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., challenged the provisional attachment of 38 bank accounts imposed by the respondent authorities during GST investigation.

  • The cumulative balance in these accounts was ₹1,67,550.12.
  • Some accounts had zero balance.
  • Additionally, 13 other bank accounts belonging to persons/entities not under investigation were also attached.

The petitioners limited their relief to lifting of provisional attachment orders.

Issues Involved

  1. Whether provisional attachment of multiple bank accounts under Section 83 CGST Act was justified during investigation.
  2. Whether attachment of accounts with negligible or zero balance is arbitrary.
  3. Whether accounts of third parties (not under investigation) can be attached.
  4. What safeguards should be imposed while lifting such attachments.

Petitioner’s Arguments

  • The attachment of 38 bank accounts was excessive and disproportionate.
  • Several accounts had nil or negligible balance, making the attachment unjustified.
  • Attachment of 13 accounts not under investigation was illegal.
  • Petitioners sought lifting of attachment to enable business operations.

Respondent’s Arguments

  • The provisional attachment was necessary to protect revenue interests during investigation.
  • The department agreed to lift the attachment subject to safeguarding revenue, including payment of available balance.
  • A show cause notice was under preparation for further adjudication.

Court Findings / Order

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

  1. Provisional attachment of all 38 bank accounts to be lifted.
  2. The available balance (₹1,67,550.12) to be remitted to the Revenue.
  3. The amount to be kept in an 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 bank accounts also to be lifted.
  8. Final adjudication to be completed via a reasoned speaking order. 

Important Clarifications by Court

  • Provisional attachment must be proportionate and not excessive.
  • Attachment of accounts not linked to investigation is impermissible.
  • Revenue interests can be protected through less intrusive measures (like deposit).
  • Ensured balance between taxpayer rights and revenue protection.

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

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