Case Note & Summary
The petitioners, Abhi Engineering Corporation Pvt. Ltd. and another, filed a writ petition under Article 226 of the Constitution of India challenging two provisional attachment orders dated 27.09.2019 and 22.09.2020 issued by the Commissioner of Central Goods and Services Tax and Central Excise, Mumbai (respondent No.2). The orders provisionally attached an escrow account held jointly by petitioner No.1 and respondent No.3 in Bank of Baroda. Petitioner No.1 is a contractor engaged in construction activities and had entered into a joint venture with respondent No.3 for a landscaping project with Maharashtra State Power Generation Company Limited. The escrow account was created to receive payments from MSPGCL. The first attachment order dated 27.09.2019 automatically ceased after one year under Section 83(2) of the CGST Act, 2017. During the pendency of the writ petition, respondent No.2 issued a fresh attachment order dated 22.09.2020 attaching the same account. The petitioners sought quashing of these orders to the extent they attached petitioner No.1's share in the escrow account and sought directions to the bank to release 97% of the amount to petitioner No.1. The legal issue was whether the provisional attachment of an escrow account jointly held by a third party (petitioner No.1) and the assessee (respondent No.3) under Section 83 of the CGST Act is valid when the petitioner is not the person chargeable with tax or a noticee under the Act. The petitioners argued that the attachment was without jurisdiction as they were not the assessee or noticee. The respondents contended that the attachment was valid to protect revenue. The court analyzed Section 83 of the CGST Act and held that provisional attachment can only be of property belonging to the person chargeable with tax or a noticee. Since petitioner No.1 was neither, the attachment of its share in the joint account was without authority of law. The court quashed the attachment orders to the extent they attached petitioner No.1's share and directed the bank to release 97% of the amount to petitioner No.1.
Headnote
A) Constitutional Law - Writ Jurisdiction - Article 226 - Maintainability - Petition challenging provisional attachment order under Section 83 of CGST Act, 2017 is maintainable as the order affects the petitioner's property rights and is without jurisdiction. (Paras 1-2) B) Goods and Services Tax - Provisional Attachment - Section 83 CGST Act, 2017 - Scope - Provisional attachment under Section 83 can only be of property belonging to the person chargeable with tax or a noticee under the Act. Attachment of property of a third party who is not an assessee or noticee is without authority of law. (Paras 5-10) C) Goods and Services Tax - Provisional Attachment - Section 83(2) CGST Act, 2017 - Duration - Attachment order ceases to have effect after expiry of one year from the date of order. Fresh attachment order can be issued only if conditions under Section 83 are satisfied. (Para 3) D) Goods and Services Tax - Provisional Attachment - Section 83 CGST Act, 2017 - Reasons - Attachment order must be based on recorded reasons and cannot be mechanical or without application of mind. (Para 9)
Issue of Consideration
Whether the provisional attachment of an escrow account jointly held by the petitioner (a third party) and the respondent (assessee) under Section 83 of the CGST Act, 2017 is valid when the petitioner is not the person chargeable with tax or a noticee under the Act.
Final Decision
The court quashed the provisional attachment orders dated 27.09.2019 and 22.09.2020 to the extent they attached petitioner No.1's share in the escrow account. The court directed respondent No.4 bank to release 97% of the amount lying in the escrow account to petitioner No.1 as per the instruction dated 25.07.2017.
Law Points
- Provisional attachment under Section 83 CGST Act
- 2017 can only be of property belonging to the person chargeable with tax or a noticee
- not a third party
- Attachment order must be based on recorded reasons and cannot be mechanical
- Attachment order ceases to have effect after one year under Section 83(2)
- Writ petition maintainable against provisional attachment order
