Personal bank accounts of promoters cannot be attached under CGST
What is section 83 of the CGST act, 2017?
Section 83 deals with provisional attachment of property to protect revenue in certain cases. Where during the pendency of any proceedings under act the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.
The proper officer can assess the tax liability and pass ‘Assessment Orders’ under following provisions
- Section 62: Assessment of non-filers of returns
- Section 63: Assessment of unregistered persons
- Section 64: Summary assessment in certain special cases
- Section 67: Provides for inspection, search and seizure. Section 73/74 provides for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized.
Fact and Issue of the case
The petitioner was acting as a director on the Board of Directors of a company, going by the name of Milk food Ltd, between 2006 and 2008. The petitioner is also a shareholder in the said company, and owns approximately 14.33 % equity shares. The petitioner drew a salary of Rs.1.50 crores per annum qua the financial year 2019-2020.The respondent, based on the information received, that Milk food Ltd. was availing Input Tax Credit against fake/ineligible invoices, commenced investigation, under Section 67 of the Central Goods and Services Tax Act, 2017 against Milk food Ltd. The respondent claims that, the statement of the persons, who controlled entities, which enabled Milk food Ltd. to claim ITC, were recorded in the course of the investigation. It is in this connection, the respondent claims, that “the voluntary statement” of the petitioner was recorded on 03.12.2020. The petitioner, as per the respondent, in her statement made to the concerned officer, inter alia, admitted to the fact that she had acted as a director of the company, i.e., Milk food Ltd., between 2006 and 2008, and since then, she has been working in the company in the capacity of a mentor/advisor.
Furthermore, the petitioner is also said to have stated that, it is in her capacity as the mentor/advisor to Milk food Ltd., that she received Rs.1.50 crores in the concerned FY i.e. 2019-2020, from Milk food Ltd. According to the petitioner, this money was given as she had been providing “strategic guidance” to Milk food Ltd. The petitioner, as noticed above, had accepted the fact that, she held an equity stake of 14.33% in Milk food Ltd. Since the petitioner was aggrieved qua the impugned action of the respondent, she approached this Court by way of the instant writ petition. Upon notice being issued, the respondent has filed its counter-affidavit.
Observation of the Court
The Court has heard the learned counsel for the parties and perused the record. According to us, the submission advanced by Mr. Singh, that the instant petition. under Article 226 of the Constitution, should not be entertained as recourse to an alternate remedy was taken by the petitioner, does not impress us, since the exercise of power under Section 83 of the Act, to begin with, was without jurisdiction. The fact that an alternate remedy is available to a litigant is a self-imposed limitation on the Court; something which did not deter the Court, when notice was issued in the matter, in the first instance, perhaps, given the assertions made in the petition. The Court can, and should exercise its powers, under Article 226 of the Constitution, amongst others, in cases where the impugned action or order concerned is without jurisdiction1. In this case, one of the jurisdictional ingredients‟, which is missing, is that the petitioner is not a taxable person. This aspect is borne out upon perusal of the impugned orders, which are identical. In the impugned orders, dated 07.12.2020, the respondent adverts to the fact that, Milk food Ltd. is the taxable person.
The petitioner claimed, in her voluntary statement, that she was paid Rs.1.50 crores in the FY 2019-2020 for rendering services in her capacity as a mentor/advisor to Milk food Ltd. Therefore, even if we assume, for the moment, that, since investigations are on against the taxable person, and therefore, proceedings are pending under Section 67 of the Act, there is nothing placed on record to show that there was material available with the respondent, linking the petitioner to purported fake invoices. In other words, in the absence of such material, the impugned action concerning provisional attachment of the petitioner‟s bank accounts, which is otherwise a “draconian” step, was unsustainable. In the zeal to protect the interest of the revenue, the respondent cannot attach any and every property, including bank accounts of persons, other than the taxable person.
Conclusion
The court allowed the writ petition filed by the petitioner and quashed the provisional attachment orders dated 07.12.2020. The respondent will communicate the order passed today to the concerned Banks.
Read the full order from below
Personal-bank-accounts-of-promoters-cannot-be-attached-under-CGST
