Only bank accounts belonging to of the taxpayer can be frozen: Bombay High Court

What is section 83 of the CGST Act?

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 of the case

Petitioner is the sole proprietor engaged in the business of export of various products, such as, garments, footwear, leather accessories etc. Petitioner holds Importer Exporter Code. Office of respondent carried out search operations in the residence and office premises of the petitioner whereafter various documents etc. were seized. Simultaneously, the importer-exporter code of the petitioner was blocked. Thereafter summons were issued to the petitioner by respondent seeking certain information pertaining to export incentives claimed by the petitioner. Petitioner made payment of Rs. 30,00,000. Parallelly respondents commenced an investigation against the petitioner’s firm vide summons directing the appearance of the petitioner. In the month of July, 2020, various bank authorities that accounts belonged to the petitioner and his family members were frozen by respondent.

Issue of the case

Petitioner has sought for the following reliefs:

For a direction to the respondents restraining them from adopting any coercive measures without issuing show cause notice to compel the petitioner to pay further customs duty and / or goods and services tax (GST) dues which are disputed by the petitioner;
For a direction to the respondents to unfreeze the 12 bank accounts of the petitioner and family members as per details furnished in the writ petition including in the prayer portion;
For a direction to the respondents to unfreeze the Importer Exporter Code No.0314035460 of the proprietorship firm of the petitioner by the name of ‘M/s. XS Components’; And
For a direction to the respondents allowing presence of a lawyer of petitioner’s choice during investigation(questioning) of the petitioner

Observation of the court

High Court states that, when a law requires a thing to be done in a particular manner, it has to be done in that particular manner and recourse to any other manner is necessarily forbidden. Suspension and cancellation of importer exporter code number can be done only under Foreign Trade (Development and Regulation) Act, 1992 by the Director General of Foreign Trade or by his authorized officer for the reasons specified and in the manner provided in section 8 of the said Act. Respondents arrayed in this petition are neither the Director General of Foreign Trade nor his authorized officer. Prima facie, they are not empowered either to suspend or cancel the importer exporter code of the petitioner, the only two measures provided under law. There is no provision for blocking of importer exporter code, that too by an authority which is not competent either to suspend or cancel such code. If that be the position, blocking of importer exporter code of the petitioner by any authority other than the Director General of Foreign Trade or by his authorized officer under section 8 of the Foreign Trade (Development and Regulation) Act, 1992 would be unauthorized, unwarranted and without jurisdiction.

High Court observed that the property including the bank account liable to or which has been provisionally attached must belong to the taxable person. ‘Taxable person’ has been defined in section 2(107) to mean a person who is registered or is liable to be registered under sections 22 or 24. It was observed that Bank accounts at Sr. Nos.3, 5 and 12 are in the joint names of Ms. Mansi Mandavia and Mr. Siddharth P. Mandavia whereas the bank account at Sr. No. 10 is solely in the name of Ms. Mansi Siddharth Mandavia. It has been clarified that Mansi Mandavia and Mansi Siddharth Mandavia is one and the same person and is the wife of the petitioner. On the other hand, the bank accounts at Sr. Nos.6 and 11 are in the joint names of the petitioner and Hriaan Siddharth Mandavia (minor) who is stated to be the son of the petitioner. Prima facie, Mansi Mandavia alias Mansi Siddharth Mandavia and Hriaan Siddharth Mandavia (minor) are not the concerned taxpayers in this case. There are no allegations against them. High Court held that they are not the taxpayers in this case and provisional attachment of their bank accounts, therefore, would not be justified.

Conclusion

The High Court, as an interim measure, the court pass the following orders:

The account number at Sr.No.10 of paragraph 8.8 which is solely in the name of Ms. Mansi Siddharth Mandavia shall be unfrozen forthwith;
The account numbers which are jointly in the names of the petitioner and either Mansi Mandavia alias Mansi Siddharth Mandavia and Hriaan Siddharth Mandavia at Sr. Nos.3, 5, 6, 11 and 12 of paragraph 8.8 shall be unfrozen forthwith subject to the condition that until otherwise directed, those accounts shall be in debit freeze to the extent of 50% of the amounts presently credited;
In so far the other accounts are concerned, petitioner may file objection before the Principal Additional Director General of GST Intelligence within a period of 7 days from today;
If such objection is filed as above, the Principal Additional Director General shall afford an opportunity of hearing to the petitioner and thereafter pass an appropriate order in accordance with law within a period of 3 weeks from the date of filing of the objection;
Blockage of importer exporter code of the petitioner by respondent No.3 or by any other authority shall be withdrawn forthwith.

Read the full order of court from below

Only-bank-accounts-belonging-to-of-the-taxpayer-can-be-frozen

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