Allahabad High Court: Party Must Avail Remedy under Rule 159 (5) CGST Rules, 2017 Against Provisional Attachment Before Approaching Court

Allahabad High Court: Party Must Avail Remedy under Rule 159 (5) CGST Rules, 2017 Against Provisional Attachment Before Approaching Court

The Allahabad High Court by its coram comprising of Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava has held that Rule 159(5) of the Central Goods and Service Tax Rules, 2017 (CGST) which provides remedy to file objections against the attachment of property must be availed before approaching the Court.

A writ petition was filed by the petitioner assailing the legality, propriety and correctness of the order dated 21 April, 2023 passed by the Commissioner, Central Goods and Service Tax, Ghaziabad, respondent no. 1 whereby and whereunder the current account of the petitioner maintained with ICICI Bank had been provisionally attached exercising powers under Section 83 of the CGST Act, 2017 read with Rule159 (1) of the CGST Rules 2017.

It was the case of petitioner that the CGST Department had carried out an investigation against 3 persons including the petitioner and her husband for availing and passing on wrong Input Tax Credit by creating various firms without supply of goods.

Petitioner’s current bank account was provisionally attached exercising powers under Section 83 of the CGS Act, 2017 read with Rule- 159 (1) of the CGST Rules 2017.

Under Section 82(3) of the CGST Act, 2017 any attachment order under Section 83 ceases to have effect after the expiry of one year. After the expiry of the said year, the petitioner moved the application requesting for a de-attachment of the Bank account since the petitioner was not a taxable person as defined under Section 2 (107) of the CGST Act, 2017, and no investigation was pending against her.

Counsel for Petitioner contended that the impugned order lacked the necessary ingredients for the exercise of power under Section 83 (Provisional Attachment to Protect Revenue in Certain Cases). The procedure prescribed in Rule 159 of the CGST Rules 2017 relating to ‘Provisional Attachment of Property’ was not followed by the Department. No show cause notice in form DRC-01 under Rule 142 had been issued to the Petitioner before proceeding under Section 122 of the Act (Penalty for Certain Offences).

On the other hand, the Counsel for Respondent, argued that the petitioner has a remedy under Rule 159 (5) of the CGST Rules 2017 for filing objections against the attachment.

Therefore, the Court having considered the rival submissions and having perused the case laws cited found that Rule 159 of the CGST Rules, 2017 sets out the procedure to be followed for issuing a provisional attachment order.

Under Rule 159 (5) a person whose property is attached may within 7 days of such attachment, file an objection to the effect that the property attached was or is not liable to attachment.

“After such objection is filed, the Commissioner is required to offer the person objecting an opportunity of .being heard and thereafter pass appropriate order in Form GST DRC-23, if he is of the view that property is required to be released from attachment,” the Court observed.

Consequently, the bench dismissed the writ petition holding that the petitioner had the remedy under Rule 159(5) of the CGST Rules 2017, and partially the petitioner herself is to be blamed for not taking recourse to Rule 159 (5) of the Rules early.

However, the Court granted an opportunity to the petitioner to approach the Department.