Third-Party Payment Blockade Under GST Section 70(1) Ruled Invalid: Jurisdictional Limits Protect Taxpayer Financial Interactions

HC determined that a notice under GST Act Section 70(1) cannot direct a third party to stop payments to an assessee. The court found the payment stoppage direction exceeded the officer's jurisdictional powers, which are limited to summoning individuals for evidence or document production. The writ petition was allowed, setting aside that specific portion of the notice while permitting other procedural actions to continue.

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Issues: Challenge to notice under Section 70(1) of GST Act

Analysis:
The writ petition challenged a notice issued under Section 70(1) of the GST Act to a company, which was a customer of the petitioner. The petitioner contended that the notice contained a direction for the customer to stop all further payments to the petitioner, which was beyond the jurisdiction of the issuing authority.

Legal Arguments:
The petitioner's counsel argued that while Section 70(1) of the GST Act empowers the proper officer to summon individuals for evidence or document production, it does not authorize directing a party to stop payments. On the other hand, the Government Pleader acknowledged that the officer issuing the notice may not have the power to stop payments under Section 70(1) but argued that such power exists under Section 83 of the GST Act, which deals with provisional attachment of property or bank accounts.

Judgment:
The High Court held that the impugned notice was issued under Section 70(1) of the GST Act and not under Section 83. Section 70(1) specifically grants the power to summon individuals for evidence or document production and nothing more. The Court emphasized that under Section 70(1), the officer cannot direct a party to stop payments to the assessee. The Court clarified that the power to stop payments exists under Section 83 for protecting government revenue, but since the notice was issued under Section 70(1), the direction to stop payments was beyond the officer's jurisdiction.

Decision:
Consequently, the Court allowed the writ petition, setting aside the portion of the notice directing the customer to stop payments to the petitioner. The Court granted liberty to the officer to proceed in accordance with the law regarding the other parts of the notice issued under Section 70(1) of the GST Act. No costs were awarded, and any pending interlocutory applications were closed as a result of the judgment.

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