Bombay High Court’s Landmark Judgment on Provisional Attachment under GST

Introduction

In a significant ruling, the Bombay High Court addressed the issue of provisional attachment orders under the Maharashtra Goods and Services Tax Act, 2017 (MGST Act) and the Central Goods and Services Tax Act, 2017 (CGST Act). This article examines the court’s decision in the case of Patil Construction and Infrastructure Ltd. Vs The Commissioner of State Tax and its implications for taxpayers and tax authorities.

Facts of the Case

The case centered around the issuance of attachment orders under Section 83 of the MGST Act and CGST Act, in conjunction with Rule 159 of the CGST Rules. The Joint Commissioner of State Tax-II, Pune Division, Pune, provisionally determined the petitioner’s liability following an investigation. It was suggested that the petitioner might default in paying the ultimate tax, interest, and penalty, prompting the exercise of powers under Section 83 to safeguard government revenue.

Issue

The primary issue before the court was the legality and justification of the provisional attachment of the petitioner’s bank accounts under Section 83 of the GST laws.

Held

The Bombay High Court found that the order lacked sufficient material to demonstrate the necessity of attaching the petitioner’s bank accounts to protect government revenue. The court emphasized that before exercising powers under Section 83, the Commissioner must be satisfied that such action is necessary to safeguard government revenue. The court cited the Supreme Court’s judgment in M/s Radha Krishan Industries Vs. State of Himachal Pradesh & Ors., highlighting that the power to order provisional attachment, including bank accounts, is draconian and must be preceded by the formation of an opinion by the Commissioner.

The court’s decision reinforces the principle that the power of provisional attachment under GST laws should be exercised judiciously and not arbitrarily. It serves as a reminder to tax authorities to ensure that the interests of government revenue are balanced with the rights of taxpayers.

Conclusion

The judgment in Patil Construction and Infrastructure Ltd. Vs The Commissioner of State Tax marks a significant development in GST jurisprudence. It underscores the importance of a balanced approach in exercising powers under the GST laws and emphasizes the need to protect taxpayers’ rights while safeguarding government revenue.