Provisional attachment of bank accounts under CGST lifted on furnishing a bank guarantee and director undertakings

Provisional attachment of bank accounts under the CGST Act was addressed by permitting conditional de-freezing upon provision of tangible security. The legal basis relied on offering alternative security to protect revenue interest, and the consequence was that the provisional attachment ceased once the taxpayer furnished a bank guarantee for Rs. 1.25 Crore and individual undertakings from the company directors. The operative effect is interlocutory relief by restoration of access to three bank accounts contingent on the specified bank guarantee and director undertakings, with the writ petition disposed on those terms.

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Issues involved:
Challenge to the legality and validity of three orders of provisional attachment of bank accounts under Section-83 of the CGST Act. Request for issuance of writs of Certiorari, mandamus, and other directions under Article 226 of the Constitution of India.

Detailed Analysis:

1. Challenge to Provisional Attachment Orders:
The writ-application challenges the legality and validity of three orders of provisional attachment of the petitioner's bank accounts under Section-83 of the CGST Act. The petitioner, engaged in trading of bullion and agricultural commodities, contests the necessity of the attachment to protect government revenue. The High Court refers to the Supreme Court's stance on the draconian nature of the power to levy provisional attachment, emphasizing the need for the Commissioner to form an opinion based on tangible material. The petitioner argues that the orders lack satisfaction regarding the necessity of attachment, as required by law.

2. Representation and Rejection:
Following the provisional attachment orders, the petitioner filed a representation under Rule 159(5) of the Rules, which was subsequently rejected by the respondent no.2. The rejection prompted the petitioner to challenge the action, highlighting the potential adverse impact on business operations if the attached funds remain frozen.

3. Bank Guarantee and Undertakings:
During the proceedings, the Court suggested the petitioner furnish tangible security to protect the revenue's interest. The petitioner agreed to provide a bank guarantee of Rs. 1.25 Crore, leading to the Court's decision to de-freeze the bank accounts upon compliance. The Court also required individual directors of the company to provide written undertakings regarding potential liabilities.

4. Disposal of Writ-Application:
The Court disposed of the writ-application with a directive to de-freeze the bank accounts upon the petitioner's compliance with the bank guarantee and individual undertakings. The bank guarantee would remain in effect until the statutory period of the attachment orders expires. The Court emphasized the need for the Department to expedite any inquiry and issue show-cause notices promptly to avoid unnecessary prolongation of the bank guarantee requirement.

This detailed analysis covers the key aspects of the legal judgment, addressing the issues raised in the writ-application challenging the provisional attachment orders and the subsequent resolution provided by the High Court.

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