17.08.2023: A Communication Under Section 83 Issued By Any Officer Other Than The Commissioner Is Without Authority Of Law – Delhi High Court

The Hon’ble High Court of Delhi vide its order dated 31.07.2023 in the matter of M/s Vikas Enterprises Vs. Commissioner of Central Tax (GST), Delhi North & Anr. in W.P. (C) 9495/2023 & C.M. Appl. 36293/2023, set aside the communication directing the attachment of bank accounts of the assessee, finding the same in violation of provisions of Section 83.  It was found that only Commissioner is empowered to pass any order under Section 83 of the Act if he is of the view that it is necessary to pass such an order for protecting the interest of Revenue, and not any Officer.

The Petitioner filed the writ petition before the Hon’ble High Court challenging the communication dated 25.03.2022, issued by Respondent No. 2 [Superintendent (Anti-evasion) Group 1] to the Branch Manager, State Bank of India, Indraparstha Building, Vikas Marg, Lakshmi Nagar, Delhi, calling upon the bank to furnish certain documents pertaining to the petitioner.  The said communication also directed the bank not to permit any debit from the petitioner’s bank account maintained with the said bank without prior permission of the Department.

It was submitted on the behalf of the Petitioner that the bank account freezed by respondent no. 2 is a cash credit account, therefore, the petitioner was unable to effectively operate the same.  Further, the petitioner filed its objections in terms of the Rule 159(5) of the Central Goods and Services Tax Rules, 2017, assuming that the impugned communication was passed under Section 83 of the CGST Act.  However, the said objections were not considered and admittedly, the respondents did not furnish any response to the said application.

On the other hand, it was submitted on the behalf of the Respondents that the order freezing the petitioner’s bank account would cease to be operative since a period of one year has since elapsed.

Held: –

  • The Hon’ble Court after considering the submissions made and facts of the case, found that the respondents are unable to point out any provision under the Central Goods and Services Tax Act, 2017, permitting respondent no. 2 to issue such a communication directing the Bank to freeze the bank account.
  • On the behalf of the respondents, reference was made to Section 83 of the Act, which empowers to Commissioner to issue an order for provisional attachment of assets including bank accounts. However, an order of provisional attachment of assets under Section 83 of the CGST Act can be issued only if the Commissioner is of the view that it is necessary to protect the interest of the Revenue. And, admittedly, in the present case, the Commissioner has not issued any such order.
  • Further, it was found by the Hon’ble Court referring the decision of Hon’ble Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh & Ors. (2021) 6 SCC 771, that it is well settled that the orders of provisional attachment of bank accounts or other assets of a tax payer has a serious adverse effect on the business of the tax payer. It was observed by the Hon’ble Supreme Court that such drastic powers must be exercised only where it is necessary as it has wide adverse ramifications.  Further, this Court in number of decisions held that the power under Section 83 of the CGST Act can be exercised only subject to the conditions, as specified therein, being fully satisfied.
  • It was found that no order under Section 83 of the CGST Act can be passed by any officer other than the Commissioner and this can be done only if he is satisfied that it is necessary to pass such an order for protecting the interest of Revenue. Though, in the present case the respondent no. 2 has issued a letter directing freezing the petitioner’s bank account.  The impugned communication is without authority of law and has been issued in complete disregard of the provisions of the CGST Act.
  • Considering the submissions on the behalf of the respondents, the Hon’ble Court found that the contention raised is premised on the basis the impugned Communication is an order under Section 83 of the CGST Act. However, no such order was passed by the Commissioner. It is conceded that the order in Form DRC-22 has not been issued. The impugned communication has emanated from respondent no. 2 and not by the Commissioner exercising jurisdiction in respect of the tax payer. The impugned communication also does not indicate that it was issued with the authority of the Commissioner.

The Hon’ble Court with the above findings, set aside the impugned communication to the extent that it seeks to place a debit freeze on the petitioner’s account. The respondents are required to act in accordance with the statutory provisions, which has been disregarded by them.  Finding it appropriate, a cost of Rs. 5,000/- was imposed on the respondents.

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