Bank Account Freezing Under GST Act Section 16(4) Challenged as Coercive Recovery Measure Requiring Full Payment for Relief

The HC addressed a challenge to Section 16(4) of the GST Act regarding bank account freezing. The petitioner contested the coercive recovery measure, citing infringement of rights under Articles 14, 19(1)(g), and 300A, and argued that appeal remedies under Section 112 were unavailable due to the absence of a GST council in Bihar. The court declined to grant interim relief by staying the impugned order, as this would effectively suspend Section 16(4). Instead, the court directed that the proprietor's saving account would be de-attached only if the petitioner paid the full liability amount pending the writ application's outcome.

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Issues:
Challenge to vires of Section 16(4) of the GST Act for freezing bank accounts, availability of remedy under Section 112 of the GST Act for appeals, interim relief seeking defreezing of saving bank account, constitutional rights under Article 14, 19(1)(g), and 300A.

Analysis:
The petitioner sought interim relief to defreeze the saving bank account, challenging the coercive action taken by freezing the account as a recovery measure for tax, interest, and penalty. The challenge primarily focused on the vires of Section 16(4) of the GST Act, alleging infringement of fundamental rights under Article 14, 19(1)(g), and constitutional rights under Article 300A. The petitioner contended that due to the absence of the GST council in Bihar, the remedy under Section 112 for appeals to the appellate tribunal was unavailable. Section 112 mandates depositing 20% of the remaining tax amount in dispute for maintaining an appeal, with a stay on recovery proceedings until appeal disposal upon payment.

The respondent contested the prayer for interim relief, arguing that staying the impugned order would essentially suspend the operation of Section 16(4) of the GST Act, which courts typically avoid. Referring to a previous case, the respondent suggested that if the petitioner deposits the entire liability amount, the saving bank account could be de-attached. The court noted the prayer for quashing the order and challenging the demand issued, emphasizing that success in challenging Section 16(4) was crucial for obtaining the prayed reliefs. Staying the impugned order was deemed equivalent to staying the effect of Section 16(4), a step the court refrained from taking.

In line with a previous decision, the court directed that if the petitioner pays the full liability amount pending the writ application's outcome, the saving bank account of the proprietor would be de-attached. The matter was tagged with other relevant cases for further proceedings, maintaining consistency with the approach taken in similar situations.

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