Facts of the Case

  • The petitioners, namely Ms Sun Flame Trading Pvt Ltd, M/s Blue Star International Pvt Ltd, and M/s Atlantic International Trading Pvt Ltd, had multiple bank accounts provisionally attached by the respondent authorities.
  • A total of 38 bank accounts belonging to the petitioners were under attachment.
  • The cumulative credit balance across these accounts was Rs. 1,67,550.12/-, with several accounts having zero balance.
  • Additionally, 13 other bank accounts belonging to entities/persons not under investigation were also attached.
  • The petitioners confined their relief to lifting of provisional attachment of these accounts.

Issues Involved

  1. Whether provisional attachment of multiple bank accounts, including those with negligible or zero balance, is justified under GST law.
  2. Whether attachment of accounts of entities not under investigation is legally sustainable.
  3. Whether such attachment is disproportionate to the interest sought to be protected by the revenue.

Petitioner’s Arguments

  • The attachment of 38 bank accounts was excessive and disproportionate.
  • Several accounts had no or negligible balances, rendering attachment unnecessary.
  • Inclusion of 13 accounts not under investigation was arbitrary and beyond jurisdiction.
  • The petitioners sought lifting of attachment subject to reasonable safeguards to protect revenue interest.

Respondent’s Arguments

  • The provisional attachment was necessary to safeguard revenue during investigation.
  • The department was in the process of issuing a show cause notice.
  • The revenue agreed to lift attachment subject to deposit/remittance of the cumulative balance amount and compliance conditions.

Court’s Findings / Order

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

  1. Provisional attachment of 38 bank accounts to be lifted, subject to remittance of Rs. 1,67,550.12/- to the revenue.
  2. The amount remitted shall be kept in an interest-bearing fixed deposit and will abide by final adjudication.
  3. Petitioners to file quarterly bank statements for monitoring.
  4. Petitioners to be given opportunity to respond to show cause notice.
  5. Revenue to issue show cause notice within three weeks.
  6. Revenue to pass a speaking order after adjudication.
  7. Attachment of additional 13 accounts (not under investigation) also directed to be lifted.

Important Clarification by Court

  • Provisional attachment must be proportionate and justified.
  • Attachment of accounts with minimal or zero balance lacks practical justification.
  • Accounts of persons/entities not under investigation cannot be arbitrarily attached.
  • Revenue interest can be protected 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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