Cash Credit Account Cannot be Provisionally Attached under GST, rules Appellate Authority.

Court Name : High Court Calcutta

Parties : J.L. Enterprises Vs Assistant Commissioner State Tax

Decision Date : 16 June 2023

Judgement ref : MAT 1001 of 2023

AT 1001 of 2023

with

IA No. CAN 1 of 2023

J.L. Enterprises

Vs.

Assistant Commissioner, State Tax, Ballygunge Charge & Ors.

Mr. Vinay Kr. Shraff

Miss. Priya Sarah Paul

Mr. R. Banerjee

Mrs. S. Dey

... For the Appellants

Mr. A. Ray, Ld. G.P.

Mr. T.M. Siddiqui

... For the State

1. We have elaborately heard the learned advocates appearing for the parties.

2. This intra-Court appeal is directed against the

order dated 25.05.2023 passed in WPA 12132 of 2023. By

the said order the writ petition was disposed of by relegating

the appellant to resort to the remedy provided under Section

159(5) of Central Goods and Services Tax Rules 2017 (for

short “the Rules”).

3. The petitioner was aggrieved by an order of

provisional attachment of cash credit account maintained

by the appellant with its banker. The legal question

involved in the writ petition was whether an order of

provisional attachment can be made to a cash credit

account. In fact, the learned Single Bench has noted all the

decisions, which were cited by the learned advocate for the

appellant and has held that the cash credit facility is not a

debt and, therefore, it cannot be made attachable and that

the writ Court is bound by the precedent. The operative

portion of the order reads as follows:

“It is submitted by the learned advocate for

the petitioner referring to a decision of this Court in

the case of Jugal Kishore Das Vs. Union of India

reported in 2013 SCC Online Cal 19941 that the

cash-credit limit is a facility provided by the bank to

its customers to use and utilise the money and if

such facility availed of, it would attract the interest

to be charged for the same so utilised. It is further

held that the cash-credit facility is not a debt to be

attached by the respondent authority.

Learned counsel appearing for the petitioner

further refers to another decision of the Division

Bench of Gujarat High Court reported in 2022

(64) GSTL 482 (Guj) wherein it is specifically held

that the law is well-settled that a cash-credit

account of the assessee cannot be provisionally

attached in exercise of powers under Section 83 of

the CGST Act.

Referring to a decision of the Hon’ble

Supreme Court in Radha Krishan Industries Vs.

State of Himachal Pradesh reported in 2021 (48)

GSTL 113 (SC). It is submitted by the learned

advocate for the petitioner that the order of

provisional attachment before assessemnt order

should be imposed in rarest of rare cases and

sparingly.

The Hon’ble Supreme Court quoted the

observation of the Gujarat High Court in Valerius

Industries Vs. Union of India reported in 2019

(30) GSTL 15 (Guj) as hereunder:

The order of provisional attachment before

the assessment order is made, may be justified if

the assessing authority or any other authority

empowered in law is of the opinion that it is

necessary to protect the interest of revenue.

However, the subjective satisfaction should be

based on some credible materials or information ...

It is not any and every material, howsoever vague

and indefinite or distant, remote or far-fetching,

which would warrant the formation of the belief.

(1)The power conferred upon the authority

under Section 83 of the Act for provisional attach-

ment could be termed as a very drastic and far-

reaching power. Such power should be used spar-

ingly and only on substantive weighty grounds and reasons.

(3)The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore,

be exercised with extreme care and caution.

(4)The power under Section 83 of the Act for

provisional attachment should be exercised only if

there is sufficient material on record to justify the

satisfaction that the assessee is about to dispose of

wholly or any part of his/her property with a view to

thwarting the ultimate collection of demand and in

order to achieve the said objective, the attachment

should be of the properties and to that extent, it is

required to achieve this objective.

(5)The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.

(6)The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under

Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings.

(7)The authority before exercising power under Section 83 of the Act for provisional attachment should take into consideration two things:

(i) whether it is a revenue neutral situation.

(ii) the statement of “output liability or

input credit”. Having regard to the amount paid by

reversing the input tax credit if the interest of the

revenue is sufficiently secured, then the authority

may not be justified in invoking its power under

Section 83 of the Act for the purpose of provisional

attachment.”

Thus, it is submitted by the learned advocate

for the petitioner that cash-credit facility is not a

debt and it is not provisionally attached under

Section 83 of the CGST Act and rules made

thereunder.

The learned advocate for the respondent, on

the other hand submits that Section 83 of the

Central Goods and Services Tax Act, 2017 gives

power to the GST authority to provisionally attach

the bank accounts to protect revenue in certain

cases. cash-credit facility is also a bank account

issued by the bank in favour of the petitioner

wherefrom the petitioner is using credit facility for

the purpose of his business. It is found from the

record of the case that even the petitioner has been

paying GST from the said cash-credit account.

Be that as it may, it is held by this Court that

cash-credit facility is not a debt and therefore, it

cannot be made attachable. This Court is bound by

the above-stated precedent.”

4. In the light of the above conclusion, it goes

without saying that the Court has accepted the legal

position which has been settled by various decisions which

have been referred to in the impugned order. If such be the

case, no useful purpose will be served by relegating the

petitioner to avail the remedy under sub-Section 5 of

Section 159 of the Rules. Therefore, we are of the view that

the learned writ Court ought to have allowed the writ

petition in its entirety instead of relegating the appellant to

a remedy which is inapplicable to the cases where there is

an order of provision attachment of a cash credit account.

5. In the light of the above, the appeal stands

allowed and the order passed by the learned writ Court is

set aside insofar as it directs the appellant to avail the

remedy under Sub-Section 5 of Section 159 of the Rules

and in other respect where the learned writ Court has

rightly accepted the legal position stands confirmed.

6. In the light of the above conclusion the

respondents are directed to lift the order of provisional

attachment of the cash credit account within 10 days from

receipt of the server copy of this order.

7. Needless to state that this order will not in any

manner prejudice the rights of the department to initiate

other proceedings in accordance with law and this order

pertains only to the provisional attachment of the cash

credit account and not to the other bank accounts of the

appellant.

8. In the result, the appeal stands allowed to the

extent indicated hereinabove. Consequently, the connected

application stands allowed.

(T. S. Sivagnanam)

Chief Justice

(Uday Kumar, J.)