tangible material, that attachment is necessary to protect government revenue — the Court found that the grave, unrebutted facts on record (non-operational premises, likely forged rental agreement, fake e-way bills, and ITC of over Rs.3 crore involved on both sides) prima facie justified the attachment.
  • The Court noted that the petitioner had not submitted any explanation or objection to the DRC-01A intimation, nor clarified the serious allegations in the writ petition itself, and found no illegality in the attachment orders.
  • The writ petition was dismissed, with liberty granted to the petitioner to file objections against the attachment under Rule 159(5) of the CGST Rules within two weeks, for the respondent to consider and decide within one week thereafter.

Important Clarification

A provisional attachment order under Section 83 of the GST Act is not rendered invalid merely because it is issued by an officer other than the Commissioner/Chief Commissioner named in the statute, provided there is a valid delegation of that power under the applicable delegation provisions (such as Section 5(3) read with Section 167). Courts will also uphold such attachments where the record discloses grave, specific, and largely unrebutted facts suggesting fraudulent ITC claims, even if the attachment precedes formal adjudication proceedings, so long as tangible material supports the Commissioner's (or delegate's) opinion that attachment is necessary to protect revenue.

Sections Involved

  • Section 83, APGST/CGST Act, 2017 — empowers provisional attachment of property, including bank accounts, to protect government revenue during pendency of certain proceedings.
  • Section 167, APGST Act, 2017 — enables delegation of powers conferred on an officer under the Act to another officer.
  • Section 74(5) and (8), APGST/CGST Act, 2017 read with Rule 142(1A) — the intimation (DRC-01A) mechanism preceding formal notice, and the timeline for voluntary payment.
  • Rule 159, CGST Rules, 2017 — procedure for provisional attachment, including the mechanism (sub-rule 5) for filing objections.

Decision – In Favour of

The decision is in favour of the Department. The writ petition challenging the provisional attachment was dismissed, though the petitioner retained liberty to file objections before the department.

Case Details

Court: High Court of Andhra Pradesh at Amaravati
Case No.: Writ Petition No.38754 of 2022
Coram: Justice U. Durga Prasad Rao and Justice T. Mallikarjuna Rao
Date of Order: 28.08.2023

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