Order of Provisional Attachment issued under Section 83 without any pending proceedings under Section 62, 63, 64, 67, 73, 74 of the Goods and Services Tax Act, 2017 was not sustainable.

S.S. Offshore (P.) Ltd. v. Union of India

High Court of Bombay

Writ Petition (L) No. 13363 of 2021

Category: Provisional Attachment / Jurisdictional Error / Fraud Allegation under CGST

Date of Judgement: 3 August 2021

Relevant Sections: Section 83 of CGST Act, 2017; Rule 159(1) & 159(5) of CGST Rules, 2017

Facts of the Case [¶1–4]:

1. The petitioner, S.S. Offshore (P.) Ltd., challenged the order dated 17 May 2021 by the Commissioner, CGST & Central Excise, Belapur, refusing to lift the provisional attachment of its bank account under Section 83 read with Rule 159 of CGST Rules [¶1].
2. The petitioner argued that no proceedings under Sections 62, 63, 64, 67, 73, or 74 were pending, a precondition for invoking Section 83, and hence, the attachment was without jurisdiction [¶2].
3. The petitioner relied on Radha Krishan Industries v. State of Himachal Pradesh and Kaish Impex (P.) Ltd. v. UOI to emphasize that provisional attachment is a draconian measure and must meet strict statutory requirements [¶2].
4. The respondent (department) justified the attachment alleging fraud involving fake invoices and availing of fake ITC, which justified protecting revenue interests [¶3–4].

Questions in Consideration [¶2, 4, 6]:

• Whether the provisional attachment under Section 83 of the CGST Act is valid in the absence of pending proceedings under specified sections?
• Can an allegation of fraud override statutory preconditions under Section 83?
• Does the Supreme Court’s interim order in SLP(C) No. 10070/2020 (Kushal Ltd.) preclude courts from acting?

Observations of the Court [¶7–10]:

1. The Bombay High Court observed that the Supreme Court in Radha Krishan Industries (April 2021) clarified that Section 83 can be invoked only when proceedings under specific sections (62, 63, 64, 67, 73, 74) are pending. Thus, the issue stood settled post-April 2021 [¶7].
2. The Court noted that the Commissioner, despite acknowledging fraud, failed to demonstrate that any proceedings were pending under those sections—making the attachment ultra vires [¶8].
3. It reiterated that taxing statutes must be strictly construed, and fraud, while a serious allegation, does not permit deviation from statutory safeguards unless explicitly provided [¶9].
4. Absence of due diligence by the department in detecting fraud further weakened the justification for provisional attachment [¶9].

Judgement of the Court [¶11–12]:

• The Court held the impugned order as unsustainable in law and set it aside.
• The Commissioner was directed to immediately defreeze the petitioner’s bank account.
• Writ petition was allowed with no order as to costs.

Between Fine Lines:

• Merely alleging fraud does not empower the tax authorities to bypass the conditions in Section 83.
• No provisional attachment is valid unless there are ongoing proceedings under specified sections.
• Supreme Court’s later ruling in Radha Krishan Industries clarified and reinforced this position.
• Strict adherence to statutory preconditions is essential in tax law.
• Administrative actions must align with procedural prerequisites, even in cases of suspected fraud.

Summary of Referred Cases:

Takeaway:

“Fraud Cannot Override Statutory Safeguards: When Provisional Attachment Requires Procedural Compliance”