2022 (7) TMI 1228 - HC - GST

Revenue authorities' blocking order quashed for failing Section 83 jurisdictional prerequisites and limitation requirements

Delhi HC quashed a blocking order issued by revenue authorities, holding it failed to comply with jurisdictional prerequisites under Section 83 of the ... Provisional attachment - blocking of bank account vs provisional attachment - jurisdictional prerequisites for provisional attachment - Rule 159(5) of the CGST Rules, 2017 - natural justice - extension of statutory timeframe by operation of Suo Motu orders - protection of revenue as object of provisional attachment under Section 83Blocking of bank account vs provisional attachment - jurisdictional prerequisites for provisional attachment - Rule 159(5) of the CGST Rules, 2017 - natural justice - Validity of the impugned communication blocking the petitioner's bank account and compliance with the statutory scheme for provisional attachment. - HELD THAT: - The communication of 25.02.2020 did not refer to Section 83 of the CGST Act, 2017 and therefore did not constitute or trigger the statutory procedure for provisional attachment entitling the petitioner to the objections mechanism under Rule 159(5) of the CGST Rules, 2017. The expression used in Section 83 is 'provisional attachment' which carries definite legal consequences and preconditions; a mere direction to 'keep the account blocked' without invoking the statutory provision or initiating the requisite proceedings is legally deficient. No proceedings under the sections identified in Section 83 (Sections 62, 63, 64, 67, 73 or 74 as they stood then) were shown to be pending when the communication issued, and the respondents failed to put to the petitioner the investigative facet relied upon (inward suppliers and alleged non receipt of foreign remittances). For these reasons the blocking order infringed principles of natural justice and lacked the jurisdictional facts necessary to sustain a provisional attachment. [Paras 11, 13]Impugned communication blocking the bank account is unsustainable and was quashed.Extension of statutory timeframe by operation of Suo Motu orders - protection of revenue as object of provisional attachment under Section 83 - Whether the interim order in Suo Motu WP(C) No.3/2020 or related proceedings under a different statute extend the timeframe or revive the operation of the impugned blocking order. - HELD THAT: - The court rejected the respondents' contention that the Supreme Court's order in Suo Motu WP(C) No.3/2020 extended the timeframe applicable under Section 83 of the CGST Act, 2017 or otherwise validated the blocking order. The Division Bench interim order in the LPA arising from a challenge under the Prevention of Money Laundering Act pertained to a different statute and addressed status quo in respect of ownership, possession and encumbrances; it did not stay the Single Judge's conclusion in the Vikas matter nor alter the statutory scheme under Section 83. Further, Section 83 provides a statutory window to enable investigation to protect revenue (and is not a limitation period in the sense contended for by respondents), and the Court was bound by the Supreme Court's ruling in Radha Krishnan which circumscribes extension of such orders in the circumstances relied upon by the respondents. Consequently the reliance on the Suo Motu order and on parity with Section 5(1) of the PMLA was found misplaced. [Paras 14]The contention that the Suo Motu order or parallel proceedings extend or validate the blocking order is not accepted.Final Conclusion: The communication dated 25.02.2020 directing the bank to keep the petitioner's account blocked is quashed for failure to comply with the jurisdictional prerequisites of provisional attachment and for infringing natural justice; the respondents are directed to inform the bank to unblock the account, subject to any other remedy available to the respondents under law. Issues:Blocking of bank account under Section 83 of the Central Goods and Services Tax Act, 2017 without compliance with jurisdictional prerequisites; Violation of principles of natural justice; Tenability of the impugned communication; Compliance with Rule 159(5) of the CGST Rules, 2017; Possibility of recovery proceedings for wrongly availed IGST refund.Analysis:The petitioner's principal grievance arose from a communication dated 25.02.2020, where the respondents/revenue directed the bank to block the petitioner's account until the credentials of M/s. Zuric Traders are established. The petitioner contended that the communication did not mention Section 83 of the 2017 Act, denying the petitioner the right to file objections as per Rule 159(5) of the 2017 Rules. The respondents argued that the impugned action was justified under Section 83, citing an extension due to a Supreme Court order in another case.The Court noted that the impugned communication lacked reference to Section 83 and was issued without jurisdictional facts. It emphasized that provisional attachment under Section 83 requires specific prerequisites and cannot be triggered without pending proceedings under relevant sections of the Act. The Court also highlighted the need for the respondents to form an opinion that attachment was necessary to protect revenue interests.The respondents claimed investigations revealed discrepancies in foreign remittances against IGST refunds credited to the petitioner's account. However, the Court found no evidence that this information was communicated to the petitioner despite multiple representations. The Court quashed the impugned communication, ordering the unblocking of the bank account and disposing of the writ petition accordingly.The judgment clarified that the impugned action was unsustainable in law and did not comply with the statutory requirements of Section 83. It rejected the argument for extending the blocking order based on a pending appeal under a different statute, emphasizing the Supreme Court's ruling on the provisions of Section 83. The Court concluded that the impugned communication was quashed, allowing for any other available remedies to the respondents/revenue for alleged legal infractions by the petitioner.