2023 (5) TMI 1230 - HC - GST

Attachment of Bank Accounts of petitioner - evasion of GST while providing an online payment gateway (Aggregator Services) under the trade name Onion-Pay - respondents allege that that ZIPL was supporting illegal gambling products such as Teen Patti , Roulette , Ludo , Matrix 5 and all merchants associated with the payment gateway were suspected to be fake and shell companies - creation of web of fake gaming merchant entities, which were operated and managed by ZIPL. Whether the impugned orders are in accordance with Section 83 of the CGST Act? HELD THAT - There is no issue regarding the CGST liability of ZIPL, it is apparent that ZIPL s bank accounts could not be attached for any amount due and payable to the merchants using the ZIPL s platform. The provisions of Section 83 of the CGST Act can be invoked for attaching the assets and bank accounts of a taxable person or a person specified under Section 122(1A) of the CGST Act, if in the opinion of the Commissioner it is necessary to do so for the purpose of protecting the interest of government revenue. Thus, the bank accounts of ZIPL cannot be attached for securing the revenue of another taxable person. It is implicit that the bank accounts and assets of only those taxable person or persons specified in Section 122(1A) of the CGST Act can be attached who may be liable for payment of any government revenue and the Commissioner is of the opinion that it is necessary to attach their assets in the interest of government revenue. 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 being an asset of such a person. But the bank account of the person owing such debt cannot be subject to a provisional attachment order under Section 83 of the CGST Act. This Court considers it apposite to dispose of the present petition by setting aside the impugned orders attaching ZIPL s bank accounts albeit with the further direction that ZIPL shall make payments due to various merchants directly in their respective bank accounts as disclosed by ZIPL to the respondents and as recorded in the impugned order dated 01.02.2023. Insofar as the remaining amount of ₹69.92 crores is concerned, ZIPL shall transfer the same to its current account. Petition disposed off.

Summary

Issues Involved:
1. Legality of the orders attaching ZIPL's bank accounts under Section 83 of the CGST Act.
2. Compliance of ZIPL with CGST and RBI guidelines.
3. Validity of the objections raised by ZIPL under Rule 159(5) of the CGST Rules.

Summary:

Legality of the Orders Attaching ZIPL's Bank Accounts:
The petitioner, ZIPL, challenged the orders dated 10.10.2022 and 06.10.2022 attaching its bank accounts under Section 83 of the CGST Act. ZIPL argued that there was no ground for the respondents to believe that attaching its bank accounts was necessary in the interest of the Revenue. The court noted that the attachment of ZIPL's Escrow/Nodal account would effectively shut down its business. The respondents alleged that ZIPL was involved in GST evasion and supporting illegal gambling products, but admitted that there was no tangible material to form an informed view regarding these allegations. The court concluded that ZIPL's bank accounts could not be attached for securing the revenue of another taxable person and set aside the impugned orders.

Compliance of ZIPL with CGST and RBI Guidelines:
ZIPL claimed that it had complied with the KYC requirements and discharged the GST on the amounts charged from merchants for using its online payment platform. The respondents, however, alleged that ZIPL was operating in violation of RBI guidelines and had engaged in activities contravening the Foreign Exchange Management Act, 1999. The court clarified that the scope of the present proceedings was confined to determining the legality of the impugned orders under Section 83 of the CGST Act and not the actions taken by the RBI. ZIPL was directed to comply with RBI's directions unless set aside by a competent court or authority.

Validity of the Objections Raised by ZIPL under Rule 159(5) of the CGST Rules:
ZIPL's objections under Rule 159(5) of the CGST Rules were initially rejected by the respondents for not being in the correct format. The court directed the respondents to pass a speaking order on ZIPL's objections, which was subsequently done on 01.02.2023. The court found no basis for the various directions issued by respondent no. 1 in the order dated 01.02.2023 requiring ZIPL to obtain NOCs or acknowledgments from the bank accounts of the recipient merchants. The court accepted ZIPL's undertaking to pay the amounts due to the merchants without holding back any amount and directed ZIPL to transfer the remaining amount to its current account.

Conclusion:
The court set aside the impugned orders attaching ZIPL's bank accounts, with the direction that ZIPL shall make payments due to various merchants directly in their respective bank accounts. The court also clarified that the respondents are not precluded from taking any effective steps in accordance with law to protect government revenues or taking any action against ZIPL if any amount is found due and payable by ZIPL. The petition was disposed of in these terms.