Delhi High Court Rules on Provisional Attachment of Bank Accounts in GST Case: Provisional Attachment Limited to Taxable Persons

In a significant judgment, the Delhi High Court addressed the issue of provisional attachment of bank accounts under the Central Goods and Services Tax Act, 2017 (CGST Act). The case involved petitioners who challenged the provisional attachment of their savings bank accounts by the Principal Additional Director General, Directorate General of GST Intelligence (DGGI), Delhi Zonal Unit. The attachment was based on an investigation into fraudulent claims of Input Tax Credit (ITC) involving fake firms.

The petitioners contended that they were neither taxable persons nor persons specified under Section 122(1A) of the CGST Act. They argued that the funds in their bank accounts were returns of advances and loans extended by them, and not proceeds from any taxable activity. The DGGI, however, proceeded with the attachment, assuming that the funds belonged to taxable persons involved in the fraudulent ITC claims.

The High Court, comprising Justice Vibhu Bakhru and Justice Amit Mahajan, examined the provisions of Section 83 of the CGST Act, which empowers the Commissioner to provisionally attach the assets of a taxable person to protect the interest of government revenue. The Court emphasized that this power is limited to attaching the assets of taxable persons and those specified under Section 122(1A). It held that the petitioners did not fall under these categories, and therefore, the attachment of their bank accounts was beyond the jurisdiction of the authorities.

The Court observed that the attachment of bank accounts is a draconian measure and should only be exercised when the conditions specified in Section 83 are fully satisfied. It stated that the exercise of power under this section must be confined within its limits and cannot be extended based on mere assumptions about the ownership of funds. Consequently, the Court set aside the order of provisional attachment of the petitioners' bank accounts.

This judgment underscores the importance of adhering to the statutory provisions while exercising powers under the CGST Act. It highlights that authorities must ensure that the conditions for provisional attachment are strictly met and that such measures are not taken arbitrarily, thereby safeguarding the rights of individuals and businesses.