In W.P. (C) 3428/2023 - DEL HC - Delhi High Court sets aside attachment of Zhudao Infotech's bank accounts under Central Goods and Services Tax Act
Justice Vibhu Bakhru & Justice Amit Mahajan [22-05-2023]


Read Order: Zhudao Infotech Private Limited V. The Principal Additional Director General & Anr.


Chahat Varma


New Delhi, June 6, 2023: The High Court of Delhi has ruled in favor of Zhudao Infotech Private Limited (ZIPL-petitioner), setting aside the orders that had attached ZIPL's bank accounts under Section 83 of the Central Goods and Services Tax Act (CGST Act). The court held that ZIPL's bank accounts could not be attached for any amount due and payable to the merchants using ZIPL's platform.


In the present case, the petitioner operated a payment aggregator platform called 'Onion-Pay' and claimed that its role was limited to processing payments and it was not involved in the supply of any services by the merchants using its platform. The payments received by the petitioner were held in escrow/nodal accounts, and the petitioner was entitled to only a portion of the payments, with the remaining amounts to be paid to the merchants and suppliers. The petitioner argued that the attachment of its bank accounts would effectively shut down its business as it would be unable to operate the online platform.


On the other hand, the respondents alleged that the petitioner indulged in GST evasion and supported illegal gambling activities through its online payment gateway. They claimed that ZIPL was involved in supporting illegal gambling products such as ‘Teen Patti’, ‘Roulette’, ‘Ludo’, ‘Matrix 5’ and that the merchants associated with the payment gateway were suspected to be fake and shell companies. Additionally, they alleged that the petitioner had created a network of fake gaming merchant entities, which were operated and managed by the petitioner, with a Chinese national named Jian Li as the director and mastermind of the operation.


The bench of Justice Vibhu Bakhru and Justice Amit Mahajan observed that 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 was necessary to do so for the purpose of protecting the interest of government revenue.

The court held that a debt owed by an individual to a taxable person, whose assets or bank accounts are liable to be attached under Section 83 of the CGST Act, can indeed be attached as it is considered an asset of that person. However, the court ruled that the bank account of the individual who owes such a debt cannot be subjected to a provisional attachment order under Section 83 of the CGST Act.


The court directed that, “ZIPL shall make payments due to various merchants directly in their respective bank accounts as disclosed by ZIPL to the respondents and as recorded in the impugned order dated 01.02.2023. Insofar as the remaining amount of Rs. 69.92 crores is concerned, ZIPL shall transfer the same to its current account.”

Add a Comment