2023 (8) TMI 584 - HC - GST

Provisional attachment of three bank accounts - attachment primarily on the basis that the Petitioner had claimed input tax credit from 14 parties which as per the preliminary investigation of the Respondents are suppliers who are fictitious/non-existent - Section 83 of the Central Goods and Service Tax Act, 2017 - HELD THAT - As per Section 16(2), ITC can be taken only if there is actual receipt of goods or services. In the instant case, the Respondents preliminary investigation have revealed that the 14 parties from whom the Petitioner has purchased the goods, are not in existence and, therefore, there is a question mark whether if at all the goods have been received or not. The Respondents are investigating the entities/persons from whom the Petitioner has purchased the goods and as of today, they have found 14 parties who are fictitious. The amount of alleged ITC and the purchases made by the Petitioner are substantial and which is under investigation by the Respondents. It is informed that the Respondents would issue a show cause notice after completing their investigation. The Petitioner has not made out a prima facie case for grant of any interim relief. Furthermore, attachment of Overdraft Account having been lifted, there cannot be any irreparable damages or inconvenience in operating the business. Furthermore, the Petitioner has its offered to reverse ITC availed on purchases from these 14 parties which till today, the Petitioner has not reversed. In the peculiar facts and circumstances of the case, if the Petitioner deposits a sum of Rs. 2 crores with the Respondents, then in that case, the provisional attachment of all the accounts shall stand lifted which shall be subject to the further orders to be passed on this petition - Insofar as the legal issues as raised in the petition in the context of Section 83 of the CGST Act are concerned, it is opined that the petition would require final hearing. List this petition for final hearing on 29th September 2023.

Summary

Issues involved:
The judgment involves a challenge to the provisional attachment of bank accounts under Section 83 of the Central Goods and Service Tax Act, 2017 (CGST Act) based on alleged fictitious/non-existent suppliers, and the issue of whether the petitioner has made out a prima facie case for grant of interim relief.

Provisional Attachment of Bank Accounts:
The petitioner challenged the provisional attachment of three bank accounts, particularly focusing on the overdraft account with Kotak Mahindra Bank. The Court noted that the petitioner was able to operate the overdraft account after contacting the concerned officer and the attachment was lifted. The Respondents had communicated with the bank to de-freeze the account. The Court emphasized that the only remaining concern was the interim prayer for stay of further coercive measures, as there was no prayer to de-freeze the other accounts.

Claimed Input Tax Credit and Provisional Attachment:
The Respondents provisionally attached the bank accounts based on the petitioner's claim of input tax credit on purchases from alleged fictitious/non-existent suppliers. The petitioner contended that all details had been submitted to prove the purchases, and therefore, the attachment was unjustified.

Legal Analysis and Decision:
The Court considered the petitioner's admission of wrongly availing Input Tax Credit and failure to reverse it by the specified date. It was noted that the Respondents' preliminary investigation revealed that the suppliers from whom the goods were purportedly purchased did not exist, raising doubts about the actual receipt of goods or services. The Court found that the petitioner had not made out a prima facie case for interim relief. However, in a unique circumstance, the Court ordered the provisional attachment to be lifted if the petitioner deposited a specified sum with the Respondents.

Final Hearing and Future Proceedings:
The Court determined that the legal issues raised in the petition necessitated a final hearing, scheduling it for a later date. Further pleadings on the petition were to be completed before the final hearing.