Attachment of the bank account of the person owing debt of the taxable person in question cannot be subject to a provisional attachment order U/s 83 of the CGST Act : Delhi HC

ZHUDAO INFOTECH PVT LTD (ZIPL)

Issue: ZIPL is providing online gateway services under the trade name “ Onion Pay”. The department passed the impugned order to attach the petitioner’s bank account on the alleged grounds that the petitioner is indulged in evasion of GST. The department further alleged that some of the merchants registered on the gateway are suspected to be fake and shell companies and there are certain contraventions of FEMA for which RBI issued a compounding order.

Order:Sec 83 can be invoked only for attaching account of taxable person or a person specified u/s 122(1A) of the CGST Act if the Commissioner deems it for the purpose of protecting the interest of government revenue. The department have accepted the fact that there is no outstanding demand or any issue regarding ZIPL’s liability under the GST Act. The HC held that Since there is no outstanding liability of ZIPL, the bank of account of ZIPL cannot be attached for any amount due or payable by ZIPL to the merchants by who are using ZIPL’s online platform. The bank account of ZIPL cannot be attached for securing the revenue of the of another taxable person, in the given case the merchants using ZIPL’s platform. Moreover, the court also held that a debt owed by any person to the taxable person, whose assets or bank accounts are liable to be attached under Section 83 of the CGST Act, can be attached as assets of the taxable person however bank account of the person owing such debt cannot be attached U/s 83. The court set aside the impugned order of the department on conditions that ZIPL will make the payment in those bank account of the merchant’s which are disclosed by ZIPL. The court reserved itself from examining the action taken by RBI.