M/S Vikas Enterprises vs. Commissioner Of Central Tax (GST), Delhi North & Anr.

Facts

The petitioner, M/s Vikas Enterprises, filed a writ petition challenging a communication dated March 25, 2022, issued by the Superintendent (Anti-Evasion) to the Branch Manager of the State Bank of India. The communication requested documents pertaining to the petitioner and directed the bank not to permit any debit from the petitioner's account without prior permission from the Department. The respondents' counsel was unable to identify a statutory provision under the CGST Act that permitted the Superintendent to issue such a communication freezing the bank account. While Section 83 of the CGST Act empowers the Commissioner for provisional attachment of assets, no such order was issued by the Commissioner in this case. The petitioner had also filed objections under Rule 159(5) of the CGST Rules, which were not considered.

Held

The Court held that the impugned communication dated March 25, 2022, issued by the Superintendent (Anti-Evasion) to the bank, directing a debit freeze on the petitioner's account, was without authority of law. The Court found that the Superintendent lacked the power to issue such a direction, as the power to provisionally attach assets, including bank accounts, under Section 83 of the CGST Act vests solely with the Commissioner, and requires a specific order to be passed by the Commissioner upon being satisfied that it is necessary to protect the interest of the revenue. The Court noted that no such order was issued by the Commissioner, and the communication emanated from an officer who did not possess the requisite authority. The Court also observed that the respondents had disregarded statutory provisions with impunity. Consequently, the Court set aside the impugned communication to the extent it sought to place a debit freeze on the petitioner's account. The Court also imposed costs of ₹5,000/- on the respondents, to be recovered from the concerned officer (respondent no.2).

Key Issues

1. Whether the communication dated March 25, 2022, issued by the Superintendent (Anti-Evasion) to the bank, directing a debit freeze on the petitioner's bank account, is legally sustainable under the Central Goods and Services Tax Act, 2017 ('CGST Act')? Petitioner's arguments: The petitioner contended that the impugned communication was issued without authority of law and in disregard of statutory provisions. They argued that the power to freeze bank accounts under Section 83 of the CGST Act can only be exercised by the Commissioner and requires a satisfaction that it is necessary to protect the interest of the revenue. The petitioner also highlighted that the bank account in question was a cash credit account, making its operation difficult. They further stated that their objections filed under Rule 159(5) of the CGST Rules were not considered. Revenue's arguments: The respondents' counsel could not point to any specific provision under the CGST Act that permitted the Superintendent to issue such a communication. While Section 83 was referred to, it was admitted that no order of provisional attachment was issued by the Commissioner. The respondents also argued that the order freezing the bank account would cease to be operative as a period of one year had elapsed, but this was based on the premise that the communication was a Section 83 order, which was not the case.