2022 (3) TMI 182 - HC - GST

Provisional Attachment of Bank Accounts Quashed Under CGST Act Where Taxpayers Paid Excess Amount With No Revenue Loss

Additional Director General Versus Pranit Hem Desai

The HC allowed writ applications challenging provisional attachment of bank accounts under CGST Act, 2017, finding that taxpayers had paid an excess ... Provisional attachment of bank accounts of the opponents - Section 83 of the CGST Act, 2017 - HELD THAT:- In fact so far as the controversy raised in the main matters is concerned, the same has come to an end today. The orders of the provisional attachment of the bank accounts were ordered to be quashed and set aside. Nothing further is required to be done in that regard. The matter as on date has reached to the stage of issue of show cause notice to the opponents. If the show cause notice is issued, the opponents will have to give an appropriate reply to the same. Thereafter, the adjudication would take place and the final liability will be determined in accordance with law, if any. It will be open for the department to issue a show cause notice in the manner they propose to and if the opponents are aggrieved in any manner with the contents of the show cause notice, they can raise the issues accordingly by way of their reply. As on date, there is nothing we need to clarify. It is also open for the department to proceed against all those persons in whose favour the input tax credit availed by the opponents stood transferred respectively in their favour - Application disposed off. Issues:Challenge to orders of provisional attachment of bank accounts under Section 83 of the CGST Act, 2017; Clarification sought regarding liability despite tax payment and transfer of input tax credit to other parties; Maintainability of civil applications; Show cause notice issuance and response; Department's stance on liability for wrongful input tax credit availment.Analysis:The High Court heard multiple applications with similar issues challenging orders of provisional attachment of bank accounts under the CGST Act, 2017. The Court allowed the writ applications based on the discrepancy between input tax credit availed and tax paid during a specific period. The Court noted that an excess amount had been paid compared to the credit availed, indicating no loss to government revenue. The judgment emphasized the revenue-neutral aspect and the treatment of tax payments even if not originally due. The Court quashed the attachment orders, concluding the matter related to the controversy in the main cases.Regarding the liability aspect, a concern was raised about the transfer of input tax credit to other parties beyond the tax payment made by the opponents. The Court was asked to clarify that the tax payment did not absolve the opponents of their entire liability. The Revenue sought assurance that the tax payment should not hinder issuing a show cause notice or determining the final liability. The Court permitted the Revenue to take a stance in future notices that tax payment does not relieve the opponents of wrongful input tax credit liability.The maintainability of civil applications was challenged by the opponents' counsel, arguing that the Court's view was based on the evidence and could be challenged in a higher forum if disputed by the revenue. The Court acknowledged the stage of issuing show cause notices and the subsequent adjudication process to determine final liabilities in accordance with the law.In conclusion, the Court clarified that the observations made did not imply any adverse inference against the opponents as contended by the Revenue. The judgment disposed of all applications, leaving room for the Revenue to proceed with issuing show cause notices and for the opponents to respond accordingly. The Court maintained that the Revenue's stance on liability for wrongful input tax credit could be addressed through the show cause notice process, ensuring a fair opportunity for both parties to present their positions.