Provisional Attachment was not lifted where Assessee has failed to file objections under Rule 159(5) of the CGST Rules. Writ Petition was not maintainable.

Case Title: R.J. Exim v. Principal Commissioner, Central Goods and Services Tax

Court: High Court of Allahabad

Petition No.: Writ Tax No. 608 of 2020

Relevant Sections: Section 83 r/w Section 74 of the CGST Act, 2017; Rule 159(5), Rule 142(1A) of the CGST Rules, 2017

Category of Dispute: Provisional Attachment – Recovery of Credit availed on Ineligible Supplier

Date of Judgment: 24 November 2020

Citation: [2021] 124 taxmann.com 275 (Allahabad)

Facts of the Case [Paras 1–10]

1. The petitioner, R.J. Exim, purchased readymade garments worth ₹6.5 crore (including IGST of ₹69,67,729) from M/s Unimax Overseas.
2. It availed input tax credit (ITC) on the said IGST based on six invoices.
3. On verification, the supplier was found to be non-existent.
4. The department issued Form GST DRC-01A under Section 74(5) requiring deposit of tax, interest (24%) and 15% penalty, or submission of objections under Section 74(1).
5. Despite the opportunity, the petitioner failed to submit objections to the ascertainment.
6. Consequently, a provisional attachment order under Section 83 was issued attaching the petitioner’s bank accounts and FDRs.
7. The petitioner filed the writ petition to challenge the attachment orders dated 5-2-2020 and 22-7-2020.

Questions in Consideration [Para 11]

• Whether the provisional attachment order under Section 83 of the CGST Act is liable to be quashed for not being legally sustainable?
• Whether failure to file objections under Rule 159(5) renders the petition non-maintainable?

Observations of the Court [Paras 10–18]

1. The order under Section 74(5) and Rule 142(1A) clearly offered the petitioner a chance to either pay or object, which was not availed.
2. The provisional attachment was invoked during pendency of proceedings, satisfying the conditions under Section 83.
3. Rule 159(5) provides a remedy by way of objection to provisional attachment within seven days.
4. Petitioner’s failure to file such objection precludes it from challenging the attachment directly via writ.
5. Judgments cited by petitioner (e.g., Bindal Smelting, Kaish Impex, Kushal Ltd., UFV India) were distinguished based on facts, notably lack of proceedings under Sections 62-74 in those cases, unlike the present one.
6. Hence, the invocation of Section 83 in the present case was held proper.

Judgment of the Court [Para 19]

• The writ petition was dismissed.
• The court found no legal infirmity in the provisional attachment as the statutory remedies under Rule 159(5) were not exhausted.
• The attachment was held valid as it was made to protect government revenue during proceedings under Section 74.

Between Fine Lines:

• The court upheld provisional attachment under CGST where the taxpayer failed to contest liability before the proper officer.
• Section 83 attachment is valid if any proceedings under Sections 62 to 74 are ongoing.
• The taxpayer had a statutory remedy under Rule 159(5), which was not availed.
• Judgments cited by the petitioner were factually distinguishable.
• Writ jurisdiction cannot be invoked when adequate alternative remedies exist.

Summary of Referred Cases:

Takeaway:

“Remedy Ignored is Remedy Lost – Failure to Object Bars Challenge to Provisional Attachment”