Bindal Smelting Pvt. Ltd VS Additional Director General

The Petitioner, a limited company, through an instant petition under Article 226 of the Constitution of India, is seeking the quashing of the order dated 10.07.2019 (Annexure P-8) and the order dated 12.09.2019 (Annexure P-10) passed by the Additional Director General, Gurugram, who is the Respondent, in the exercise of power conferred under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), whereby the Respondent has provisionally attached the bank account of the Petitioner. Additionally, the Petitioner has requested that the Respondent be restrained from taking any coercive steps against the Petitioner and its Directors/employees. The brief facts necessary to adjudicate the controversy involved include the initial circumstances leading to the attachment order and the legal grounds on which the Petitioner is challenging the validity and enforcement of the said order.

The Petitioner, a limited company, has filed an instant petition under Article 226 of the Constitution of India seeking to quash orders dated 10.07.2019 (Annexure P-8) and 12.09.2019 (Annexure P-10) passed by the Additional Director General, Gurugram-Respondent, who in the exercise of power under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) has provisionally attached the bank account of the Petitioner. The Petitioner further prays for the Respondent to be restrained from taking coercive steps against the Petitioner and its Directors/employees. The Petitioner is engaged in the manufacturing of lead ingots, red oxide, and grey oxide. On 27.03.2018, officials of the Respondent/GST Directorate searched the Petitioner’s premises and seized records. The Respondent repeatedly directed the Petitioner to supply various documents, which the Petitioner did, but failed to provide transporter bilty and weighment slips. The Respondent recorded statements from Petitioner’s officials and conducted further investigations, finding that the Petitioner had purchased scrap batteries from different suppliers, including 16 suppliers who are untraceable. From July 2017 to March 2018, the Petitioner availed Input Tax Credit (ITC) amounting to Rs.13.38 Crore based on invoices from these 16 suppliers. On 10.07.2019, the Respondent provisionally attached the Petitioner’s Over Cash Credit (OCC) Account maintained with Lakshmi Vilas Bank, Karol Bagh, New Delhi. The Petitioner, in accordance with Rule 159 of CGST Rules, 2017, made a representation to the Respondent, who on 23.10.2019 declined the request to lift the attachment of the bank account, leading to the filing of this petition. Mr. Bansal, counsel for the Petitioner, contends that the OCC Account in question has a utilized credit limit of Rs. 6.42 Crore, resulting in a debit balance, and its attachment effectively halts the Petitioner’s business operations, as it is impossible to conduct business activities without a functional bank account. He argues that Section 83 of the CGST Act, read with Rule 159 of the CGST Rules, 2017, is intended to protect the revenue’s interest and not to close down any business.

The Petitioner, a limited company, has filed a petition under Article 226 of the Constitution of India seeking the quashing of orders dated 10.07.2019 and 12.09.2019 passed by the Additional Director General, Gurugram, who in the exercise of power under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) provisionally attached the Petitioner’s bank account. The Petitioner also seeks to restrain the Respondent from taking coercive steps against the Petitioner and its Directors/employees. The Petitioner is engaged in manufacturing lead ingots, red oxide, and grey oxide. On 27.03.2018, officials of the Respondent searched the Petitioner’s premises and seized records, directing the Petitioner to supply various documents, which they did, except for transporter bilty and weighment slips. During the investigation, it was found that the Petitioner purchased scrap batteries from suppliers, including 16 untraceable ones, and availed Input Tax Credit (ITC) amounting to Rs.13.38 Crore based on their invoices. On 10.07.2019, the Respondent provisionally attached the Petitioner’s Over Cash Credit (OCC) Account with Lakshmi Vilas Bank, Karol Bagh, New Delhi. The Petitioner’s representation to lift the attachment was declined by the Respondent on 23.10.2019. Mr. Bansal, counsel for the Petitioner, argued that the OCC Account is utilized with a credit limit of Rs. 6.42 Crore, and its attachment effectively closes the business, affecting over 100 families dependent on the unit. He contended that Section 83 of CGST Act read with Rule 159 of CGST Rules, 2017, permits attachment to protect revenue, not to close a business, and highlighted that no show cause notice has been issued under Section 73 or 74 of the CGST Act, making any demand without such notice and adjudication unlawful. Mr. Sourabh Goel, counsel for the Respondent, argued that the Petitioner did not purchase inputs from the 16 untraceable suppliers, making them liable to repay the wrongly availed ITC of Rs.13.38 Crore, based on fake invoices and bogus transport details. He maintained that the bank account was attached to safeguard government revenue, and such attachment does not violate Articles 14, 19(1)(g), and 21 of the Constitution of India. The court is limiting its findings to the attachment of the OCC account, acknowledging that the Petitioner is a running manufacturing unit and addressing their primary grievance that this attachment equates to the closure of their business.

