GST Demand and Account Freeze Upheld; Assessee to Pursue Alternate Remedies for Identity Theft Claim

A writ petition cannot be filed to challenge an assessment order that was not challenged earlier.

Issue: Whether a writ petition challenging a GST demand and seeking to de-freeze bank accounts based on an identity theft claim is maintainable, especially when the demand was finalized under Section 74 (involving fraud) and the account freeze was for recovery purposes.

Facts:

An assessment order under Section 74 was passed against the petitioner, confirming a tax demand.
The petitioner’s bank accounts were frozen under Section 79(1)(c) for recovery of the dues.
The petitioner filed a writ petition challenging the demand and seeking to de-freeze the accounts, claiming identity theft.
The petitioner alleged that their PAN and Aadhaar were misused to obtain GST registration for a company they were not associated with.

Decision:

The court held that the writ petition was not maintainable for challenging the demand or seeking de-freezing of accounts.
The tax demand was finalized under Section 74 in 2019, and the petitioner had not taken any steps to challenge it through the available statutory remedies.
The identity theft claim involved factual disputes that could not be resolved in a writ petition.
The court clarified that the bank accounts were frozen under Section 79(1)(c) for recovery purposes, not under Section 83, which deals with provisional attachment.
The court disposed of the writ petition, stating that it could not grant the relief of demand cancellation or de-freezing of accounts.
However, the petitioner was granted liberty to pursue other legal remedies and raise the identity theft claim in appropriate forums.

Key Takeaways:

This case clarifies that writ jurisdiction is not the appropriate remedy for challenging a finalized GST demand under Section 74 or for resolving factual disputes related to identity theft.
Assessees should exhaust available statutory remedies, such as appeals, before resorting to writ petitions.
Identity theft claims, which involve factual disputes, should be raised in appropriate forums where evidence can be presented and adjudicated.
This decision underscores the importance of following due process and utilizing appropriate legal channels for resolving different types of grievances in GST matters.

HIGH COURT OF DELHI

Ramesh

Union of India

Yashwant Varma, and Dharmesh SharmaJJ.

W.P.(C) 14632 of 2022
CM APPL. 44841 of 2022
CM APPL. 33456 of 2023

DECEMBER 13, 2024

Order dated 14.07.2023[Para 3]Followed

M.M. Khan and Amitava Poddar, Advs. for the Petitioner. Ms. Pratima N. Lakra, Ripudaman Bhardwaj, Ms. Arunima Dwivedi, CGSCs, Chandan Prajapati, Kushagra Kumar, Abhinav Bhardwaj, Ms. Pinky Pawar, and Ms. Thonpinao Thangal, Advs. for the Respondent.

ORDER

1. This writ petition has been preferred seeking the following reliefs:-

(a)

issue an appropriate writ, order or direction to the respondents No.3 & 4 for cancellation of the alleged demand of GST for the amount of Rs.l,00,36,472/- levied and charged in the respect of M/s Shree Kamakhya Steels Pvt. Ltd. having its registered office at Fatehpur Road, Byepass, District Siwan Bihar, allegedly showing in the name of the petitioner herein whereas the petitioner is not connected and related with the said company at all.

(b)

Direct the respondent No.3 & 4 to order for de-sealing and opening for operation the above said Bank Accounts of the petitioner in the above named Banks as the petitioner is having no liability to pay any GST Amount as alleged by the respondent No.3 & 4

(c)

Pass any other or further.orders as this Hon’ble Court may deem fit, and proper in the interest of justice and under the special facts and circumstances of the case.”

2. The petitioner is principally aggrieved by a demand of INR 1,00,36,472/- which has come to be raised under the Central Goods and Services Tax Act, 2017¹ against him. It appears to have been alleged that the transactions which formed the basis for the creation of the demand under that enactment are not concerning the writ petitioner at all. It was in the aforesaid backdrop that the petitioner had sought the initiation of appropriate inquiries and investigation. The petitioner additionally seeks the de-freezing of his bank accounts.

3. We find that the issues which are broadly raised in the writ petition had been noticed in some detail by us in our order of 14 July 2023 and which reads as follows:-

“1.

The petitioner has filed the present petition impugning a demand of ^1,00,36,472/ – which is raised in respect of M/s. Shree Kamakhya Steel Pvt. Ltd. The petitioner claims that the said demand does not pertain to him. He claims that his PAN Card and Aadhaar Card have been misused for securing a GST registration and that he has not carried out any business activity which could result in any demand. The petitioner is also aggrieved as his bank accounts (Bank Account No. 06430100015079 maintained with Bank of Baroda, Mandoli Branch, Delhi; Bank Account No. 043331930010974 maintained with HDFC Bank, Branch Shalimar Garden Extn-2, Sahibabad, District Ghaziabad, U.P.; and Bank Account No. 918020012850921 maintained with Axis Bank, Jyoti Nagar Branch, Delhi), have been frozen.

This petition was taken up for hearing on 05.07.2023 and on that date this Court had passed an order proposing that the bank accounts be de-frozen as more than one year had elapsed since the bank accounts were frozen. It was also proposed that liberty be granted to the petitioner to pursue his complaint regarding theft of identity.

Learned counsel appearing for the Revenue points out that the petitioner’s bank accounts have not been frozen by any order under Section 83 of the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’) but by an order passed under Section 79(1)(c) of the CGST Act. He points out that the confirmed demand was already raised after following the procedure as set out in Section 74 of the CGST Act. The matter is at the stage of recovery of the demands, so raised. In terms of Section 79(1)(c) of the CGST Act, recovery may be effected by calling upon any other person who holds any money payable to the dealer or who may subsequently hold any money payable to the dealer, to pay the same to the extent of the said demand.

In view of the above, direction as proposed by us and recorded in order dated 05.07.2023, cannot be passed.

The principal question to be addressed is a question of fact, that is, whether the petitioner’s PAN Card and Aadhaar Card have been misused for securing a GST Registration and transacting business, by an unknown person. Clearly, the investigation in this regard cannot be limited only to examining whether a GST registration has been created using the PAN number / PAN Card and Aadhaar Card or UID number of the petitioner. Any inquiry in this regard must necessarily extend to whether the transactions that have given rise to the demand, were conducted by the petitioner and not by any other person misusing his identity.

Learned counsel appearing for the Revenue seeks time to take instructions in this regard.

At his request, list on 25.09.2023.”

4. Admittedly, a final order referable to Section 74 of the CGST Act had come to be passed against the writ petitioner in 2019. The petitioner has not adopted any steps to assail that order in accordance with law. In fact, the original order under Section 74 does not even form subject matter of challenge in the instant proceedings. The freeze, as the Court correctly noticed in the earlier order, was thus referable to Section 79(1)(c) as opposed to Section 83, with the latter being confined to a provisional attachment.

5. Insofar as the various allegations laid by the petitioner and which extend to unlawful use of his PAN and Aadhar Card for securing a Goods and Services Tax registration and transactive business is concerned, the same clearly gives rise to disputed questions of fact which cannot possibly be resolved in the writ petition.

6. Accordingly, while we find no justification to grant the reliefs as are prayed for in the instant writ petition, we deem it appropriate to accord liberty to the writ petitioner to adopt such appropriate remedies as may be permissible in law. It shall further be open for the writ petitioner to raise all grounds including that of identity theft in any proceedings that may be instituted. This order shall also not absolve the respondents from their obligation of duly investigating the complaint that has been made by the writ petitioner.

7. The writ petition shall stand disposed of on the aforesaid terms.