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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
Zhudao Infotech Private Limited. – Appellant
Versus
The Principal Additional Director General & Anr. – Respondents
W.P.(C) 3428 of 2023 & CM APPL. 13239 of 2023, CM APPL. 25805 of 2023
Decided On : 22-05-2023
GST - Attachment of Bank Accounts - Section 83 of the Central Goods & Services Tax Act, 2017 - Summary of Acts and Sections: CGST Act, 2017, Section 83; CGST Rules, 2017, Rule 159(5) - The court discussed the provisions of Section 83 of the CGST Act, which allows for the attachment of assets and bank accounts of a taxable person for protecting the interest of government revenue. The court also considered Rule 159(5) of the CGST Rules, which pertains to objections raised by the petitioner.
Fact of the Case:
The petitioner, ZIPL, challenged the attachment of its bank accounts under Section 83 of the CGST Act, contending that there was no ground for the attachment. ZIPL operates a payment aggregator platform and claimed that it had complied with regulatory requirements.
Finding of the Court:
The court found that the attachment of ZIPL's bank accounts was not justified as there was no issue regarding ZIPL's liability under the CGST Act. The court set aside the impugned orders and directed ZIPL to make payments due to various merchants directly in their respective bank accounts.
Issues: The issues revolved around the legality of the attachment of ZIPL's bank accounts under Section 83 of the CGST Act and the objections raised by ZIPL under Rule 159(5) of the CGST Rules.
Ratio Decidendi: The court held that the bank accounts of ZIPL could not be attached for securing the revenue of another taxable person and that the directions issued by the respondents in the impugned order were not justified. The court also emphasized that ZIPL's liability under the CGST Act was not in question.
Final Decision: The court set aside the impugned orders attaching ZIPL's bank accounts and directed ZIPL to make payments due to various merchants directly in their respective bank accounts. ZIPL was also directed to transfer the remaining amount to its current account. The respondents were not precluded from taking any action in accordance with the law if any amount was found due and payable by ZIPL.
JUDGMENT
Vibhu Bakhru, J.
1. 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 Rs.643 crores in ZIPL's Escrow/Nodal Account No.01726110000004.
2. 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').
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
Factual Context
9. A search was conducted on the premises of ZIPL as well as it Directors on 06.10.2022 and 07.10.2022. As noted above, the impugned orders attaching ZIPL's bank accounts were passed on 06.10.2022 and 10.10.2022.
10. Aggrieved by the same, ZIPL filed its objections under Rule 159(5) of the CGST Rules, praying that its bank accounts be defreezed. The respondents did not consider the said objections and sent a letter dated 04.01.2023, informing ZIPL that its objections were not in the correct/prescribed format.
11. Being aggrieved by the impugned orders, ZIPL approached this Court by filing a writ petition [W.P.(C) No.492/2023], inter alia, praying that the impugned orders be set aside. Before this Court, it was contended on behalf of the respondents that there was a serious apprehension that the merchants onboarded and transacting through ZIPL's online platform, Onion-Pay, were not genuine. This Court disposed of the said writ petition by an order dated 16.01.2023, directing the respondents to pass a speaking order in respect of the objections raised by the petitioner within a period of two weeks from the said date.
12. Thereafter, respondent no.1 scheduled a personal hearing and provided an opportunity to ZI
AI
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