The Petitioner, a limited company, has filed an instant petition under Article 226 of the Constitution of India seeking to quash orders dated 10.07.2019 and 12.09.2019 passed by the Additional Director General, Gurugram (Respondent), which provisionally attached the Petitioner’s bank account under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017). The Petitioner also seeks to restrain the Respondent from taking coercive actions against the Petitioner and its Directors/employees. The Petitioner is a manufacturer of lead ingots, red oxide, and grey oxide. On 27.03.2018, officials from the Respondent’s GST Directorate searched the Petitioner’s premises, seizing records and requesting additional documents, which the Petitioner provided except for transporter bilty and weighment slips. The investigation revealed that the Petitioner purchased scrap batteries from various suppliers, including 16 untraceable ones, and availed Input Tax Credit (ITC) of Rs.13.38 Crore based on invoices from these suppliers. The Respondent provisionally attached the Petitioner’s Over Cash Credit (OCC) Account maintained with Lakshmi Vilas Bank, Karol Bagh, New Delhi, under Rule 159 of CGST Rules, 2017. The Petitioner represented to the Respondent to lift the attachment, but the request was declined on 23.10.2019. Hence, the instant petition was filed.

Mr. Bansal, counsel for the Petitioner, contended that the OCC account, with a utilized credit limit of Rs. 6.42 Crore, has a debit balance, and its attachment amounts to a business closure since business activities cannot proceed without a bank account. Section 83 of CGST Act and Rule 159 of CGST Rules are meant to protect revenue interests, not to close businesses, and with a debit balance in the account, revenue interests are not at risk. The Petitioner has availed ITC of Rs.60.89 Crore and paid GST of Rs.62.45 Crore during the GST regime, operates a running unit, and employs more than 100 families who depend on it for livelihood. No show cause notice under Sections 73 or 74 of CGST Act has been issued, making any demand prior to adjudication beyond the Respondent’s jurisdiction.

Mr. Sourabh Goel, counsel for the Respondent, argued that the Petitioner did not actually purchase inputs from the 16 untraceable suppliers, making the Petitioner liable for Rs.13.38 Crore ITC wrongly availed. The investigation showed that the scrap batteries were bought from unorganized/unregistered persons with fake invoices and bogus transport details. The bank account was attached to safeguard government revenue interests, and the contention that the account’s attachment amounts to business closure is untenable. The legislature provided for bank account attachment, which is not in violation of Articles 14, 19(1)(g), and 21 of the Constitution of India.

The only issue addressed is the attachment of the OCC account, as it purportedly results in business closure. The Petitioner is a running manufacturing unit with a debit balance of Rs.6.42 Crore in the OCC account. The investigation is ongoing, and a show cause notice under Sections 73 or 74 will be issued post-investigation. The Respondent has attached the bank account under Section 83 of CGST Act to protect revenue interests. Upon scrutinizing the case record and hearing arguments, it is evident that the Respondent has the power to attach property and bank accounts of taxable persons to protect revenue interests. An aggrieved person can make a representation against the attachment, and the Commissioner must decide after a hearing.

Section 83 of CGST Act and Rule 159 of CGST Rules provide the legal framework for provisional attachment to protect government revenue. The Commissioner can attach property, including bank accounts, if deemed necessary during the pendency of proceedings under various sections of the CGST Act. Provisional attachment ceases after one year from the date of the order. The Commissioner must pass an order in FORM GST DRC-22 to attach any property, including bank accounts, and send a copy of the order accordingly.

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