Assessed’s cash credit account cannot be provisionally seized in exercise of GST powers: Gujarat High Court

The High Court of Gujarat has ruled that the cash credit account of the assessee cannot be provisionally seized in the exercise of powers under the GST.

The Petitioner, Manish Scrap Traders, has sought rescission and annulment of the Bank Account Interim Seizure Order in Form GST DRC-22 dated 29.11.2021 issued by the Respondent as the same applies to the provisions of Article 83 of the CGST Law of 2017 and since the seizure of the cash credit account, not being the property of the taxpayer, is not authorized by law.

In this case, the cash credit account could be considered to have been opened to enable the applicant to borrow money from the Bank for the purposes of his business. Therefore, any money that the Bank might make available to the assessee would necessarily be in the nature of a cash loan or credit facility. In either case, it would be a borrowing by the plaintiff of the writ from the Bank. In such circumstances, the Bank and the applicant therefore do not have a debtor-creditor relationship. The decision of this Court in Kaneria Granito Ltd. has been followed in various other cases of the present kind for some time. Various orders have been issued over time condemning the action of the Department in temporarily seizing the Cash Credit Account in the exercise of powers under Section 83 of the Act.

The Divisional Bench of Judge J.B. Pardiwala and Judge Nisha M. Thakore held that the law is well established that a cash credit account of the assessee cannot be temporarily seized in the exercise of powers under the article 83 of the CGST law.

“The order for the interim seizure of the plaintiff’s cash credit account is hereby set aside and set aside,” the court said.

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