Tax Dispute Resolved: Partial Bank Account Access Granted While Investigating Alleged GST Refund Fraud Under Section 74

HC ruled on a tax dispute involving provisional attachment of bank account under CGST Act. Court allowed petitioner to operate bank account above Rs.2.4 crores while permitting investigation into alleged fraudulent GST refund. Respondent's power to freeze assets was upheld, but communication deficiencies were noted. Petitioner directed to seek further clarification from bank, with all legal remedies reserved.

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Issues:
Petitioner's bank account frozen under Section 83 of the CGST Act without being informed of reasons - Allegations of fraudulent GST refund and non-response to summons - Provisional attachment of assets - Dispute over freezing amount - Relief sought for operating bank account - Grievance against Respondent no.3.

Analysis:

Issue 1: Freezing of Bank Account under Section 83 of the CGST Act
The petitioner challenged the freezing of their bank account under Section 83 of the CGST Act, contending that they were not informed of the reasons for the same. The communication dated 06.12.2022, issued by Respondent no.3, stated that the petitioner was non-existent and had not responded to summons. The court noted that Respondent no.3 had the power to provisionally attach assets under specific circumstances to protect government revenue. The petitioner, named as a suspicious entity colluding to fraudulently avail GST, had allegedly received a refund under investigation. The court clarified that the bank account could be frozen up to the amount of Rs.2.4 crores, allowing the petitioner to operate the account above this balance.

Issue 2: Allegations of Fraudulent GST Refund and Non-Response to Summons
Respondent no.3 alleged that the petitioner had fraudulently availed a GST refund of Rs.2.4 crores, leading to the investigation. It was highlighted that the petitioner did not respond to the summons issued under Section 70 of the CGST Act, indicating non-cooperation. The court considered these allegations in determining the extent to which the bank account could be frozen, emphasizing the need to protect government revenue in such cases.

Issue 3: Relief Sought for Operating Bank Account
The petitioner sought relief to operate the bank account beyond the frozen amount of Rs.2.4 crores. The court allowed the petitioner to access the bank account above this specified balance, ensuring that they could conduct transactions beyond the frozen sum. The court directed the bank to provide reasons for freezing the account, granting the petitioner the opportunity to seek clarification directly from the bank.

Issue 4: Grievance Against Respondent no.3
The petitioner raised grievances against Respondent no.3 for freezing the bank account without prior communication to the bank. The court noted that no communication was issued to ICICI Bank before 06.12.2022 regarding the freezing of withdrawals from the petitioner's account. Consequently, the petitioner was directed to address any concerns regarding the operation of the bank account directly with ICICI Bank, emphasizing that the petitioner could approach the bank for clarification on the freezing of the account.

Conclusion
The court disposed of the petition with observations, reserving all remedies for the petitioner. It stressed the need for expeditious completion of proceedings against the petitioner by the Respondents. The judgment provided clarity on the freezing of the bank account, specifying the permissible amount for provisional attachment and granting the petitioner the right to operate the account above the frozen balance.

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