2023 (6) TMI 945 - HC - GST

HC Strikes Down Provisional Attachment of Cash Credit Account, Protecting Taxpayer Rights Under CGST Regulations

J.L. Enterprises Versus Assistant Commissioner, State Tax, Ballygunge Charge & Ors.

HC ruled that a cash credit account cannot be provisionally attached under CGST Act. The court found such attachment impermissible, emphasizing that cash ... Maintainability of petition - relegation of remedy provided under Section 159(5) of Central Goods and Services Tax Rules 2017 - provisional attachment to a cash credit account - HELD THAT:- It goes without saying that the Court has accepted the legal position which has been settled by various decisions which have been referred to in the impugned order. If such be the case, no useful purpose will be served by relegating the petitioner to avail the remedy under sub-Section 5 of Section 159 of the Rules. Therefore, the learned writ Court ought to have allowed the writ petition in its entirety instead of relegating the appellant to a remedy which is inapplicable to the cases where there is an order of provision attachment of a cash credit account. The appeal stands allowed and the order passed by the learned writ Court is set aside insofar as it directs the appellant to avail the remedy under Sub-Section 5 of Section 159 of the Rules and in other respect where the learned writ Court has rightly accepted the legal position stands confirmed - the respondents are directed to lift the order of provisional attachment of the cash credit account within 10 days from receipt of the server copy of this order. Appeal allowed. Issues: The legal question involved in the writ petition was whether an order of provisional attachment can be made to a cash credit account.Judgment Details:Issue 1: Provisional Attachment of Cash Credit Account The writ petition challenged an order of provisional attachment of a cash credit account maintained by the appellant with its banker. The Court considered various decisions cited, including one from the Gujarat High Court, which held that a cash-credit account cannot be provisionally attached under Section 83 of the CGST Act. The Court emphasized that the power of provisional attachment should be used sparingly and only on substantive grounds, with reasonable apprehension of default in revenue collection. It was concluded that the cash-credit facility is not a debt and cannot be made attachable, based on established legal precedents.Issue 2: Applicability of Remedy under Section 159(5) of the Rules The Court found that since the legal position regarding the attachment of cash credit accounts had been settled by previous decisions, there was no need to relegate the appellant to avail the remedy under sub-Section 5 of Section 159 of the Rules. The Court held that the writ petition should have been allowed in its entirety, instead of directing the appellant to pursue a remedy that was inapplicable in cases of provisional attachment of a cash credit account.Final Decision and Directions The appeal was allowed, setting aside the order directing the appellant to avail the remedy under Sub-Section 5 of Section 159 of the Rules. The respondents were directed to lift the provisional attachment of the cash credit account within 10 days. The order clarified that it did not prejudice the department's rights to initiate other proceedings and pertained only to the provisional attachment of the cash credit account, not other bank accounts of the appellant. Consequently, the appeal and connected application were allowed.This judgment highlights the importance of legal precedent in determining the attachability of cash credit accounts and emphasizes the need for authorities to exercise the power of provisional attachment cautiously and based on substantive grounds.