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Power Of Bank Account Attachment Cannot Be Exercised As Per Whims/Caprices Of The Authority: Gujarat High Court To GST Dept

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Power Of Bank Account Attachment Cannot Be Exercised As Per Whims/Caprices Of The Authority: Gujarat High Court To GST Dept
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In an important judgement, the Gujarat High Court asked tax officials to stop provisionally attaching bank accounts of alleged GST defaulters after the GST department’s raids over suspected tax evasion. The high court said the tax authorities must apply their mind properly before taking action like attaching accounts of firms and individuals.

The court was hearing an application filed by a Chechani Trading Company which is engaged in in the business of trading of ferrous and non-ferrous metal scrap.

A bench of Justice J B Pardiwala and Justice I J Vora observed ,”We are of the opinion that Respondent can attach an account only if there is some balance in the form of FDR or savings. The power of attachment of bank account cannot be exercised as per whims and caprices of the Authority. The Commissioner is bound to ensure that by attachment of property or bank account, interest of revenue is going to be protected. In case a property is mortgaged with bank and value of property is less than outstanding dues of bank, provisional attachment is meaningless and action remains only on paper. In the absence of record showing that interest of revenue is protected by attaching property or bank account, action deserves to be declared as taken without application of mind and formation of opinion on the basis of cogent material. Thus, attachment of current account having debit balance does not protect interest of revenue, instead merely ruins the business of a dealer. Such an action of attachment of “over cash credit” account for the sake of recovery of confirmed demand, may in some peculiar case, may be still permitted but not at the stage of pending investigation.”

The bench further noted,”We have noticed over a period of time that in each and every matter, in which proceedings under Section 67 of the Act are initiated, an order of provisional attachment of the bank accounts under Section 83 of the Act would follow. This mechanical exercise of the power is not appreciated. The Legislature has thought fit to confer upon the authority the power to provisionally attach the property of the assessee in the hope that such power is not exercised casually but, only after due and proper application of mind,”

“A mechanical or casual exercise of such power will dilute the very efficacy of the provisions of Section 83 of the Act. Every day, there are not less than 10 matters on the subject of Section 83 of the Act in the cause-list. When there are plethora of judgments explaining Section 83 of the Act in details, then why so much of litigation in the High Court. The only reason that can be attributed is the mechanical exercise of power under Section 83 of the Act. This should stop at the earliest. So much judicial time is wasted in all such matters wherein the law is so well settled,” the court noted.

The court said, “We request the Union of India as well as the CBDT to read this judgment thoroughly and consider issuing appropriate instructions or guidelines at the earliest with respect to the exercise of power under Section 83 of the Act, 2017.”

The registry is directed to forward one copy each of the judgment to the Principal Secretary, Finance Department, Union of India, New Delhi, and also to the Chairman of the CBDT, New Delhi, at the earliest.

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