Facts of the Case

The petitioner, Blue Water Expotrade India Pvt. Ltd., challenged the provisional attachment of its bank account maintained with ICICI Bank by the GST authorities. The attachment order dated 13.10.2021 was passed under Section 83 of the CGST Act.

The attachment arose during an investigation concerning alleged fake Input Tax Credit (ITC) transactions. The petitioner contended that the allegations primarily pertained to another entity, Vibe Tradex, a proprietorship concern owned by the brother of the petitioner company’s director.

Although it was admitted that both entities shared certain common vendors, the petitioner denied any involvement in fraudulent ITC activities. The director of the petitioner company had already been granted anticipatory bail, and the petitioner claimed full cooperation with the ongoing investigation.

Issues Involved

  1. Whether provisional attachment of the petitioner’s bank account under Section 83 CGST Act was justified.
  2. Whether the petitioner is entitled to relief through objection under Rule 159(5) of CGST Rules.
  3. Whether attachment can continue despite cooperation and lack of direct involvement in alleged fraud.

Petitioner’s Arguments

  • The petitioner company is not involved in fake ITC transactions.
  • Allegations are against a separate entity (Vibe Tradex), which has no legal nexus with the petitioner.
  • The petitioner is fully cooperating with the investigation.
  • The provisional attachment is arbitrary and adversely affects business operations.
  • Reliance was placed on judicial precedents including:
    • Watermelon Management Services Pvt. Ltd. v. Commissioner, CGST
    • Bhavesh Kiritbhai Kalani v. Union of India
    • Valerius Industries v. Union of India

Respondent’s Arguments

  • The provisional attachment was validly exercised under Section 83 CGST Act.
  • Investigation into alleged fake ITC transactions is ongoing.
  • The petitioner has an alternative remedy under Rule 159(5) CGST Rules by filing objections.

Court’s Findings

  • The Court refrained from making observations on merits due to the ongoing investigation.
  • It acknowledged the availability of statutory remedy under Rule 159(5).
  • The Court directed that the writ petition be treated as an objection under Rule 159(5) of CGST Rules.
  • The concerned officer was instructed to:
    • Provide a personal hearing to the petitioner
    • Pass a reasoned (speaking) order
    • Consider relevant judicial precedents cited by the petitioner

Court Order / Directions

  • The writ petition was disposed of with directions:
    • The petitioner’s appearance before the concerned officer on a specified date
    • Decision to be made within three days of hearing
    • Speaking order to be issued and communicated
  • If the order is adverse, the petitioner is granted liberty to challenge it as per law 

Important Clarification by Court

  • Even if objections are filed beyond the prescribed time under Rule 159(5), they may still be considered.
  • Authorities must pass a reasoned order after granting a fair hearing.
  • Judicial precedents must be taken into account before deciding the matter.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1875-DB/RAS13052022CW75042022_175324.pdf

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