Summary
The Supreme Court held that once a provisional attachment order under Section 83(1) of the CGST Act, 2017 ceases to have effect on expiry of one year under Section 83(2), the revenue cannot issue a fresh or 'renewed' provisional attachment order on substantially the same grounds; the Act contains no power of extension or renewal (unlike the Excise and Customs Acts), a statutory authority needs power conferred by statute or valid executive instruction and cannot act merely because nothing prohibits it, and reading in such a power would render Section 83(2) otiose. The Gujarat High Court's contrary view was set aside and the Kerala High Court's view in Ali K. approved.
Issues
- Whether the CGST Act or any other law permits issuance of a second provisional attachment order under Section 83(1) after the initial order has ceased to have effect by efflux of one year under Section 83(2).
- Whether an authority may exercise a power on the ground that the statute does not prohibit it, in the absence of statutory conferment or executive instruction.
Provisions considered
- Section 83(1) and (2), Central Goods and Services Tax Act, 2017Sub-section (1), a draconian power, allows the Commissioner, on forming the requisite opinion, to provisionally attach property including bank accounts to protect the revenue; sub-section (2), on a plain reading, makes every such attachment cease to have effect after one year. The Court held the section cannot be read to confer any additional power to renew or re-issue an attachment after lapse, which would reduce sub-section (2) to a dead letter; provisional attachment is a pre-emptive, not a recovery, measure. (¶¶ 16, 17, 18, 19, 30, 31, 32, 39, 41)
- Rule 159 (including sub-rules (2) and (5)), Central Goods and Services Tax Rules, 2017Rule 159 prescribes the manner of attachment, objection and release; the GST Council's 53rd meeting agenda recognised that Rule 159(2) was misaligned with Section 83(2) and recommended amendments so that attachment ceases after one year. Until amended, provisional attachments must be implemented in strict compliance with the statute. The appellant's objection under Rule 159(5) had been left undecided. (¶¶ 2, 9, 16, 37, 38)
- Article 13 (with Articles 73 and 162), Constitution of IndiaFor an authority to exercise a power it must be empowered by statute or authorised by executive instructions or another instrument that is law within Article 13; a power not so conferred cannot be justified by arguing that it is not prohibited. Inherent executive power under Articles 73/162 may supplement but not supplant statutory law. (¶¶ 23, 24, 26, 28)
- Sections 11DDA and 28BA, Central Excise Act, 1944 and Customs Act, 1962Both provide for provisional attachment with express extension up to a cumulative two years; Parliament, cognizant of these, deliberately omitted any extension provision from Section 83 CGST Act, so the executive cannot overreach the statute to extend, renew or re-issue an attachment. (¶¶ 6, 32, 39)
Held
- The Court endorsed Radha Krishan Industries on Section 83(1): the power of provisional attachment is draconian and its exercise depends on strict and punctilious observance of the statutory preconditions; sub-section (2), not considered there, must be interpreted in light of the stringent nature of the power. (¶¶ 17, 18)
- The old principle that a statutory authority has no power to act without statutory conferment must now be read with the Constitution: law-making extends to executive orders in fields where the legislature is competent but has not legislated, but inherent executive power cannot be exercised inconsistently with statutory law or rules and may supplement but not supplant them. Hence a power must be conferred by statute, executive instruction or another instrument that is law under Article 13; it cannot be justified merely because neither statute nor instruction prohibits it. (¶¶ 22, 23, 26, 27, 28)
- There is neither statutory conferment nor any executive instruction consistent with the CGST Act authorising renewal of a lapsed provisional attachment order; the fresh orders were therefore indefensible. (¶ 29)
- Section 83 must be construed so that sub-section (2) is not reduced to a dead letter (ut res magis valeat quam pereat): conceding a power to issue a fresh attachment after lapse, or to renew it, would render sub-section (2) otiose. A fresh order on substantially the same grounds disregards the safeguard in sub-section (2) and offends the principle that what cannot be done directly cannot be done indirectly; accepting the High Court's 'no embargo' reasoning would permit endless renewals with no change in circumstances. (¶¶ 30, 31)
- Provisional attachment is a pre-emptive measure to protect revenue, not a recovery measure; one year is sufficient to conclude investigation, and if not, the legislature could have provided for renewal as in the Excise and Customs Acts. Once a final demand arises, recovery must proceed under the recovery provisions, which also give the assessee a right of challenge; using provisional attachment to recover tax frustrates the statute. (¶¶ 32, 39)
- The Court concurred with the order in RHC Global Exports lifting an attachment after one year, approved the Kerala High Court's view in Ali K., and deprecated the revenue's practice of continuing debit-freezes beyond a year, forcing citizens to approach High Courts to enforce a protection the statute already gives; such deliberate non-compliance undermines the rule of law. (¶¶ 33, 34, 35, 36)
- The GST Council has itself recognised that a provisional attachment order has no life after a year and recommended amending Rule 159(2) and FORM GST DRC-22; until such amendments, attachments must be implemented in strict compliance with the statute. (¶¶ 37, 38)
- The appellant's challenge on delegation and jurisdiction of the Vadodara officer was left unconsidered as the orders fell on the point of law; the order does not preclude the respondent from continuing its investigation and taking further steps in accordance with law. (¶¶ 40, 43)
Result
Appeal allowed; question answered in the negative; provisional attachment orders dated 13.11.2024 and 18.12.2024 held to be without authority; attached bank accounts to be de-frozen and made operable forthwith on production of the judgment before the banks; investigation may continue in accordance with law.