Facts of the Case

The petitioners, namely M/s Sun Flame Trading Pvt. Ltd., M/s Blue Star International Pvt. Ltd., and M/s Atlantic International Trading Pvt. Ltd., approached the Delhi High Court challenging the provisional attachment of 38 bank accounts by the GST authorities during the course of investigation.

It was observed that:

  • Several bank accounts had zero balance, and the cumulative balance across accounts was only ₹1,67,550.12.
  • Additionally, 13 bank accounts belonging to persons/entities not under investigation were also attached.
  • The petitioners limited their relief to lifting of the provisional attachment orders.

Issues Involved

  1. Whether provisional attachment of multiple bank accounts under GST law was justified during investigation.
  2. Whether attachment of accounts of entities not under investigation is legally sustainable.
  3. Whether protection of revenue can be ensured through alternative safeguards instead of continuing attachment.

Petitioner’s Arguments

  • The attachment of 38 bank accounts was excessive and disproportionate, especially when balances were negligible.
  • Attachment of accounts not related to investigation (13 accounts) was arbitrary and unjustified.
  • The petitioners were willing to secure the revenue interest by remitting available balance.
  • Continued attachment was hampering business operations and financial functioning.

Respondent’s Arguments (Revenue)

  • The provisional attachment was necessary to protect revenue interest during investigation.
  • The department indicated that a show cause notice was under preparation and proceedings were ongoing.
  • The respondent agreed that attachment could be lifted subject to deposit of ₹1,67,550.12 and compliance conditions.

Court’s Findings

  • The Court noted that:
    • The total balance available was minimal, and several accounts had no funds.
    • Certain attached accounts belonged to entities not under investigation, which was not justified.
  • The Court emphasized balancing revenue protection with fairness to taxpayers.
  • It accepted the arrangement suggested during proceedings to secure revenue without continuing harsh attachment measures.

Court Order / Directions

The Delhi High Court disposed of the petitions with the following directions:

  1. Provisional attachment of 38 bank accounts to be lifted.
  2. Banks to transfer available balance (₹1,67,550.12) to the Revenue.
  3. Amount to be kept in interest-bearing fixed deposit, subject to final adjudication.
  4. Petitioners to be given opportunity to contest the show cause notice.
  5. Revenue to issue show cause notice within 3 weeks.
  6. Petitioners to file quarterly bank statements for monitoring.
  7. Attachment of additional 13 accounts (non-investigated entities) also to be lifted.
  8. Proceedings to continue in accordance with law and culminate in a speaking order.

Important Clarifications

  • Provisional attachment under GST cannot be exercised arbitrarily or excessively.
  • Attachment of accounts of non-investigated persons/entities is impermissible.
  • Courts may allow conditional lifting of attachment to balance interests of both parties.

Revenue protection can be ensured through less intrusive measures, such as deposit and monitoring.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2586-DB/RAS11072022CW90482021_201359.pdf 

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