M/S Brijbihari Concast PVT. LTD. (Through Its Director Sh. Rajeev Agarwal) vs. Directorate General Of Goods And Services Tax Intelligence Meerurt Zonal Unit (Through Its Addition

Facts

The Petitioner, M/s Brijbihari Concast Pvt. Ltd., filed a writ petition challenging an Order-in-Original dated March 28, 2024, which affirmed the provisional attachment of its bank account. The Directorate General of Goods and Services Tax Intelligence (DGGI) conducted an investigation at the Petitioner's premises, alleging unaccounted stock and evasion of GST amounting to Rs. 15.09 crores. Based on a voluntary statement from the Petitioner's Director, the DGGI provisionally attached the bank account on December 18, 2023, through Form GST DRC-22. The Petitioner contended that substantial GST and Income Tax had been paid in previous years and that the attachment was causing severe financial hardship. The DGGI stated that a show cause notice was being processed. The Court noted that over 16 months had passed since the Panchnama and one year since the impugned order, with no show cause notice yet issued.

Held

The Court held that while the DGGI had the power to provisionally attach bank accounts under Section 83 of the CGST Act, 2017, to protect revenue, such attachment should not unduly prejudice a running business, especially when no final adjudication has occurred. The Court noted that over 16 months had passed since the initial investigation and a year since the impugned order, yet no show cause notice had been issued, despite the Department having a three-year period to do so. The Court acknowledged the Petitioner's substantial tax payments and the severe financial difficulties caused by the complete attachment. Considering the net worth of the directors and the Petitioner's business operations, the Court found it sufficient to secure 10% of the alleged evaded amount. Therefore, the Court directed the Petitioner's bank account to maintain a minimum credit balance of Rs. 1.5 crores. Additionally, no third-party interest was to be created on a specific residential property until the final Order-in-Original was passed. The issue of whether the entire amount of alleged evasion was payable immediately was left to be adjudicated in accordance with law.

Key Issues

1. Whether the provisional attachment of the Petitioner's bank account under Section 83 of the CGST Act, 2017, was justified given the absence of a show cause notice and the ongoing nature of the investigation? Petitioner's Arguments: The Petitioner argued that the assessment of tax evasion was based on a mere eye-estimation by DGGI officials and that no show cause notice or formal proceedings had been initiated. They emphasized their history of substantial tax payments (over Rs. 100 crores in GST and Rs. 4.06 crores in Income Tax over three years) and the severe financial prejudice caused by the bank account attachment, which jeopardized their business. They also highlighted that the bank account balance was approximately Rs. 2.75 crores. Respondents' Arguments: The Respondent (DGGI) contended that they were in the process of issuing a show cause notice shortly and that the amount in dispute ought to be secured to protect the interest of revenue. They relied on the voluntary statement of the Petitioner's Director and the provisions of Section 83 of the CGST Act, 2017, read with Rule 159(1) of the CGST Rules, 2017, for the provisional attachment.