GST update on whether Bank accounts of persons other than the taxable person can be attached?

GST Departmental actions in recent times have been very aggressive like GST audit, busting fake racket related to ITC invoice, etc. It has been seen that in most cases department take harsh actions than required. In this update we will discuss whether Bank accounts of persons other than the taxable person can be attached? Recently in the case of Roshni Sana Jaiswal vs. Commissioner of Central Taxes, GST Delhi (East) wherein 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 drew a salary of Rs.1.50 crores per annum qua the financial year (in short FY) 2019-2020. The department, based on the information received, that Milk food Ltd. was availing Input Tax Credit (in short ITC) against fake/ineligible invoices, commenced investigation, under Section 67 of the Central Goods and Services Tax Act, 2017. Department claimed 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 department claims, that "the voluntary statement" of the petitioner was recorded on 03.12.2020. The petitioner admitted to the fact that she had acted as a director of the company, i.e., Milkfood Ltd., between 2006 and 2008, and since then, she has been working in the company in the capacity of a mentor/advisor. She received an amount of Rs 1.5 cr for providing "strategic guidance" to Milkfood Ltd. The department contented that petitioner has availed the alternate remedy available to it under Rule 159(5) of the Central Goods and Services Tax Rules, 2017 by filing objections under the said Rule during the pendency of the writ petition. Department further contended that since objections, were filed during the pendency of the writ petition and thus the same should not be allowed as an alternate remedy. Further for understanding the petitioner’s contention we will have to look into some sections: Relevant portion of section 83 of CGST act relating to provisional attachment: “…….1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, 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……..” Section 2(107) of the Act3, provides that only that person can be a taxable person, who is registered or liable to be registered as per the Act. The petitioners thus contented that neither there was any pending proceedings u/s 62/63/64/67/73 or 74 nor the department has formed any opinion before taking recourse to Section 83 of the Act, that attachment of the petitioner’s bank account was necessary for the purpose of protecting the interest of the revenue. They also relied on reasoning given in M/s Radha Krishan Industries vs. State of Himachal Pradesh & Others. The High Court relied that 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 jurisdiction. In this case, one of the jurisdictional ingredients, which is missing, is that the petitioner is not a taxable person. Also, court said that when the Constitution (ARTICLE 226) confers on the High Courts the power to give relief it becomes the duty of the Courts to give such relief in fit cases and the Courts would be failing to perform their duty if relief is refused without adequate reasons. The order was quashed for both reasons. Court held that since the department failed to initiate the proceeding in the respective sections as mentioned in section 83 the same could not be invoked. Also, the petitioner was not taxable person falling under the definition in section 2(107) as discussed above thus the provisional attachment was not tenable. It is a matter of time where more of such decisions might be seen in near future. Thus, it is high time for the department to introspect itself whether such harsh actions which do not stand merit in courts are viable to be taken. But on the contrary, they are increasing the powers of officers. Section 106 of Finance Bill 2021 proposes to amend Section 83. The proposed Section 83 allows officers to attach not only bank accounts of taxable person but also of other person. Further, the proposed amendment will give power to officers to attach the bank accounts from initiation of proceedings under Assessment-chapter XII, Inspection, Search, Seizure and Arrest-chapter XIV or Demand and Recovery-chapter XV. Hence, the powers are given to officers to nullify the effect of High Court decisions.

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GST update on whether Bank accounts of persons other than the taxable person can be attached?

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