The power of bank account attachment cannot be utilised to harass the taxpayer, according to HC
Fact and issue of the case
Brief facts leading to the present petition are as follow:
The petitioner is a private limited company engaged in the business of trading in coal. It is also having valid registration number under the Act.
The respondent No.2 is an officer under the provision of section 3 of the Act entrusted with the assessment and recovery of GST under various provisions of the Act.
The petitioner is regular in filing its return under the Act both annually and periodically.
During the period between 2018-19, the petitioner company had purchased Iron and Steel Waste Scrap from M/s.Arsh Enterprise, which has having valid GST registration at the time of purchase of goods. The goods worth Rs.37,31,420/- had been purchased where the value of goods was of Rs.31,53,746/-and the GST was Rs.5,67,674/-. The goods purchased from M/s.Arsh Enterprise also had been sold by the petitioner to various other purchasers and the sale proceeds were received in his Bank account. The GST registration of M/s.Arsh Enterprise had been cancelled on 31.10.2020.
On 04.01.2022 summons under section 70 of the Act was issued to the petitioner where he was called upon by the respondent No.2 to remain present for recording of statement and production of sales and purchase registers. The summons is silent regarding specific subject matter about the inquiry. The Director of the petitioner was unable to attend on specific date, the request of adjournment was made on 11.01.2022.
A detailed letter was addressed to the respondent No.2 as no new date was given on 11.02.2022 submitting all documents. The petitioner again served with a letter from respondent No.2 being the letter dated 10.03.2022 calling upon the petitioner to submit details of freehold immovable property, property card, index copy, etc. The respondent failed to indicate any live link with the document sought as well as with the inquiry which the summons under section 70 of the Act was issued.
It is averred by the petitioner that respondent No.2 had taken extreme coercive steps, whereby his entire business came to a grinding halt by attaching the Bank account without any pending proceedings. With communication on 18.05.2022, FORM GST DRC-22 was issued on the Bank under section 83 of the Act.
On 21.05.2022, request was made by the petitioner to the respondent No.2 to release the Bank account, however, till date the Bank account is not released and hence,
In the facts of the case, undisputedly, the respondent no.2 has not only provisionally attached the stock of goods lying at the factory premise of the writ applicants, at the same time, the respondent No.2 has also provisionally attached the demat account and current account of the writ applicants. These are the valuable assets of the writ applicants, more particularly, raw material and the finished goods are valuables which are otherwise necessary for running of the business of the applicants. Even operating the demat account and current account are essentially required for the routine business of the writ applicants. Time and again, this Court as well as even the instructions instructions issued by the higher authority of the respondents, has directed the proper officer to ensure that their action of the provisional attachment should not hamper normal business activities of the taxable person. Even thereafter this Court vide judgment dated 27.01.2022 passed in Special Civil Application No.188 of 2022 in the case of M/s. Utkarsh Ispat LLP Vs. State of Gujarat had an occasion to deal with the similar facts whereby the respondent authorities have provisionally attached goods, stock and receivables and also bank accounts. This Court did not approve the provisional attachment of the goods, stock and receivables, more particularly, when the entire stock and receivables have been pledged and a floating charge has been created in favour of the Kalupur Commercial Bank Limited for the purpose of availing the cash credit facility with the provisional attachment of the goods, stock and receivables the entire business will come to a standstill.
Observation of the court
This order will not come in the way of respondent authority in carrying out its recourse as provided under the law in relation to this inquiry.
The amount of tax amount of 3,95,568/- for the year 2018-19 and tax amount of Rs.1,72,104/- for the year 201920 which the Bank is directed not to part with, let the said amount be parted once there is a direction subject to the crystallization of this liability of the petitioner and subject to the order of the Appellate Authority if any appeal is preferred within the time frame given under the statute. For the remaining amount of penalty and interest, the petitioner shall furnish the bond before the authority concerned.
With the above directions, present petition is allowed accordingly.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
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