Pranit Hem Desai vs. Additional Director General

Held

The Court allowed all six writ applications, quashing and setting aside the orders of provisional attachment of the bank accounts of the writ applicants. The Court reiterated that the power under Section 83 of the CGST Act is drastic and must be exercised sparingly and only on substantive weighty grounds with valid reasons. It emphasized that provisional attachment should not be used to harass the assessee or cause irreversible detrimental effects on their business. The Court noted that attachment of bank accounts should be a last resort, as it can paralyze business operations. The Court found that the attachment in this case was not justified and ordered its removal, making the rule absolute.

Facts

The petitioners, Pranit Hem Desai and a company (Petitioner No. 2), filed multiple Special Civil Applications challenging the provisional attachment of bank accounts belonging to Petitioner No. 2. Petitioner No. 2 is a manufacturer registered under GST, regularly paying taxes and availing Input Tax Credits (ITC). On March 18, 2019, Petitioner No. 1 was arrested by the Directorate General of Goods & Service Tax Intelligence (DGGI) on allegations of fraudulent ITC passing by several companies, including those associated with Petitioner No. 1. Subsequently, on April 3, 2019, the respondent authorities issued orders (Form GST DRC-22) to various banks to provisionally attach bank accounts of several companies, including Petitioner No. 2, based on investigations revealing alleged fraudulent ITC utilization of over Rs. 43.00 Crore. The petitioners sought immediate removal of these attachments.

Key Issues

1. Whether the provisional attachment of bank accounts under Section 83 of the CGST Act, 2017, was justified given the facts and circumstances of the case? (Question of law and fact) The petitioners argued that the attachment was arbitrary and illegal, as no specific allegations were made against Petitioner No. 2 company. They contended that the investigation report lacked bifurcation of alleged fake invoices or illegal credit transfers by individual companies. The petitioners emphasized that Petitioner No. 2 is a regular taxpayer and the attachment would severely impact its business operations. They relied on the principle that provisional attachment should be a last resort and exercised with extreme care. The revenue, represented by the Additional Director General, likely argued that the attachment was necessary to protect the interest of the revenue pending investigation into alleged large-scale fraudulent ITC claims.