Facts of the Case:

In this case, the petitioner company challenged Form GST DRC-13 dated 14.10.2025, whereby a sum of ₹24,73,000 was recovered from its bank account maintained with Canara Bank. The recovery pertained to GST dues allegedly payable by M/s. Xylem Resource Management Private Limited (XRMPL) for FY 2022-23.

The petitioner and XRMPL are separate juristic entities, though one common director (Mr. Gautam Chowdhury) was a Director in both companies. A show-cause notice under Section 73 had been issued to XRMPL alone on 01.08.2023, culminating in an adjudication order dated 29.11.2023 against XRMPL.

Instead of recovering dues from XRMPL, the department issued DRC-13 directly to the petitioner’s bank, attaching and recovering money from the petitioner’s account, despite no proceedings against the petitioner, the petitioner not being a garnishee, and no amount being payable by the petitioner to XRMPL.

The petitioner relied upon the Karnataka High Court judgment in SJR Prime Corporation Pvt. Ltd. v. Superintendent of Central Tax and the Bombay High Court judgment in Galaxy International v. Union of India, both dealing with illegal invocation of Section 79 garnishee proceedings.

Issue:

Whether recovery proceedings under Section 79 of the CGST/KGST Act can be initiated against a company that is neither the defaulter nor a garnishee. Whether the doctrine of lifting the corporate veil can be invoked merely because the defaulter company and the third-party company share a common director. Whether issuance of DRC-13 directly to the bank, without first serving notice upon the alleged garnishee, is legally sustainable.

Held that:

The Court held that the petitioner -Company and XRMPL are independent legal entities. Merely because one individual is a Director in both companies, the petitioner cannot be saddled with tax liabilities of XRMPL. Further, recovery under Section 79(1)(c) is permissible only against a person who owes money to the defaulter, or who holds or may hold money on behalf of the defaulter. Since the petitioner was neither a garnishee nor liable to XRMPL, the recovery was held to be without authority of law.

The Court held that lifting of the corporate veil cannot be resorted to merely due to common directorship, in the absence of fraud, sham transactions, or statutory justification.

Relying on SJR Prime Corporation Pvt. Ltd. and Galaxy International, the Court reiterated that a notice must be served on the alleged garnishee, the garnishee must be given an opportunity to establish that no amount is due, before any attachment or recovery from its bank account.

The impugned DRC-13 was held to be unsustainable, warranting quashing and refund of the amount recovered, subject to due verification.

Case Name: M/s. Ramms India Private Limited Versus The Deputy Commissioner of Commercial Taxes Bengaluru, The Manager Canara Bank Karnataka, M/s. Xylem Resource Management Private Limited Karnataka. Dated 19.12.2025

To read the complete judgement 2025 Taxo.online 3502