Delhi HC: Bank Account Freeze Order Under GST Can Give Only Commissioner Not Superintendent

The Delhi High Court in its recent decision in the matter of M/S. Vikas Enterprises Vs. Commissioner of Central Tax (Gst), Delhi North & Anr. [2023 (8) Tmi 239- Delhi High Court], ordered to eliminate debit freeze on a bank account of a taxpayer wherein the directive was given by the superintendent.

However, under the GST law, only Commissioner has the authority to pass the order to freeze a bank account. Even the Commissioner could pass the order only after making sure that it is the requirement for safeguarding the interest of revenue. In this current situation, the superintendent only passed the order. The mandatory Form DRC-22 was also not issued.

Attaching a taxpayer’s bank account or other assets is an extreme measure that can lead to face serious consequences for the business. The Supreme Court, in the case of Radha Krishan Industries Vs the State of Himachal Pradesh, acknowledged that such drastic powers should only be exercised when required. However, this has had little impact on the concerned officer while passing the order and without even having the required authority under the law.

Believing that the attachment order was issued following due process, the taxpayer sought relief from the Commissioner. But, the Commissioner did not respond to the application because he did not pass any such order. Even after that Commissioner did not find it necessary and could not look further into the matter to learn why the taxpayer was forced to make the application in the first place.

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These facts clearly indicate that someone in the Commissioner’s office may have misused their position by passing an order without any legal authority by the law. The Commissioner should have taken the necessary steps to inquire into and address this issue.

Eventually, the honourable Delhi High Court ordered the authority to defreeze the bank account, the order dated, July 31, 2023. On March 25, 2022, the account was attached and since then it has been more than a year after it was frozen. Interestingly, Section 83 states that a bank account can only be frozen for one year. However, in this case, the time limit applies only to legally issued orders.

What are the consequences for the officer responsible? Or for the supervising commissioner? The officer gets away with a penalty of Rs. 5,000/-, and there is no mention of any action taken against the commissioner. So, the illegal freezing of a taxpayer’s bank account for over a year results in a mere penalty of Rs. 5,000/-. Can we consider this justice served? Is the penalty sufficient to deter other officers from similar ignorance of the law?