2025 (1) TMI 51 - HC - GST

Cancellation of the alleged demand of GST - de-freezing of bank accounts - It appears to have been alleged that the transactions which formed the basis for the creation of the demand under that enactment are not concerning the writ petitioner at all - HELD THAT - Admittedly, a final order referable to Section 74 of the CGST Act had come to be passed against the writ petitioner in 2019. The petitioner has not adopted any steps to assail that order in accordance with law. In fact, the original order under Section 74 does not even form subject matter of challenge in the instant proceedings. The freeze, as the Court correctly noticed in the earlier order, was thus referable to Section 79(1)(c) as opposed to Section 83, with the latter being confined to a provisional attachment. There are no justification to grant the reliefs as are prayed for in the instant writ petition, it is deemed appropriate to accord liberty to the writ petitioner to adopt such appropriate remedies as may be permissible in law. It shall further be open for the writ petitioner to raise all grounds including that of identity theft in any proceedings that may be instituted. Petiotion disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the demand of INR 1,00,36,472/- under the Central Goods and Services Tax Act, 2017 (CGST Act) is valid against the petitioner, given the claim of identity theft involving the misuse of the petitioner's PAN and Aadhaar Card for GST registration.
Whether the freezing of the petitioner's bank accounts is justified under the provisions of the CGST Act.
What legal remedies are available to the petitioner in light of the alleged identity theft and the resultant GST demand?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of GST Demand

Relevant Legal Framework and Precedents: The demand was raised under the CGST Act, specifically following the procedure outlined in Section 74, which pertains to the determination of tax not paid or short-paid due to fraud or willful misstatement.
Court's Interpretation and Reasoning: The court noted that the petitioner had not challenged the final order passed under Section 74 of the CGST Act in 2019, which confirmed the demand. The court emphasized that the petitioner's claim of identity theft involves disputed questions of fact unsuitable for resolution in a writ petition.
Key Evidence and Findings: The petitioner alleged that his PAN and Aadhaar Card were misused for GST registration, resulting in the demand. However, no steps were taken to legally challenge the order confirming the demand.
Application of Law to Facts: The court determined that since the petitioner did not contest the original demand order, it stands valid unless challenged through appropriate legal channels.
Treatment of Competing Arguments: The petitioner argued for relief based on identity theft, while the Revenue maintained that the demand was confirmed following due process.
Conclusions: The court found no justification to grant relief regarding the demand, suggesting the petitioner pursue other legal remedies for the alleged identity theft.

Issue 2: Freezing of Bank Accounts

Relevant Legal Framework and Precedents: The freezing of the bank accounts was executed under Section 79(1)(c) of the CGST Act, which allows recovery from any person holding money payable to the dealer.
Court's Interpretation and Reasoning: The court clarified that the freeze was not provisional under Section 83 but a recovery measure under Section 79(1)(c), following the confirmed demand.
Key Evidence and Findings: The court noted that the accounts were frozen as part of the recovery process, not as a provisional measure.
Application of Law to Facts: The court upheld the freezing of accounts as a legitimate recovery action under the CGST Act.
Treatment of Competing Arguments: The petitioner sought de-freezing based on elapsed time and identity theft claims, while the Revenue justified the freeze under statutory provisions.
Conclusions: The court did not grant the relief of de-freezing, aligning with the statutory framework for recovery.

Issue 3: Legal Remedies for Identity Theft

Relevant Legal Framework and Precedents: The court suggested that the petitioner could explore legal remedies for identity theft, separate from the writ petition.
Court's Interpretation and Reasoning: The court recognized the petitioner's right to pursue claims of identity theft through appropriate legal channels.
Key Evidence and Findings: The petitioner alleged misuse of identity documents, but the court noted the need for a detailed factual inquiry beyond the writ jurisdiction.
Application of Law to Facts: The court allowed the petitioner to pursue identity theft claims separately, emphasizing the need for thorough investigation.
Treatment of Competing Arguments: The court balanced the petitioner's allegations with the procedural requirements for addressing such claims.
Conclusions: The court granted liberty to the petitioner to seek legal remedies for identity theft, without absolving the respondents from investigating the complaint.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The principal question to be addressed is a question of fact, that is, whether the petitioner's PAN Card and Aadhaar Card have been misused for securing a GST Registration and transacting business, by an unknown person."
Core Principles Established: The court established that disputed facts, such as identity theft, require a detailed factual inquiry beyond the scope of a writ petition. It also clarified the distinction between recovery measures and provisional attachments under the CGST Act.
Final Determinations on Each Issue: The court did not grant the reliefs sought in the writ petition but allowed the petitioner to pursue appropriate legal remedies for identity theft. The freezing of bank accounts was upheld as a valid recovery measure.

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