Facts of the Case

The petitioner, Shri Pradeep Kumar Siddha, had earlier obtained an order in Writ Petition No. 8915 of 2021 directing the GST authorities to unfreeze his Axis Bank account, which the bank complied with only after being threatened with contempt proceedings. Subsequently, on 20.05.2022, the CGST authorities (Thane Commissionerate) caused Rs. 62,32,400/- to be debited from the petitioner's Axis Bank account and transferred by RTGS to the department, without any instruction from the account-holder and without informing him either before or after the debit. The respondents sought to justify the action under Section 79(1)(c)(i) of the CGST Act, which the petitioner contended was inapplicable. On an earlier occasion, the Division Bench had directed the department to deposit the entire amount with the Registrar (Judicial-I) of the Court and had called for a personal affidavit from the officer responsible, explaining the legal authority for the debit.

Issues Involved

  1. Whether the CGST authorities had legal authority under Section 79(1)(c)(i) of the CGST Act to unilaterally instruct the petitioner's bank to debit and transfer funds to the department's Electronic Cash Ledger without following the procedure prescribed for such recovery.
  2. Whether the amount so debited was liable to be restored to the petitioner.

Petitioner's Arguments

  • No instruction to debit the amount had been given to Axis Bank by the account-holder, and the department had no authority of law to cause such a debit and transfer without following due procedure.
  • Section 79(1)(c)(i) of the CGST Act, being akin to a garnishee proceeding with its own procedural safeguards, was wholly inapplicable to the manner in which the respondents had acted.

Respondent's Arguments

  • The respondents initially relied on Section 79(1)(c)(i) of the CGST Act to justify debiting the petitioner's account, stating that the petitioner had not cooperated even after an earlier court order.
  • Ultimately, on instructions, the respondents' counsel conceded the deposit made in Court could be withdrawn for onward credit to the petitioner's bank account, with an officer's affidavit confirming the timeline.

Court Order / Findings

  • The Court had earlier observed that it failed to understand, prima facie, how the authorities could take away money from a person's bank account without the account-holder's permission, and without even informing him afterward, describing this as "nothing but high-handedness and gross abuse of power" amounting to harassment of taxpayers.
  • Having examined Section 79 of the CGST Act and its recovery modes, the Court found that the respondents had unilaterally deducted the amount without demonstrating any legal basis for doing so.
  • The Court permitted the respondents to withdraw the amount deposited with the Registrar (Judicial), upon the responsible officer filing an affidavit, and directed that the amount be credited to the petitioner's bank account within two weeks of withdrawal.

Important Clarification

Recovery under Section 79(1)(c)(i) of the CGST Act is a garnishee-type mechanism with its own procedural safeguards; tax authorities cannot simply instruct a bank to debit a taxpayer's account and remit funds to the department's cash ledger without following that procedure or intimating the account-holder, and doing so exposes the responsible officer to being called to personally account for the action.

Sections Involved

  • Section 79 of the CGST Act, 2017 – prescribes the modes of recovery of tax, including deduction of money due, detention/sale of goods, and garnishee-type notices under Section 79(1)(c)(i).

Decision – In Favour of

The decision was in favour of the Assessee, with the department directed to restore the entire unauthorisedly debited amount of Rs. 62,32,400/- to the petitioner's bank account.

Case Details

  • Court: High Court of Judicature at Bombay, Civil Appellate Jurisdiction
  • Case Number: Writ Petition No. 8298 of 2022
  • Coram: Nitin Jamdar and Abhay Ahuja, JJ.
  • Date of Order: 28 April 2023

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