ITC Mismatch Allegations: Delhi HC upholds Provisional Attachment of Bank Account by GST Commissioner

The Delhi High Court upheld the powers vested in the Principal Additional Director General, Directorate General of GST Intelligence, Gurugram Zonal Unit in a case pertaining to mismatch in the Input Tax Credit ( ITC ) filed by the Petitioner company. The GST Commissioner proceeded to provisionally attach the Bank Account of the Petitioner Company under Section 83 of the Central Goods and Services Tax Act, 2017 ( CGST Act ) based on findings that the Petitioner had submitted fake amounts to avail ITC. The GST Commissioner found that the Petitioner had filed a total ITC of Rs.26,91,938/-  from two separate suppliers. During the course of investigation, it was discovered by the GST Commissioner that both the entities whom the Petitioner had claimed to have supplied to were not legitimate; the fake tax entities were created by one Shyam Dev Gupta as a means to issue invoices without supply of goods. The fraudulent practice was unearthed during physical verification conducted by the GST Department wherein it was found that the aforementioned fake tax entities had no physical place of business. In addition, the Department found that Shyam Dev Gupta had used the identities of other individuals and vested them proprietorship to set up the fake tax entities. In light of the circumstances, the GST Commissioner proceeded to provisionally attach the Petitioner’s bank account to the extent of Rs.26.91 lacs, the same amount that was filed by the Petitioner as ITC with regards to the allegedly fake supplies provided to the fake tax entities. The Division Bench of the Delhi HC comprising Justice Vibhu Bakhru and Justice Sachin Datta sought to adjudicate on whether the GST Commissioner had overstepped his powers in provisionally attaching the bank account of the Petitioner under Section 83 of the CGST Act. Section 83 of the CGST Act grants the Commissioner ample powers to provisionally attach the property of a delinquent assessee to safeguard the interest of the revenue. The Delhi High Court observed that the present Petition seeking to impugn the GST Commissioner’s order of provisional attachment of the Petitioner’s bank account is not bad in law and upheld the powers vested in the GST Commissioner. The Division Bench further corroborated its decision by affirming that the “material available with the Commissioner has a live nexus with his opinion” and proceeded to dismiss the petition and other pending applications