HC directs unblocking of Electronic Credit Ledger as one year period was expired

Krishna Fashion Vs Union of India (Delhi High Court)

GST Authority cannot block the bank accounts or ECL beyond an year if assesse is cooperating

The Hon’ble Delhi High Court in M/S Krishna Fashion vs. Union of India & Ors. [W.P. (C) 602/2022 & CM APPL. 1696/2022 dated January 18, 2022] held that once the assessee is cooperating and has submitted the relevant documents to the Revenue Department then the bank accounts and Electronic Credit Ledger (ECL) of such assessee to be unblocked upon the expiry of one year from the date of imposing such restrictions.

Facts:

M/s Krishna Fashion (“the Petitioner”) filed this present writ petition before the Delhi High Court challenging the order dated March 16, 2020 (“Impugned order”) passed by the Revenue Department (“the Respondents”) stating that the Respondents have attached the Petitioner’s bank account maintained in Union Bank of India and blocked the ECL.

The Petitioner contented that as per the Rule 86A(3) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) the ECL was supposed to be unblocked on February 05, 2021 upon completion of one year from the date of imposing such restrictions. However, it continued to remain the same.

Also, as per the Section 83(2) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) the Impugned order will stand invalid upon completion of one year from the date of passing such order.

The Respondents argued that there were no new GST DRC-22 (i.e., Provisional attachment of property under Section 83 of the CGST Act) issued in this matter, the Petitioner has not appeared before the Investigating Officer despite of the service of the summons and not even produced the relevant documents.

Issue:

Whether the Respondent has the power to keep the bank account and the ECL blocked under Section 83(2) of the CGST Act and Rule 86A(3) CGST Rules beyond one year?

Held:

The Hon’ble Delhi High Court in W.P. (C) 602/2022 & CM APPL. 1696/2022 dated January 18, 2022 held as under:

• Observed that the Petitioner has cooperated with the investigating agencies and will continue to appear before the Investigating Authorities as and when required along with the relevant documents.
• Directed the Respondents to de-freeze the bank account of the Petitioner maintained with M/S Union Bank of India as well as unblock the ECL within three working days of uploading the present order.

Relevant Provisions:

Section 83(2) of the CGST Act

“83. Provisional attachment to protect revenue in certain cases

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section.”

Rule 86A(3) of the CGST Rules

“86A. Conditions of use of amount available in electronic credit ledger: –

(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.”

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. The petition has been heard by way of video conferencing.

2. Present writ petition has been filed challenging the order dated 16th March, 2020, whereby Petitioner’s current bank account maintained with Union Bank of India has been provisionally attached as well as the order dated 6th February, 2020 blocking the Petitioner’s Electronic Credit Ledger. Petitioner also seeks directions to the Respondents to de-freeze the Petitioner’s account and unblock the Petitioner’s Electronic Credit Ledger.

3. Learned counsel for the petitioner states that in accordance with Rule 86A(3) of the CGST Rules, 2017, the order blocking the Petitioner’s Electronic Credit Ledger had ceased to operate on 5th February, 2021 on completion of one year. However, the same continues to be blocked and, thus, the Petitioner is unable to operate it. In support of her submissions, she relies on the orders of various High Courts where it has been held that Rule 86A(3) is a restriction which will cease to have effect after the expiry of one year from the date of imposing such restriction.

4. Similarly, learned counsel for the petitioner states that as per Section 83(2) of the CGST Act, 2017, the impugned provisional attachment order has lapsed upon completion of one year from the date on which the order was passed.

5. However, she states that even though the attachment order has ceased to have effect, the Petitioner’s bank account remains attached to this date. In support of her submissions, she relies upon the judgment of this Court in M/s. Shri Dhan Laxmi Trade House Vs. Principal Commissioner of Goods and Service Tax, 2021 (11) TMI 863. She further states that the impugned order does not disclose the pendency of any proceeding under Sections 62, 63, 64, 67, 73 or 74 of the GST Acts, which can justify the provisional attachment order. She relies on the judgment of the Supreme Court in the case of Radha Krishan Industries Vs. State of H.P., (2021) 6 SCC 771.

6. Issue notice. Mr. Rakesh Kumar, Advocate accepts notice on behalf of respondent No.1 and Mr. Aditya Singla, Advocate accepts notice on behalf of respondents No.2 and 3.

7. Mr. Aditya Singla, Advocate fairly admits that every attachment and blocking of electronic credit ledger shall cease to have effect after expiry of a period of one year from the date the orders had been passed. He clarifies that no fresh GST DRC-22 has been issued in the present case. He, however, states that despite service of summons, the petitioner has not been appearing before the Investigating Officer and all the relevant documents have not been supplied by the petitioner.

8. In rejoinder, learned counsel for the petitioner states that the petitioner has been cooperating with the Investigating Agencies and the relevant documents have been furnished. She assures and undertakes to this Court that the petitioner will continue to appear as and when directed by the Investigating Authorities and will supply the documents which may be asked for. The statement/undertaking given by learned counsel for the petitioner is accepted by this Court and the petitioner is held bound by the same.

9. In view of the aforesaid statement, the present writ petition along with pending application is disposed of with the directions to the respondents to de-freeze the petitioner’s bank account No.508502010001156 maintained with M/s.Union Bank of India, 16, Hargobind Enclave, Karkardooma, Delhi-110092 as well as unblock the Electronic Credit Ledger within three working days of uploading of the present order.

10. It is clarified that the respondents are at liberty to proceed in accordance with law.

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