Karnataka High Court quashes Provisional Attachment of Bank Accounts as 10% of Disputed GST Amount was paid [Read Order]

The Karnataka High Court quashed the provisional attachment of bank accounts as 10% of the disputed GST amount was paid.

The petitioner, Sterne India Pvt. Ltd. is stated to be a Company registered under the Karnataka Goods and Service Tax Act, 2017 and engaged in the Business to Business (B2B) e-commerce trading in ‘white goods’ including mobile handsets. It is made out in the petition that the respondent was conducting a certain investigation in respect of M/s.Pal Overseas, a registered entity under the GST Act and also as regards other entities relating to the alleged issuance of bogus/fake invoices without a supply of goods and were seeking to claim Input Tax Credit of Goods and Service Tax. It is stated that the petitioner was purchasing the mobile handsets from these suppliers and was selling them to its customers.

Dharmendra Kumar Rana, the counsel for the petitioner submitted that the said factum of provisional attachment of the bank account was learned by the petitioner only from their banker. It is further submitted that the necessary representation came to be made by the petitioner in terms of Rule 159(5) of the CGST Rules seeking the release of attachment and defreezing of bank accounts, but such request was neither considered nor any order was passed as required under the applicable Rules.

The single-judge bench of Justice Sunil Dutt Yadav pointed out that the taxable entity to which the proceedings were taken out is an entity other than the petitioner and in the context of which search has been conducted with respect to the petitioner. Admittedly, no proceedings have been initiated under Section 74 of the CGST Act as against the petitioner to date. What must also be noticed is that though the statement of objections of the respondent Authority seeks to make out a case that the proceedings under Section 74 of CGST Act are sought to be instituted and in the context of which the provisional attachment under Section 83 of CGST Act is resorted to, the impending proceedings under Section 74 of the CGST Act cannot be a ground to exercise power under Section 83 for the provisional attachment.

“The respondent Authority cannot be permitted to contend that any other proceedings contemplated under Section 83 of CGST Act have been initiated, as it is made out in the provisional order of attachment enclosed at Annexure-A that proceedings have been initiated under Section 74 of the CGST Act. Any exercise of power as may be permitted statutorily which has an adverse consequence on the petitioner, would have to be strictly construed,” the court noted.

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