“Mere Investigation and Estimation No Ground for Harsh Measures:
Delhi HC Orders Relief from Arbitrary GST Bank Account Freeze”
Summary of
the Case
The case concerned the provisional
attachment of a bank account of M/s Brijbihari Concast Pvt. Ltd., a
company engaged in manufacturing and trading of steel products, by the
Directorate General of GST Intelligence (DGGI), Meerut Zonal Unit. The
attachment was made under Section 83 of the CGST Act on the ground that
the company had evaded GST amounting to ₹15.09 crores through
clandestine removal of goods.
The petitioner argued
that the attachment was unjustified, based solely on “eye estimation”
during investigation, and no show cause notice had been issued even
after more than 16 months of ongoing inquiry. The petitioner further
claimed to be a legitimate, tax-compliant business employing over 150
workers, and highlighted its substantial GST and income tax contributions
over the years.
Taking a pragmatic
approach, the Delhi High Court observed that mere suspicion or preliminary
observations cannot justify a long-standing freeze on the company’s bank
account in the absence of concrete proceedings. The court directed that the
account be defreezed, subject to the maintenance of ₹1.5 crores
balance, and barred alienation of a key immovable property pending
adjudication.
Name of the Case: M/s
Brijbihari Concast Pvt. Ltd. v. Directorate General of GST Intelligence &
Others
Case Number: W.P.(C)
8433/2024
Date of Order: 15
April 2025
Name of the Court: High
Court of Delhi at New Delhi
Facts of
the Case
- Petitioner:
M/s Brijbihari Concast Pvt. Ltd., a registered company under the GST
regime, involved in the production of TMT bars, billets, and other steel
products.
- GSTIN:
05AACCB5197N1ZA
- Location:
Registered in Uttarakhand, factory situated at Muzaffarnagar, U.P.
- Investigation Date:
13 December 2023 — A search operation was conducted by DGGI officers at
the petitioner’s premises.
- Allegations:
The department claimed clandestine clearance of raw materials
resulting in tax evasion of ₹15.09 crores.
- Basis:
The conclusion of tax evasion was reached using eye estimation
during the search.
- Provisional Attachment:
The petitioner’s bank account maintained with IndusInd Bank, Vivek
Vihar, Delhi (A/c No. 201002965063) was frozen vide DRC-22 order
dated 28 March 2024.
- The provisional attachment was
claimed to be under Section 83(1) of the CGST Act, read with Rule
159 of the CGST Rules, 2017.
- Statement of Director:
The Director of the petitioner-company was alleged to have made an
admission of liability during investigation, dated 14 December 2023.
However, the petitioner contested that the statement was extracted under
pressure.
Submission
by the Petitioner
The petitioner,
represented by counsel Mr. Aditya Shankar and team, made the following
submissions:
a) Procedural Lapses
- The department invoked Section 83
based merely on ongoing investigation without issuance of any Show
Cause Notice (SCN) under Section 74.
- Even after 16 months, no SCN
had been issued, violating the principle of natural justice and time-bound
adjudication under GST.
b) Flawed Estimation
- The estimated tax liability of ₹15.09
crores was not based on account books or documentary evidence, but
merely on eye estimation by officers during the search.
- Such informal estimations are inadmissible
and cannot justify drastic actions like attachment.
c) No Urgency or Revenue
Risk
- The petitioner submitted proof of tax
payments exceeding ₹116.57 crores in the last 3 years and income
tax of ₹4.06 crores.
- There was no attempt to liquidate
assets, flee, or create third-party interests, indicating no risk to
revenue.
d) Financial Hardship
- The attached bank account was crucial
for salary payments, raw material procurement, logistics, and daily
operations.
- Over ₹2.75 crores lay frozen,
seriously affecting working capital and continuity of business.
e) Available Security
- The petitioner offered not to create
third-party rights in its residential property located at 9, Bonjha
G.T. Road, Ghaziabad.
- Additionally, a CA-certified
document showing promoters' immovable property worth ₹50+ crores
was filed.
Submission
by the Respondents (DGGI)
Represented by Mr.
Arun Upadhyay, Sr. Standing Counsel, the department defended its action as
follows:
a) Statutory Power under
Section 83
- Argued that Section 83 of CGST Act
permits the Commissioner to order provisional attachment to protect
the interest of revenue during pendency of proceedings under Section 67 or
74.
b) Serious Tax Evasion
- The preliminary investigation
revealed clandestine removal of goods leading to potential loss
of ₹15.09 crores to the exchequer.
c) Admitted Liability
- The company’s director had admitted
inability to pay the amount in a voluntary statement, showing
knowledge and acknowledgment of default.
d) No Abuse of Power
- The department submitted that
attachment was a preventive step, not punitive, and within the
bounds of the statute.
However, the department
could not justify why no SCN had been issued despite the passage of
considerable time.
Findings
and Observations of the Court
The Hon’ble Court
evaluated the rival submissions and made the following important observations:
a) Long Delay Without
Adjudication
- The fact that more than 16 months
had passed since investigation without any SCN or final determination
showed casual invocation of power under Section 83.
b) No Evidence of Revenue
Threat
- No record showed that the petitioner
was trying to evade future proceedings, flee, or alienate its properties.
- The petitioner had financially
strong promoters, active operations, and had paid substantial taxes
regularly.
c) Disproportionate Use
of Power
- The power of provisional attachment
must be used sparingly and proportionately.
- Here, it caused undue hardship
and disrupted the running of a bona fide, tax-compliant business.
d) Balance of Convenience
- The court emphasized the need to
balance interests of revenue and continuity of business.
- A complete freeze was held to be overreaching
and unnecessary.
Judgment
and Directions
The court disposed of the
writ petition with the following directions:
1. Partial Defreezing of
Bank Account
- The petitioner’s IndusInd Bank
account shall be unfrozen, subject to the condition that a minimum
balance of ₹1.5 crores shall be maintained.
2. Property Undertaking
- The petitioner shall not create
any third-party interest in the residential property located at 9,
Bonjha G.T. Road, Ghaziabad, till final adjudication by the
department.
3. Liberty for Revenue
Authorities
- The DGGI was given liberty to
issue SCN or proceed in accordance with law, without prejudice to this
order.
Conclusion
This judgment is another significant
precedent in favor of bona fide GST-registered taxpayers who suffer
arbitrary disruptions due to disproportionate use of powers by tax authorities.
The Delhi High Court has reinforced the principle that investigation cannot
be a license for indefinite hardship, especially when the taxpayer is
cooperating and no formal adjudication has begun.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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