Bhavesh Kiritbhai Kalani vs. Union Of INDIA

Held

The Court held that the provisional attachment of the petitioner's bank account under Section 83 of the CGST Act, 2017, was impermissible. The Court noted that no proceedings had been initiated against the petitioner under Sections 62, 63, 64, 67, 73, or 74 of the Act. Therefore, invoking Section 83 against the petitioner, who is a third party in relation to the alleged violations by M/s. Belluxa Trading Company, was not justified. The Court found the action of freezing the account to be harsh and stated that such drastic powers must be exercised judiciously and in accordance with the statute. The Court also observed that the bank's failure to provide information under the RTI Act, citing pending investigation, was impermissible, especially when the freezing of the account was not statutorily permitted. The Court quashed the communication dated 28.08.2020 and ordered the attachment to be lifted, permitting the petitioner to operate his bank account. The Court explicitly stated that it was not addressing the proceedings initiated under Section 79 of the CGST Act, as the petitioner had not challenged them in this petition and wished to challenge them before the appropriate forum.

Facts

The petitioner, Bhavesh Kiritbhai Kalani, proprietor of M/s. Global Corporation, a commission agent, had his bank account frozen on August 20, 2020, by an order from the Principal Commissioner of Central GST, Mumbai. The petitioner claims he was not given an opportunity to be heard. The freezing was allegedly due to his transactions with a third party involved in CGST Act violations. The petitioner sought information from the bank and the GST authority but received no satisfactory explanation. He later learned through an RTI reply that the information could not be disclosed as it would impede an investigation. The petitioner contends that Section 83 of the CGST Act does not permit freezing accounts of third parties for actions against assesses.

Key Issues

1. Whether the provisional attachment of the petitioner's bank account under Section 83 of the CGST Act, 2017, is permissible when no proceedings have been initiated against the petitioner himself under Sections 62, 63, 64, 67, 73, or 74 of the Act, and the attachment is based on alleged transactions with a third party involved in violations. Petitioner's arguments: The petitioner argued that Section 83 of the CGST Act does not empower authorities to freeze the bank account of a third party for alleged violations committed by another assessee. He relied on the judgments in Valerius Industries Vs. Union of India and Kaish Impex Pvt. Ltd. Vs. Union of India. Revenue's arguments: The respondents contended that the petitioner's account was frozen because a sum of Rs. 48,25,000/-, part of a refund obtained by M/s. Belluxa Trading Company through bogus invoices, was transferred to the petitioner's account. They stated that proceedings under Section 79 were initiated for recovery of proceeds of crime, and the bank was asked to withhold the amount. They also claimed the case involved fraud and willful misstatement under Section 29(2)(e) and that a show cause notice under Section 74 was issued to M/s. Belluxa Trading Company.