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Attachment proceedings cannot be at the cost of right of provision under Article 19(1)(g) of the Constitution of India: High Court

Article 19(1)(g) of Constitution of India -

"FREEDOM TO PRACTISE ANY PROFESSION, OR TO CARRY ON ANY OCCUPATION, TRADE OR BUSINESS"

Petitioner

This Writ Petition has been filed challenging the attachment orders issued under Section 83 of the CGST Act, pursuant to a search and investigation ordered against the petitioner company.

The case of the petitioner company is that the respondents by the impugned attachment orders have completely strangled the business of the petitioner. It is submitted that petitioner was employing about 15,000 employees who were deployed in various industrial units in and around Chennai and Karnataka. The allegation against the petitioner company is that the petitioner company had fraudulently availed input tax credit on fictitious invoices to discharge the GST liability. It is estimated that approximately, the fraud committed by the petitioner is for the sum of ₹ 21 Crores and investigation is still under progress.

Appearing on behalf of the petitioner, Mr.B.Kumar, learned Senior Counsel submits that apart from ₹ 5.68 Corres which have been appropriated so far against the projected demand of ₹ 21 Crores, the petitioner has agreed to pay another sum of ₹ 1 Crore, within a period of one weeks' time.

The Directors of the petitioner company were also arrested and they were released on bail subsequent to bail order dated 19.02.2021 in Crl.O.P.Nos.2175 and 2176 of 2021. This order is a conditional order subject to payment of alleged tax evaded.

The learned Senior counsel for the petitioner submits that Section 67 cannot be against the future receivables so as to strangulate the entire business module of the petitioner. It was further submitted that as against the bail order dated 19.02.2021 in Crl.O.P.Nos.2175 and 2176 of 2021, the Directors of the petitioner company have moved to the Hon'ble Supreme Court insofar as the condition, which mandates recovery/payment of entire balance amount in four instalments.

Learned Senior Counsel for the petitioner also submits that the accounts will be maintained transparently and therefore, prays for lifting of the impugned attachment orders, pending issuance of show cause notice under Section 73 and determination of tax under Section 74 of the CGST Act, 2017.

Revenue

Defending the order and the steps taken by the respondents, learned Senior Panel Counsel, submits that the petitioner has indulged in large scale fraud and therefore, the department was compelled to initiate proceedings under Section 67 of the CGST Act, 2017.

He submits that under Section 83 of the CGST Act, 2017, the respondents are entitled to order provisional attachment of any assets to protect the interest of the revenue. He further submits that it is open for the petitioner to move to the appropriate authority under Rule 159 of the CGST Rules, 2017, against the impugned attachment orders.

He further submits that the Directors of the petitioner company had breached the bail order dated 19.02.2021. It is further submitted that for the last few months, the customers/clients of the petitioner company have directly paid the salaries/wages to the employees, therefore the continuance of the impugned attachment orders will be of no prejudice to the petitioner.

High Court

No doubt, wide powers have been vested with the Officers under Section 67 of the CGST Act, 2017. The said proceedings also entails a provisional attachment of assets during the pendency of the proceedings under Sections 62, 63, 64, 67, 73 and 74 of the said Act. However, such protection cannot be made against future receivables.

Admittedly, an amount of ₹ 5.68 Crores, which was lying in the account has been appropriated till date. The petitioner has also agreed to remit another sum of ₹ 1 Crore. Thus, as against the proposed/estimated tax due involved i.e. ₹ 21 Crores, the petitioner has already discharged a sum of ₹ 5.68 Crores i.e. 27.05%. After all, there is a mechanism provided under the Act for proper adjudication of the tax due and determination under Sections 73 and 74 of the Act. Therefore, there is no meaning in attaching the bank accounts further.

The respondents have reportedly commenced the investigation during October, 2020. The respondents can issue notice under Section 73 of the CGST Act, 2017 and thereafter, determine the amount due and recover the amounts.

I find sufficient reasons to interfere with the impugned attachment orders dated 12.01.2021 and 28.01.2021. It is made clear that the attachment proceedings cannot be at the cost of right of provision under Article 19(1)(g) of the Constitution of India.

However, it is made clear that the petitioner shall deposit a sum of ₹ 1 Crore within a period of one week from the date of receipt of a copy of this order, as was undertaken by the learned Senior Counsel for the petitioner. On such deposit of Rupees One Crore, the impugned attachment orders shall stand vacated. Further, the accounts shall be maintained transparently, as undertaken by the learned Senior Counsel for the petitioner. The Respondents are directed to complete the investigation and issue appropriate show cause notice as expeditiously as possible, to protect the interest of the revenue. It is also open to the respondents to take steps for canceling the bail order in case, the Managing Director and the Director of the petitioner company have violated any of the conditions of the bail order dated 19.02.2021.


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Author:

TaxReply


May 31, 2021


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