Naval Kumar & Ors. vs. Commissioner Of Central Taxes GST Delhi East

Facts

The petitioners, Naval Kumar & Ors., filed a writ petition challenging a letter dated December 7, 2020, issued under Section 83 of the CGST Act, 2017, by the Commissioner of Central Taxes GST Delhi East. This letter directed bankers to provisionally attach the bank accounts and immovable properties of the three petitioners. The petitioners sought the release of these attached assets. The respondent stated that a show cause notice dated July 15, 2021, under Section 74 of the CGST Act had been issued to the petitioners proposing penalties. Subsequently, fresh DRC-22 notices were issued, freezing the bank accounts for Rs. 25,000/- each to secure penalties under Section 122(3) of the CGST Act.

Held

The Court directed the bankers of the petitioners to debit freeze each petitioner's account for Rs. 25,000/-. The Court also ordered the release/de-freezing of the immovable properties of the petitioners within three days from the date of the order. Furthermore, the Petitioners' bankers were directed to allow the Petitioners to utilize the amount lying in their bank accounts over and above the sum of Rs. 25,000/-. The reasoning was based on the agreement reached between the parties, where the petitioners consented to a limited freeze of Rs. 25,000/- per account pending final adjudication, and the respondent's action of issuing show cause notices and seeking to secure a limited amount. The ratio decidendi is that in cases where a limited amount is sought to be secured pending adjudication, and the assessee agrees to such a limited freeze, the Court may direct accordingly, while releasing other attached assets.

Key Issues

1. Whether the provisional attachment of bank accounts and immovable properties under Section 83 of the CGST Act, 2017, was justified in light of the subsequent issuance of a show cause notice under Section 74 of the CGST Act, 2017, and penalty proceedings under Section 122(3) of the CGST Act, 2017? Petitioner's contention: The petitioners argued that while they had no objection to their accounts being debit-frozen for Rs. 25,000/- each, subject to the final determination of the show cause notices, they prayed for the release of amounts exceeding Rs. 25,000/- in their bank accounts for utilization. Respondent's contention: The respondent indicated that a show cause notice under Section 74 of the CGST Act had been issued, proposing penalties, and that fresh DRC-22 notices were issued to freeze bank accounts for Rs. 25,000/- each to secure penalties under Section 122(3) of the CGST Act.