Order Date – 22 May 2023

Parties: Zhudao Infotech Private Limited Vs The Principal Additional Director General & Anr.

Facts – 

• The Petitioner, Zhudao Infotech Private Limited, 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.
• A search was conducted on the premises of ZIPL as well as of Directors on 06.10.2022 and 07.10.2022. The bank accounts were attached.
• Being aggrieved the petitioner filed 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 informing ZIPL that its objections were not in the correct / prescribed format.

Issue – 

• Whether the provisional attachment of bank accounts is in order?

Order – 

• The Divisional Bench of Hon’ble High Court observed that there is no issue regarding the CGST liability of ZIPL, it is apparent that ZIPL’s bank accounts could not be attached for any amount due and payable to the merchants using the ZIPL’s platform.
• The provisions of Section 83 of the CGST Act can be invoked for attaching the assets and bank accounts of a taxable person or a person specified under Section 122(1A) of the CGST Act, if in the opinion of the Commissioner it is necessary to do so for the purpose of protecting the interest of government revenue.
• A debt owed by any person to the taxable person, whose assets or bank accounts are liable to be attached under Section 83 of the CGST Act, can be attached being an asset of such a person. But the bank account of the person owing such debt cannot be subject to a provisional attachment order under Section 83 of the CGST Act.
• The writ petition is disposed of by setting aside the impugned orders attaching ZIPL’s bank accounts albeit with the further direction that ZIPL shall make payments due to various merchants directly in their respective bank accounts as disclosed by ZIPL to the respondent.