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Justice Anita Sumanth of Madras High Court has held that the reference to ‘opinion’ in Section 83 of the Central Goods and Service Tax act cannot be a mere lip service, the officer cannot merely proceed prior to issuance of notice of assessment, merely stating that this was done in the interest of revenue.

Section 83 of the CGST Act deals with provisional attachment, it reads as follows

“83. Provisional attachment to protect revenue in certain cases.- (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.”

The judgment further holds that the power conferred upon an authority under Section 83 is substantial and must be used with abundant caution. The authority concerned must necessarily justify the invocation of this ‘coercive’ and ‘intrusive’ step of recovery against an assessee even prior to determination of liability and passing an assessment order. The burden under these circumstances lies upon the revenue and has to be discharged in a proper manner.

According to the judgment the rationale of Section 83 operates on the ‘opinion’ of the commissioner for the purpose of protecting the interest of the government revenue. Such ‘opinion’ must be based upon legitimate and legal apprehensions the the interest of revenue is required to be protected.

According to the judgment investigation is a process of collecting material from the premises of the assessee and consequent upon such investigation, the authorities must study the documents and verify the same in conjunction with the assessee upon being heard. It is only only after these processes that one is expected to arrive at a conclusion as to whether the accounts of an assessee are in order.

The above was held in a case where a petitioner challenged the order of the Principal Additional Director attaching his bank accounts under Section 83 of CGST Act. The petitioner pleaded that the impugned attachment order was without any statutory sanction as it is consequent upon action under Section 67 of the act which deals with the power of the authorities to engage in inspection and seizure.

The head office of the petitioner was subject to inspection, search and seizure on the grounds that her had been suppressing transactions relating to supply of goods or services in or stock of goods in hand to claim excess input tax credit (ITC). The proceedings have been placed before Principal Additional Director on the same day and received approval as proposed, on the same day.The Senior Intelligence Officer  proceeds on the firm conviction that the petitioner was availing fraudulent ITC from bogus/non-existent units.

The court holds that this conclusion appears pre-mature, as investigation had just been completed. It is held that it is expected to arrive at a conclusion as to whether the accounts of the assessee are in order and whether the returns filed by the petitioner, both in relation to declaration of the turnover and claim of ITC, are proper only after the investigation.

Thus the Senior Intelligence Officer according to the court erred by  putting the cart before the horse and rendering a finding that the petitioner was availing fraudulent ITC from bogus/non-existent unit even before an investigation.

According to the judgment the Senior Intelligence officer committed the error based on the ‘opinion’ of the Principal Additional Director. The authorities came to a  firm conviction that the claim of ITC by the petitioner is fraudulent and emanated from bogus, non-existent firms. Their opinion, based upon which the impugned proceedings have been taken is wholly non-speaking, makes no reference to materials, if any, found in the course of the Investigation and the reasoning upon which he arrives at the conclusion that the petitioner’s bank account is to be attached.

The court held that in the present case, there are serious allegations in regard to the excess claim of ITC based on transactions with non-existent or fraudulent entities. However, such allegations are to be based upon supporting materials and evidences if they are to translate into an ‘opinion’ as required in terms of Section 83.

According to the judgment there can be instances where, even prior to the passing of the assessment order if sufficient material is available at the time of investigation to support a prima facie conclusion of suppression or excess claim attachment can be made. However, the ‘brief for opinion’ by Principal Additional Director and the ‘opinion’ of the Senior Intelligence Officer must contain references to the material while passing an order of attachment under Section 83.The court while allowing the writ petition held that this pertains only to the attachment of the bank account under Section 83 and the authorities may use the section in the same proceedings if deemed fit.

Case title: Muthuraman & Co Vs Principal Additional Director General