Provisional attachment under Section 83 of the CGST Act is not warranted in order to secure the income of another taxable person
Fact and issue of the case
The petitioner (hereafter ‘ZIPL’) has filed the present petition under Article 226/227 of the Constitution of India impugning the orders dated 10.10.2022 and 06.10.2022 (hereafter ‘the impugned orders’) passed by respondents nos.1 and 2, respectively. In terms of the impugned orders, ZIPL’s bank accounts (Current Account No.50200076276270 maintained with HDFC Bank Ltd.,SCO-15, Sector-14, Gurugram; Escrow / Nodal Account No.017261100000041 and Current Account No.017281300000462 maintained with Yes Bank Ltd., DLF Cyber City, Gurugram) were attached under Section 83 of the Central Goods & Services Tax Act, 2017 (hereafter ‘the CGST Act’). By a communication dated 10.10.2022 addressed to the Branch Manager of Yes Bank Ltd., respondent no.1 also directed the Branch Manager, Yes Bank to hold at least ₹643 crores in ZIPL’s Escrow / Nodal Account No.01726110000004.
ZIPL also impugns an order dated 01.02.2023, passed by respondent no.1 in effect, rejecting the objections raised by ZIPL under Rule 159(5) of the Central Goods & Services Tax Rules, 2017 (hereafter ‘the CGST Rules’).
ZIPL contends that the orders passed under Section 83 of the CGST Act are illegal as there is no ground for the respondents to believe that it was necessary to attach ZIPL’s bank accounts in the interest of the Revenue.
ZIPL operates a payment aggregator platform under the name ‘Onion-Pay’. It has onboarded various merchants on the said platform, which is used by merchants and their customers to pay for goods and services.
ZIPL claims that its role is limited to processing payments and it is not concerned with the supply of any services by any of the merchants using its online platform.
ZIPL also claims that it has complied with the ‘Know Your Customer’ (KYC) requirements in respect of the merchants using its platform but has no control over their activities in relation to the supply of goods and services, which may be chargeable to GST. ZIPL charges a transaction fee and claims that it has duly discharged the GST on the amounts charged from merchants for use of its online payment platform.
ZIPL states that the payments are received in the Escrow / Nodal accounts, which are maintained in terms of the guidelines issued by the Reserve Bank of India (hereafter ‘RBI’). ZIPL is entitled to only part of the payments under the Escrow / Nodal accounts and the balance amounts are required to be paid to the merchants and suppliers who have used the services of ZIPL for facilitating receipt of payments from their customers.
Undisputedly, the attachment of ZIPL’s Escrow / Nodal account would result in effectively shutting down its business as it would no longer be able to operate the online platform
Observation of the court
In view of the aforesaid submission 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.
We are also unable to find any basis for the various directions issued by respondent no.1 in the impugned order dated 01.02.2023 requiring ZIPL to obtain NOCs or acknowledgments from the bank accounts of the recipient merchants.
Tarun Gulati, learned senior counsel appearing for ZIPL, submitted that ZIPL had no issue in accepting the respondents’ condition that the payments to various merchants be made only in the specified bank accounts as communicated to the respondents and as noted in the impugned order dated 01.02.2023. He also states that ZIPL has no cavil in undertaking that the amounts payable to the merchants and as recorded in the impugned order dated 01.02.2023 will be paid without holding back any amount.
Harpreet Singh fairly states that, at this stage, attachment of the assets of ZIPL may be lifted subject to the condition that the money due to various merchants would be remitted to the specified bank accounts as disclosed by ZIPL.
In view of the above, 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.
The respondents are not precluded from taking any effective steps, in accordance with law, in respect of various merchants if they are of the opinion that it is necessary to do so in the interest of protecting the government revenues.
It is also clarified that the respondents are not precluded from taking any action against ZIPL in accordance with law, if it is found that any amount is due and payable by ZIPL. The concerned Commissioner is also not precluded from taking protective action, in accordance with law, in respect of any liability of ZIPL, if in his opinion the interest of protecting the government revenue requires such action.
The petition is disposed of in the aforesaid terms. All pending applications are also disposed of
In the result, appeal of the assessee is allowed and ruled in favour of the assessee