GST Update

Desk of CA. Praveen Sharma – 1027 Series (CAPS)

Gauhati High Court In the case of Shri Petro Chemical Mercantile Pvt. Ltd. vs Union of India

Facts of the Case

GST authorities provisionally attached the company's bank account under Section 83 of the CGST Act, 2017 during pending proceedings. The company challenged the attachment before the Gauhati High Court.

Key Issue

Whether the Commissioner had validly formed the mandatory opinion required under Section 83 before freezing the bank account.

Scope of Section 83

The Court observed that provisional attachment is a drastic and extraordinary power. It can be exercised only when necessary to protect Government revenue.

Opinion Must Be Based on Evidence

The Commissioner's opinion must be supported by relevant material and facts. Mere suspicion or routine action is not sufficient.

Application of Mind is Essential

The authority must independently examine the facts and record satisfaction. Mechanical approval or absence of proper reasoning is not permissible.

Attachment of Bank Account Has Serious Consequences

Freezing a bank account adversely affects business operations, payments, and working capital. Therefore, such power must be exercised cautiously.

Department Failed to Justify Attachment

The Department could not produce any concrete material showing that the taxpayer was likely to evade tax recovery or defeat the proceedings. Mere pendency of investigation or proceedings was held to be insufficient.

Court's Finding

The Court held that the mandatory requirement of forming a proper opinion under Section 83 had not been satisfied. Consequently, the provisional attachment order was legally unsustainable.

Final Verdict

The Gauhati High Court quashed the provisional attachment order and directed the release of the bank account. The Court reiterated that the power under Section 83 cannot be exercised mechanically and must be supported by cogent reasons, relevant material, and due application of mind.

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Regards
CAPS