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17 May 2021

Bank account can not be attached if no proceedings were pending against bank account holder – Gujarat HC

Recently in the case of “Bhavesh Kiritbhai Kalani Vs. Union of India” wherein M/s Global Corporation’s (hereinafter referred as petitioner) current account with Central bank of India was freezed by the bank on the direction of the Principal Commissioner of Central GST, Mumbai (hereinafter referred as respondent). The Petitioner directly received the attachment order without necessary details for the reasons of freezing the account. Despite his repeated requests, no information was disclosed by the authority as to why the account was freezed.

He was orally conveyed that his account was freezed due to voluminous transactions with the third party (M/s Belluxa Trading Company), which is involved in violation of the provisions of the CGST Act.

The petitioner moved an application under Right to information Act and then under this court with a grievance that section 83 does not permit the freezing of the third party account for any steps which are needed to be taken against the assesses.

The case was booked against M/s Belluxa Trading Company on the ground of procuring bogus invoices and claiming refund of accumulated ITC. As per the trail of money sum of Rs. 48,25,000 out of the total refund sanctioned to M/s Belluxa Trading Company was transferred to M/s Global Corporation on the very next day of sanction.

Learned advocate appeared on behalf of the petitioner contended on the ground that none of the proceeding under sec 62, 63, 67, 73, or 74 of the Act are pending against the petitioner. Sec 83 does not provide such powers and thus there is a need for the court to intervene. Reliance was also placed on the decision of Valerious Industries Versus Union (Special   Civil   Application   No.   13132   of 2019) wherein the Court extensively examined the scope of section 83 of the CGST Act and stated it arbitrary to freeze the bank account of the third party petitioner under sec 83 of the Act.

The court having noted that there being no proceedings under sections 62, 63, 64, 67, 73 or 74, having been initiated or pending against the writ applicant, held that the powers under section 83 of the act could not have been invoked by the respondents for the purpose of provisional attachment.

Hon’ble High Court of Gujarat in the case of Bhavesh Kiritbhai Kalani Vs. Union of India” cited in [2021] 127 taxmann.com 199 (Gujarat) held that attachment is ordered to be lifted and the petitioner was allowed to operate the bank account.