GST Authority cannot block the bank accounts or ECL beyond an year if assessee is cooperating

The Hon'ble Delhi High Court in M/S Krishna Fashion vs. Union of India & Ors. [W.P. (C) 602/2022 & CM APPL. 1696/2022 dated January 18, 2022] held that once the assessee is cooperating and has submitted the relevant documents to the Revenue Department then the bank accounts and Electronic Credit Ledger ("ECL") of such assessee to be unblocked upon the expiry of one year from the date of imposing such restrictions.

Facts

M/s Krishna Fashion ('the Petitioner') filed this present writ petition before the Delhi High Court challenging the order dated March 16, 2020 ("Impugned order') passed by the Revenue Department ('the Respondents') stating that the Respondents have attached the Petitioner's bank account maintained in Union Bank of India and blocked the ECL.

The Petitioner contented that as per the Rule 86A(3) of the Central Goods and Services Tax Rules, 2017 ('the CGST Rules') the ECL was supposed to be unblocked on February 05, 2021 upon completion of one year from the date of imposing such restrictions. However, it continued to remain the same.

Also, as per the Section 83(2) of the Central Goods and Services Tax Act, 2017 ('the CGST Act') the Impugned order will stand invalid upon completion of one year from the date of passing such order.

The Respondents argued that there were no new GST DRC-22 (i.e., Provisional attachment of property under Section 83 of the CGST Act) issued in this matter, the Petitioner has not appeared before the Investigating Officer despite of the service of the summons and not even produced the relevant documents.

Issue

Whether the Respondent has the power to keep the bank account and the ECL blocked under Section 83(2) of the CGST Act and Rule 86A(3) CGST Rules beyond one year?

Held

The Hon'ble Delhi High Court in W.P. (C) 602/2022 & CM APPL. 1696/2022 dated January 18, 2022 held as under:

• Observed that the Petitioner has cooperated with the investigating agencies and will continue to appear before the Investigating Authorities as and when required along with the relevant documents.
• Directed the Respondents to de-freeze the bank account of the Petitioner maintained with M/S Union Bank of India as well as unblock the ECL within three working days of uploading the present order.

Relevant Provisions

Section 83(2) of the CGST Act

'83. Provisional attachment to protect revenue in certain cases

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section.'

Rule 86A(3) of the CGST Rules

'86A. Conditions of use of amount available in electronic credit ledger: -

(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.'