2020 (11) TMI 187 - HC - GST

Lifting of attachment over the Bank account of the petitioner - HELD THAT - There is absolutely no basis in law for proceeding against the petitioner herein, in connection with offences alleged to have been committed by M/s Varma enterprises. The mere fact that a part of the money that was obtained from alleged fraudulent transactions have found its way to the Bank account of the petitioner cannot, without anything to suggest the complicity of the petitioner in such transactions, be the basis for the attachment of the Bank accounts of the petitioner. Thus, there being no material to implicate the petitioner in the alleged fraudulent transaction, Ext.P1 communication issued by the 1st respondent cannot be legally sustained. Petition allowed.

Summary

Issues:
1. Freezing of the petitioner's bank account based on alleged transactions with another entity.
2. Legality of the communication instructing the bank to freeze the account.
3. Implications of funds traced to the petitioner's account from alleged fraudulent transactions.

Analysis:
1. The petitioner, a supplier of diamonds under the GST Act, had his bank account frozen by the 1st respondent due to transactions with M/s. Nebal Tradings. The petitioner maintained that no investigations or notices were pending against him. The relief sought was to quash the order freezing the account as it was not linked to any ongoing proceedings against him.

2. The respondents claimed that funds from alleged illegal transactions by M/s Varma enterprises were channeled through M/s Nebal Trading to the petitioner. However, there was no mention of any offenses by the petitioner that warranted freezing the bank account. The court noted the lack of evidence implicating the petitioner in fraudulent activities and found no legal basis for the freezing order.

3. After hearing arguments from both sides, the court concluded that there was no justification to proceed against the petitioner in connection with the alleged offenses by M/s Varma enterprises. Merely tracing funds to the petitioner's account was insufficient to establish his involvement in fraudulent activities. The court deemed the communication instructing the bank to freeze the account as legally unsustainable and allowed the writ petition, quashing the order and directing the bank to lift the attachment over the petitioner's account.