Pankaj 
2 September 2023 
122 Views 
Commenting on the validity of actions of the Respondent-Department in attaching certain bank accounts in a bid to recover tax, the High Court of Delhi observed that Section 83 of the Central Goods and Services Tax Act 2017 empowered the Department to attach bank accounts of registered taxable persons only.
A Division Bench of Justice Vibhu Bhakru and Justice Amit Mahajan, clarified that the Department could not attach bank accounts of non-taxable persons, based solely on the assumption that the funds in such accounts belonged to taxable persons.
The Petitioners were represented by Advocate Aditya Kumar, whereas the Respondent-Department was represented by Advocate Harpreet Singh.
The Department had been probing the activities of on M/s Hindustan Paper Machinery Industry, which had been the beneficiaries of fake invoices raised by one M/s Shankar Trading Company.
The Petitioners herein are the sister and nephew of one of the persons who was stated as being a partner in M/s Hindustan Paper Machinery Industry. Subsequent to proceedings being commenced against M/s Hindustan Paper Machinery Industry, tax demands were raised. Subsequently the bank accounts of the Petitioners were placed under attachment by the Department, based on the view that the funds therein belonged to M/s Hindustan Paper Machinery Industry.
On hearing the contentions of both sides, the Bench observed that the Petitioners were neither taxable persons nor persons specified under Section 122(1A) of the CGST Act 2017.
The Bench further noted the Petitioner’s contentions of the funds in their accounts, being return of advances and loans that were extended by them.
Noting that the Petitioners were not taxable persons, the Bench observed that it was not open to the Department to attach the Petitioners’ bank accounts, based only on an assumption that the funds therein belonged to a taxable person.
The Bench clarified that – “…The power under Section 83 of the Act, to provisionally attach assets or bank accounts is limited to attaching the bank accounts and assets of taxable persons and persons specified under Section 122(1A) of the Act…”.
On the aspect of attachment of bank accounts itself, the Bench observed the practice to be ‘draconian’ and cautioned that it should be invoked only where the provisions of Section 83 of the CGST Act had been satisfied.
With these observations, the Bench directed that the attachment placed over the Petitioners’ bank accounts be lifted. Nevertheless, the Department was left free to take recourse to other measures to safeguard interests of the Revenue.
Cause Title: Sakshi Bahl & Anr. Vs The Principal Additional Director General [W.P.(C) 3986/2023 / 2023-Enterslice-9-HC-Del-GST]
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