2022 (1) TMI 853 - HC - GST

Court Orders Immediate Release of Frozen Account & Ledger under CGST Rules, Emphasizes Legal Compliance

The court disposed of the petition challenging the provisional attachment of the bank account and blocking of the Electronic Credit Ledger under CGST ... Provisional attachment of bank accounts - Blocking of Electronic Credit Ledger - One year limitation on provisional measures under Rule 86A(3) of the CGST Rules and Section 83(2) of the CGST Act - Right to operate bank account and electronic credit ledger upon lapse of provisional restriction - Liberty of revenue to proceed in accordance with law despite lapse of provisional measuresBlocking of Electronic Credit Ledger - One year limitation on provisional measures under Rule 86A(3) of the CGST Rules and Section 83(2) of the CGST Act - Provisional attachment of bank accounts - Right to operate bank account and electronic credit ledger upon lapse of provisional restriction - Whether the provisional blocking of the petitioner's Electronic Credit Ledger and provisional attachment of the petitioner's bank account continue to operate after expiry of one year and what relief, if any, is appropriate. - HELD THAT: - The Court recorded that under Rule 86A(3) of the CGST Rules the restriction imposed on the Electronic Credit Ledger ceases to operate after the expiry of one year from the date of imposition, and that under Section 83(2) the provisional attachment also lapses on the expiry of one year. Respondents' counsel admitted that attachments and blocking cease after one year and no fresh GST DRC 22 had been issued. The petitioner furnished an undertaking to cooperate with the investigating authorities and to supply documents; the Court accepted that undertaking and treated it as binding. In light of the admitted legal position regarding the one year limitation and the petitioner's undertaking of cooperation, the Court directed that the petitioner's bank account and Electronic Credit Ledger be de frozen and unblocked within three working days of uploading the order, while clarifying that respondents retain liberty to proceed further in accordance with law. [Paras 3, 4, 7, 8, 9]Petitioner's Electronic Credit Ledger and specified bank account to be unblocked and de frozen within three working days; respondents retain liberty to proceed in accordance with law.Final Conclusion: Writ petition disposed of by directing de freezing of the petitioner's bank account and unblocking of the Electronic Credit Ledger within three working days of uploading the order, respondent authorities remaining free to take further lawful action. Issues:Challenging the provisional attachment of bank account and blocking of Electronic Credit Ledger under CGST Rules, 2017.Analysis:The petitioner filed a writ petition challenging the order dated March 16, 2020, provisionally attaching their bank account and the order dated February 6, 2020, blocking their Electronic Credit Ledger. The petitioner sought directions to de-freeze the account and unblock the ledger. The petitioner's counsel argued that as per Rule 86A(3) of the CGST Rules, 2017, the Electronic Credit Ledger blocking order should have ceased after one year, but it remained blocked. Similarly, under Section 83(2) of the CGST Act, 2017, the provisional attachment order should have lapsed after one year, yet the bank account remained attached. The counsel relied on previous High Court judgments and the Supreme Court's decision in Radha Krishan Industries Vs. State of H.P. to support their arguments.The court issued notice to the respondents, and the counsel for respondent No.1 and No.2 and 3 accepted the notice. Respondent No.2 and 3's counsel admitted that attachments and blocking of the ledger should cease after a year but mentioned the petitioner's non-appearance before the Investigating Officer and incomplete document submission. The petitioner's counsel reassured the court of cooperation with the Investigating Agencies and pledged to provide all necessary documents. The court accepted this undertaking and disposed of the petition, directing the respondents to de-freeze the bank account and unblock the Electronic Credit Ledger within three working days.The court clarified that respondents could proceed as per the law, indicating that the petitioner's compliance with the Investigating Authorities was crucial for the resolution of the matter. The judgment emphasized the importance of following legal procedures and cooperating with investigative processes while upholding the petitioner's rights regarding the attachment and blocking issues under the CGST Rules.