DGGI communication to Bank to freeze bank account of assessee not a valid provisional attachment order

Last updated: 10 August 2023

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Quick Summary

The Delhi High Court has ruled that a communication from the DGGI to a bank, instructing it to freeze an assessee's bank account, is not a valid provisional attachment order. The court found that such an order must be issued in the prescribed Form DRC-22 under Section 83 of the CGST Act. Communications to customers directing them not to make payments were also deemed unlawful.

Court :
Delhi High Court

Brief :
The Hon'ble Delhi High Court in M/s. Redamancy World v. Senior Intelligence Officer [W.P. (C )6208/2019 dated July 31, 2023] held communication letter sent by the Directorate General of Goods and Services Tax Intelligence ("DGGI") to the assessee's bank and customers, directing them not to make payments for the goods supplied by the petitioner, was not legally authorized, being not issued inrequisiteForm DRC-22.

Citation :
W.P. (C )6208/2019 dated July 31, 2023

The Hon'ble Delhi High Court in M/s. Redamancy World v. Senior Intelligence Officer [W.P. (C )6208/2019 dated July 31, 2023] held communication letter sent by the Directorate General of Goods and Services Tax Intelligence ("DGGI") to the assessee's bank and customers, directing them not to make payments for the goods supplied by the petitioner, was not legally authorized, being not issued inrequisiteForm DRC-22.

Facts

M/s. Redamancy World ("the Petitioner") was alleged to have wrongly availed Input Tax Credit ("ITC") and the Revenue Department was investigating the chain of suppliers. To safeguard and in interest of the Revenue the DGGI ordered to freeze the bank account of the Petitioner. The Bank of the Petitioner vide communication dated April 29, 2019 intimated the Petitioner regarding freezing of their bank account.

The Petitioner filed the writ before the Hon'ble Delhi High Court overturn a communication dated April 29, 2019 contending that Section 83 of the Central Goods & Service Tax Act, 2017 ("the CGST Act") empowers the Commissioner to provisionally attach assets, including bank accounts, of the taxpayer to protect Revenue's interests, but no such attachment order was issued by the Commissioner.

It was further pointed out that Revenue Department has sent letters to various customers of the Petitioner directing them not to make payments for the goods supplied by the Petitioner.

Issues

Whether communication to freeze bank account would be considered as a valid attachment order under Section 83 of the CGST Act?

Held

The Hon'ble Delhi High Court in W.P.(C) 6208/2019 held as under:

Observed that, no order in Form GST DRC-22 was issued to the petitioner under Section 83 of the CGST Act.
Further observed that, the communication sent to various customers of the petitioner, restraining them from making payments for goods supplied by the petitioner, was without authority of law.
Noted that, Section 83 of the CGST Act empowers the Commissioner to issue orders for provisional attachment of assets, including bank accounts, of the taxpayer only when necessary to protect the interests of Revenue. However, In the Present case, there was no specific noting in the files indicating that such action was necessary.
Disposed the writ.

FAQ :

The Delhi High Court ruled that a communication from the DGGI to a bank to freeze an assessee's bank account is not a legally authorised provisional attachment order.

A valid provisional attachment order under Section 83 of the CGST Act must be issued in the prescribed Form DRC-22.

No, the court observed that communications sent to various customers of the petitioner, restraining them from making payments, were without the authority of law.

Section 83 of the CGST Act empowers the Commissioner to issue orders for the provisional attachment of assets, including bank accounts, when necessary to protect the interests of the Revenue.

The DGGI investigated M/s. Redamancy World for allegedly availing Input Tax Credit wrongly and, to protect revenue, ordered their bank account frozen via a communication, not a formal order in Form DRC-22.