Magna Wires PVT. LTD. And Others vs. Union Of INDIA And Others

Held

The Court held that the petitioners had not exhausted the alternate and statutory remedy available to them. A plain reading of Rule 159(5) of the Central Goods and Services Tax Rules, 2007, clearly indicates that after provisional attachment of property, an applicant ought to have approached the Commissioner. The Court found that the petitioners had approached the High Court without availing this efficacious alternative remedy. Therefore, no cause of action had arisen in favour of the petitioners to invoke the inherent jurisdiction of the High Court by filing the instant petition. Consequently, the petition was dismissed on the ground of non-exhaustion of alternative remedies.

Facts

The petitioners, Magna Wires Pvt. Ltd. and others, filed a writ petition seeking directions to unfreeze their bank accounts, which were provisionally attached by Respondent No. 2 under Section 83 of the CGST Act, 2017. Additionally, they sought to unblock the input tax credit of Petitioner No. 1, blocked by Respondent No. 4. The petitioners claimed the attachment was done without notice, causing financial hardship. The respondents alleged a GST fraud of Rs. 28.46 crores involving the petitioners, citing statements from an individual named Yogesh Singh and findings from searches at the premises of M/s Satya Smelting, which was found non-operational. The respondents also pointed to Rule 159(5) of the CGST Rules, 2007, suggesting the petitioners should have first approached the Commissioner.

Key Issues

1. Whether the petitioners have exhausted the alternate and statutory remedy available to them before approaching this Court by way of a writ petition, as contemplated under Rule 159(5) of the CGST Rules, 2007? Petitioner's contention: The petitioners argued that the bank accounts were frozen without issuing them a notice, causing significant financial distress, preventing them from meeting statutory dues, paying salaries, purchasing raw materials, and covering daily expenses. They asserted that their transactions were supported by statutory invoices and they regularly filed GST returns. Respondent's contention: The respondents contended that the petitioners had failed to exhaust the efficacious alternative remedy of approaching the Commissioner, CGST, under Rule 159(5) of the CGST Rules, 2007, to seek the release of their attached bank accounts. They highlighted alleged GST fraud and the provisional attachment of bank accounts and blocking of input tax credit as actions taken during the investigation.