Bank Account Freeze by Tax Authorities Invalidated Due to Lack of Proper Statutory Authorization Under CGST Act

HC ruled that the bank account freeze by tax authorities was unauthorized under CGST Act. The court found respondent lacked proper statutory authority to issue freezing order without Commissioner's directive. The communication was set aside, emphasizing strict adherence to legal procedures. Respondent was directed to comply with law and was imposed a cost of Rs. 5,000 for non-compliance.

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Issues involved:
The petitioner challenged a communication freezing their bank account issued by respondent no. 2, Superintendent (Anti-Evasion) Group 1, without proper authority under the Central Goods and Services Tax Act, 2017 (CGST Act).

Summary:

Issue 1: Authority to Freeze Bank Account
The petitioner contested a communication freezing their bank account, arguing that respondent no. 2 lacked the authority under the CGST Act to issue such a directive without an order from the Commissioner, as mandated by Section 83 of the CGST Act.

Issue 2: Adverse Effects of Freezing Orders
Citing precedents like Radha Krishan Industries v. State of Himachal Pradesh & Ors., the court highlighted the serious adverse impact of freezing bank accounts without proper authority. It emphasized that such powers must only be exercised when necessary to protect the interest of revenue, subject to strict conditions.

Issue 3: Lack of Consideration of Objections
The petitioner's objections under Rule 159(5) of the CGST Rules were not considered by the respondents, indicating a failure to follow due process and address the concerns raised by the petitioner regarding the freezing of the bank account.

Issue 4: Setting Aside the Impugned Communication
The court set aside the communication directing the freeze on the petitioner's bank account, emphasizing the need for respondents to adhere to statutory provisions and imposing a cost of Rs. 5,000 on respondent no. 2 for disregarding the law.

Conclusion:
The court ruled in favor of the petitioner, quashing the unauthorized communication freezing the bank account and directing the respondents to comply with the law. It also imposed a cost on the concerned officer for the non-compliance.

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