Gehna Trading LLP VS Union Of India

In this petition, the petitioner is contesting the decision of the respondents to provisionally attach their bank account. The dispute stems from a communication dated December 6, 2019, from the Deputy Commissioner of Central Goods and Service Tax (CGST) to the branch manager of the bank where the petitioner holds an account. This communication was regarding legal proceedings against Yusuf Fauzdar Shaikh, who is presumably connected to the petitioner as a proprietor.

In the case involving M/s. Fashion Creations, legal action has been initiated against the aforementioned taxable entity. The respondents, who are involved in the proceedings, suspect that funds are being transferred to various individuals, including the petitioner. Consequently, a directive was issued to the bank, instructing them not to permit any withdrawals from the account in question.

However, it’s worth noting that the order doesn’t explicitly cite any specific legal provision. The petitioner’s legal counsel highlights that the authority to provisionally attach a bank account lies within Section 83 of the Central Goods and Services Tax (CGST) Act, 2017. The petitioner’s counsel argues that for such attachment to be valid under Section 83, proceedings must have been initiated against the petitioner under Sections 62, 63, 64, 67, 73, and 74 of the CGST Act. As per the counsel’s interpretation, the absence of proceedings under these sections renders the attachment invalid.

In the case presented, the learned counsel for the Petitioner draws attention to a previous ruling by this Court from January 17, 2020, in Writ Petition No. 3145 of 2019 (Kaish Impex Pvt. Ltd. v/s. Union of India & Ors.). The focus of this reliance is on the interpretation of certain sections of the Act.

The crux of the argument lies in the interpretation of Section 83 of the Act, particularly in relation to the issuance of summons under Section 67. The Respondents argue that even if certain sections mentioned in Section 83 are not directly applicable to the Petitioner’s case, the summons issued to the Petitioner as part of an inquiry against another entity effectively extends the proceedings to the Petitioner.

However, the counsel contends that such an interpretation goes beyond what is permitted by the legislature. They argue that Section 83, when analyzed alongside Rule 159(1) and the form GST DRC-22, provides a specific scheme for provisional attachment in certain cases. The phrase ‘pendency of any proceedings’ in Section 83 is asserted to be applicable only to proceedings under specific sections of the Act (i.e., sections 62, 63, 64, 67, 73, and 74), and not to be automatically extended to other taxable persons based on inquiries against unrelated entities.

Furthermore, it is emphasized that Section 83, in conjunction with Section 159(2) and the form GST DRC-22, requires proceedings to be initiated against a specific taxable person. This suggests that the attachment of a bank account is tied to proceedings initiated against the taxable person under the specified sections, and does not extend automatically to others based solely on related inquiries.

In summary, the learned counsel for the Petitioner argues that the interpretation proposed by the Respondents exceeds the legislative intent behind Section 83 and its associated provisions. They maintain that the attachment of assets should be confined to cases where proceedings are initiated against the specific taxable person in accordance with the relevant sections of the Act.

In the realm of tax enforcement, the utilization of provisional attachment orders, particularly in the form of GST DRC-22, is deemed necessary to safeguard the interests of revenue. These orders serve as a crucial tool in ensuring that tax obligations are met and potential revenue losses are minimized. The format of such orders meticulously outlines the particulars of the registered taxable person and the proceedings initiated against them, establishing a clear nexus between the pending proceedings and the provisional attachment of their bank account.

However, it’s essential to recognize that the power to provisionally attach bank accounts is a significant and potentially disruptive measure. Courts have consistently underscored the need for caution in exercising this power, emphasizing that it should not be wielded routinely. While Section 83 grants authorities the authority to provisionally attach bank accounts to protect government revenue, it does so within clearly defined boundaries. This power should only be invoked under the contingencies outlined therein and is not an unrestricted prerogative.

Therefore, it is unreasonable to entertain the argument that bank accounts of unrelated taxable persons can be provisionally attached solely based on summons issued to one of them under section 70. Such an interpretation would stretch the scope of the provision beyond its intended limits and could lead to unjust consequences for taxpayers. Instead, the power to provisionally attach bank accounts should be exercised judiciously and only in circumstances explicitly provided for by the law, ensuring a fair balance between tax enforcement and taxpayer rights.

In the current case, the circumstances mirror those of a previous case involving Kaish Impex Pvt. Ltd. The petitioner in this case has a rightful claim to success. As a result, the writ petition is granted. The order issued by the respondent on December 6, 2019, which entailed attaching the petitioner’s bank account, as outlined in the petition, is declared null and void.

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