Court dismisses petition to defreeze bank accounts & unblock tax credit under CGST Act; emphasizes procedural compliance

The court dismissed the petition seeking to defreeze bank accounts and unblock input tax credit under the CGST Act, 2017 without notice. The petitioners failed to exhaust the alternative remedy of approaching the Commissioner before resorting to a writ petition. The freezing of accounts was based on allegations of GST fraud involving the petitioners, justifying the provisional attachment. The court emphasized the importance of following prescribed procedures and remedies before seeking relief through the court, leading to the dismissal of the petition.

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Issues:
Petition for defreezing bank accounts and unblocking input tax credit under CGST Act, 2017 without notice, GST fraud allegations, freezing of accounts under Rule 159(5) CGST Rules, 2007, alternative remedy of approaching Commissioner.

Analysis:
The petitioners filed a writ petition seeking directions to defreeze their bank accounts and unblock input tax credit under Articles 226/227 of the Constitution of India. The petitioners argued that their accounts were provisionally attached under Section 83 of the CGST Act, 2017 without prior notice, leading to financial constraints in paying statutory dues and day-to-day expenses. They contended that they had valid GSTIN numbers, filed regular returns, and had purchased goods against statutory invoices. On the other hand, the respondents presented allegations of GST fraud amounting to Rs. 28.46 crores involving the petitioners. The freezing of accounts was justified based on investigations revealing discrepancies in transactions and operations of the petitioners and their associated firms.

The respondents referred to Rule 159(5) of the Central Goods and Services Tax Rules, 2007, which outlines the procedure for provisional attachment of property. The rule provides for approaching the Commissioner to address objections regarding the attachment within seven days. The court observed that the petitioners failed to exhaust the statutory remedy of approaching the Commissioner before seeking relief through the writ petition. The court emphasized that in the absence of exhausting alternative remedies, the petitioners had no cause of action to invoke the court's inherent jurisdiction. Consequently, the court dismissed the petition, highlighting the importance of following the prescribed procedures and remedies under the law before approaching the court for relief.

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