2023 (4) TMI 48 - HC - GST

High Court Invalidates Provisional Bank Account Attachment, Ruling Respondent Exceeded Jurisdictional Limits Under GST Act Section 83

Sakshi Bahl & Anr. Versus The Principal Additional Director General

HC found the provisional attachment of petitioners' bank accounts unlawful. The court determined that the respondent lacked jurisdiction under Section 83 ... Provisional attachment of the savings bank accounts of the petitioners - It is the petitioner's case that they are neither taxable persons nor persons covered under Section 122(1A) of the Central Goods and Services Tax Act, 2017 - jurisdiction of impugned order - allegation of fake firms involved in passing off fake Input Tax Credit - Section 83 of GST Act - HELD THAT:- Concededly, in the present case, the petitioners are not taxable persons or persons as specified in Section 122(1A) of the Act - The petitioners have also annexed the statement of account which indicates that over a period of 9 years, ₹12.62 crores had been withdrawn from the account of petitioner no. 1 in favour of M/s Hindustan Paper Machinery Industry or Mr. Rajiv Chawla. The statement also indicates that the petitioner no. 1 had received ₹6,05,50,000/- during the aforesaid period. It is not necessary for this Court to examine the nature of the payment made by Shri Rajiv Chawla to the petitioners. Clearly, the same cannot be a subject matter of adjudication in these proceedings. However, it is clear that the petitioners are not taxable persons. The power under Section 83 of the Act, to provisionally attach assets or bank accounts is limited to attaching the bank accounts and assets of taxable persons and persons specified under Section 122(1A) of the Act. The impugned order cannot be sustained. It is not open for the respondent to attach the bank accounts of other persons on a mere assumption that the funds therein are owned by any taxable person - The attachment of bank accounts is a draconian step and such action can only be taken in case conditions specified in Section 83 of the Act, are fully satisfied. The exercise of power under Section 83 of the Act must necessarily be confined within the limits of the aforesaid provision. The order dated 06.02.2023 in so far as it attaches the bank accounts of the petitioners is set aside - Petition allowed. Issues Involved: The petitioners challenged an order for provisional attachment of their savings bank accounts by the respondent, alleging lack of jurisdiction and wrongful assumption of ownership of funds.Jurisdictional Challenge: The petitioners contended that they were not taxable persons nor covered under Section 122(1A) of the Central Goods and Services Tax Act, 2017, making the impugned order without jurisdiction.Factual Background: The respondent attached the petitioners' bank accounts based on statements made by individuals during an investigation into fake firms involved in fraudulent activities related to Input Tax Credit.Legal Analysis: The court examined Section 83 of the Act, which allows provisional attachment of assets of taxable persons, noting that the petitioners were not taxable persons as per the Act. The petitioners claimed the funds were returns of advances and loans extended by them, supported by detailed account statements.Court's Decision: The court found the impugned order unsustainable, emphasizing that the power to attach assets or bank accounts under Section 83 is limited to taxable persons or those specified under Section 122(1A) of the Act. The court set aside the order attaching the petitioners' bank accounts, highlighting that such actions must strictly adhere to the provisions of the Act.Final Order: The petition was allowed, and the order attaching the bank accounts was annulled, with a clarification that the respondents could take lawful steps to protect revenue interests.