The Rajasthan High Court has held that a company’s voluntary cancellation of its GST registration cannot automatically serve as a justification for freezing its bank accounts.
Facts & Context
A corporate taxpayer had applied for cancellation of its GST registration under the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act). Subsequently, the tax-authority directed its bank to freeze the company’s accounts on the ground of alleged non-compliance and possible tax liability. The company challenged the bank freeze order before the High Court.
Judgment & Reasoning
The Court emphasised that when a taxpayer has voluntarily opted out by cancelling its registration, this act alone does not constitute “default” which can sustain freezing of bank accounts under GST law.
The Court observed that the power to freeze assets should be exercised only where statutory conditions are clearly met, such as an order of provisional attachment under Section 83(1) of the CGST Act, and not merely on the basis of registration cancellation.
It noted that banks should not be asked to freeze accounts without a valid order and clear statutory support, giving the taxpayer a fair opportunity to respond.
The Court directed that the freeze order be reconsidered by the authority and, unless fresh grounds are established in accordance with law, the company’s account be unfrozen.
Significance
This ruling provides important protection for taxpayers by emphasising that a bank-account freeze under the GST regime cannot be triggered simply as a consequence of cancelling registration. It underscores the requirement of due process and statutory compliance before coercive recovery steps are taken.
