Madras High Court Asks GST Authority To Reconsider Its' Decision on Provisional Attachment of Bank Accounts

Madras High Court Asks GST Authority To Reconsider Its' Decision on Provisional Attachment of Bank Accounts

The Madras High Court (HC) in the case titled the Senior Intelligence Officer & Ors. (Appellants) v. M/s. KPN Travels India Ltd. (Respondent/ Assessee) directed the Appellants to consider the lifting of provisional attachment of bank accounts to enable smooth business activities.

The division bench of the HC comprising of Justices T.S. Sivagnanam and R.N. Manjula stayed the order of the Goods & Services Tax Authority (GST Authority) subject to the various directions, which are mentioned as under-

- An opportunity for a personal hearing is granted to the authorized representative.

- The first appellant is directed to pass a speaking order within 10 days therefrom.

- As the first respondent has pleaded that their business operations are virtually crippled, till final orders are passed on the representation dated 27 January 2021, the first appellant shall consider and pass appropriate interim orders, if found tenable.

- It should consider the lifting of the provisional attachment regarding a few bank accounts enabling the first respondent to carry on its business activities.

The writ petition was filed by the assessee for issuance of Writ of Certiorari to quash the summons issued by the first appellant. The challenge to the said summons was mainly on the ground that the first respondent has no jurisdiction to initiate proceedings under the Central Goods & Services Tax Act (CGST)/ State Goods & Services Tax Act (SGST Act) and the summons is without the authority of law.

The HC observed that "The prayer sought for in the writ petition was only to quash the summons and there was no consequential relief sought for in the writ petition and the order of provisional attachment made by the respondent was not put to challenge in the writ petition."

It added, "There was no specific interim prayer in the writ petition to stay the order of provisional attachment as there was no separate challenge to the order of provisional attachment."

Regarding the validity of summoning the Court held that the assessee had rightly invoked the remedy available under sub-Rule (5) of Rule 159 of the Central Goods & Services Tax Rules (CGST Rules) for lifting the attachment – on receipt of the request for lifting the attachment, the appellant issued summons under Section 70 of the CGST Act.

It added that the summons issued under Section 70 of the CGST Act cannot be construed as a notice affording an opportunity of hearing to the assessee, in terms of Rule 159(5) of the CGST Rules.

The summons is in connection with the investigation initiated against the assessee-respondent, therefore, the appellant cannot take umbrage under the summons to be construed as a notice under Rule 159(5), if the assessee can explain to the satisfaction of the officer that the provisional attachment is not warranted, the Commissioner can exercise powers and lift the order of provisional attachment or otherwise confirm the provisional attachment.

The investigation is yet to be completed and therefore, time is yet to come for issuance of show cause notice for recovery of alleged tax due or for that matter to crystallize the alleged liability.

The Court further emphasized that the business interest of the assessee should also be taken into consideration as to whether all bank accounts are required to be provisionally attached till final orders are passed on the assessee representation.

The Court added that the appellant shall consider and pass appropriate interim orders, considering the lifting of the provisional attachment regarding a few bank accounts to enable the assessee to carry on its business activities.