Bank account attachment for alleged fake ITC via "dummy" company u/s83 CGST quashed for lack of basis

Provisional attachment of a company's bank accounts under s.83 CGST was challenged where the authorities alleged it was a dummy entity facilitating fraudulent ITC. The HC held that attachment premised on s.122(1A) can be ordered only by a Commissioner having jurisdiction over the relevant taxable person, and s.122(1A) applies only where the person retains the benefit of specified transactions or the transactions are conducted at that person's instance; absent any such allegation against the petitioner, the attachment was unsustainable and was set aside. The HC further held that s.83 requires an opinion based on relevant material and a live nexus, not suspicion based merely on a director's prior employment; the attachment order was quashed, with liberty to proceed in accordance with law.

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Issues Involved:
1. Jurisdiction of the respondent to issue the attachment order.
2. Validity of the attachment order based on its content and necessity.

Summary:

Jurisdiction of the Respondent:

16. The primary issue is whether respondent no. 1 had the jurisdiction to pass the impugned order attaching the petitioner's bank account maintained with Punjab National Bank, Pitampura, Delhi. The petitioner's principal places of business are in Haryana and Uttar Pradesh, which do not fall under the territorial jurisdiction of respondent no. 1 (Principal Commissioner, CGST, Meerut).

18. Mr. Harpreet Singh did not contest that respondent no. 1 lacks territorial jurisdiction over the petitioner but argued that the attachment was justified due to the petitioner's involvement in fraudulent ITC transactions with M/s Best Crop Science Pvt. Ltd., which was under investigation by respondent no. 1.

24. The term 'the Commissioner' in Section 83 of the CGST Act refers to the Commissioner who exercises jurisdiction over the taxable person. Since respondent no. 1 does not have jurisdiction over the petitioner's principal places of business, he lacked the authority to pass the attachment order.

26. The jurisdiction of respondent no. 1 is confined to taxable persons within its territorial limits or persons specified under Sub-section (1A) of Section 122 of the CGST Act. The attachment order is thus invalid as respondent no. 1 had no jurisdiction over the petitioner.

Validity of the Attachment Order:

30. The impugned order is liable to be set aside on the jurisdictional ground alone.

31. Additionally, the attachment order must be based on the Commissioner's opinion that it is necessary to protect the interest of the Government and the Revenue, formed on credible material.

32. The Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh & Ors. emphasized that the power to order a provisional attachment is draconian and must be exercised based on tangible material.

35. The attachment order did not indicate any reason for forming an opinion that the petitioner is likely to defeat any tax demand if the bank account is not attached.

42. The principal reason for attaching the petitioner's bank account, the alleged parking of sale proceeds from M/s Best Agro Group's shares, lacked any tangible material and was based on unsubstantiated suspicion.

44. The suspicion that the petitioner is a dummy company due to one of its directors being an employee of M/s Best Crop Group is also based on assumptions and not on concrete evidence.

47. The opinion required under Section 83 of the CGST Act must be based on relevant facts, not mere suspicion. The attachment order fails to meet this standard.

Conclusion:

48. The attachment order is set aside. However, the authorities are not precluded from proceeding against the petitioner in accordance with the law.

49. The petition is disposed of accordingly.

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