Facts of the Case

The petitioner, M. Madhusudan Reddy, an agriculturist aged about 68, filed a writ petition before the Telangana High Court after his savings bank account bearing No. 913010013168874 with Axis Bank, Habsiguda Branch, Secunderabad, was frozen pursuant to a Form GST DRC-13 attachment order dated 08.03.2023 issued under Section 79(1)(c) of the CGST/APGST Act by the Assistant Commissioner (ST), Tarnaka Circle. The attachment related to recovery proceedings against M/s. Maks Industries Limited, of which the petitioner had once been managing director. The petitioner's case was that he had resigned from the directorship on 22.03.2017, that the resignation was accepted by the Board of Directors on 19.03.2018 and duly communicated to and ratified by the Registrar of Companies, and that the company thereafter operated under a separate PAN and bank accounts run by other directors. Although the attachment order was dated 08.03.2023, it was allegedly acted upon by Axis Bank only around May 2023. The petitioner submitted a representation on 06.07.2023 to the Assistant Commissioner furnishing these facts along with the company's current PAN and bank details, but no action was taken. The matter was heard by a Division Bench of the Telangana High Court on 17.11.2023.

Issues Involved

  1. Whether attachment of the bank account of a former director, who had resigned years before the recovery proceedings, under Section 79(1)(c) via Form GST DRC-13 was sustainable.
  2. Whether the Department's failure to consider the petitioner's representation dated 06.07.2023, despite documentary proof of resignation ratified by the Registrar of Companies, warranted judicial intervention.
  3. Whether the writ court should itself adjudicate the correctness of the attachment or direct the Department to examine the representation first.

Petitioner's Arguments

  • The petitioner had resigned from the directorship of M/s. Maks Industries Limited on 22.03.2017, and the resignation was accepted by the Board on 19.03.2018 and ratified by the Registrar of Companies.
  • Since 19.03.2018 the petitioner had no association with the company, which was thereafter run by other directors under a separate PAN and separate bank accounts.
  • Any recovery proceedings ought to have been directed against the company and its existing directors, not the petitioner who had already exited it.
  • A detailed representation dated 06.07.2023 furnishing these facts along with the company's current PAN and bank details had been filed but no steps were taken on it.

Respondent's Arguments

  • As per the instructions available with the Department, the defaulting company was still operating using the bank account of the petitioner, which is why the attachment was passed against the PAN available with the Department.
  • The subsequent developments regarding the petitioner's resignation had not been brought to the notice of the concerned authorities.
  • If the petitioner's representation contained sufficient details, it would be scrutinised and appropriate steps taken in accordance with law.

Court Order/Findings

  • No fruitful purpose would be served in keeping the writ petition pending; ends of justice would be met by directing the Department to immediately process the petitioner's representation dated 06.07.2023 and take appropriate steps after due scrutiny.
  • The Court specifically kept in view the fact that the petitioner claims to have resigned from the directorship of the defaulter company years before the recovery action.
  • Respondent No.2 was directed to process the representation within two weeks of receipt of the order, in accordance with law.
  • The petitioner's bank account was directed to be defreezed immediately as a consequence of this direction.
  • The writ petition was disposed of without costs, with pending miscellaneous applications, if any, closed.

Important Clarification

Where a GST recovery attachment under Section 79(1)(c)/Form GST DRC-13 targets the bank account of a person claiming to have exited the defaulting entity years earlier with documentary proof of resignation ratified by the Registrar of Companies, the appropriate course is for the authority to examine such representation promptly and defreeze the account, rather than continue an attachment based on outdated PAN records.

Sections Involved

  • Section 79(1)(c) of the Central Goods and Services Tax Act, 2017 — recovery of tax by attachment.
  • Form GST DRC-13 under Rule 145(1) of the CGST Rules, 2017 — notice to a third person/bank for recovery.
  • Article 226 of the Constitution of India, 1950 — writ jurisdiction invoked.
  • Section 151 of the Code of Civil Procedure, 1908 — interim relief sought.

Decision – In Favour of

Assessee, in substance. While the Court did not record a finding quashing the attachment on merits, it directed immediate defreezing of the account and directed the Department to examine the petitioner's representation, effectively granting the practical relief sought.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition No.31830 of 2023
  • CNR: Not available
  • Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice N. Tukaramji
  • Decision Date: 17.11.2023
  • Disposal Nature: Disposed of; bank account directed to be defreezed

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