2021 (5) TMI 528 - HC - GST

Court quashes tax attachment, petitioner not taxable under GST Act. Lack of proof and procedure cited.

The Court quashed the provisional attachment orders dated 07.12.2020, as the petitioner was not considered a taxable person under the Central Goods and ... Provisional attachment under Section 83 - Taxable person - Protection of Government revenue - Jurisdictional limits on exercise of power - Availability of alternate remedy and writ jurisdiction - Material linking third party to taxable person s fraudulent transactionsProvisional attachment under Section 83 - Taxable person - Jurisdictional limits on exercise of power - Provisional attachment of bank accounts under Section 83 was without jurisdiction as the petitioner was not a 'taxable person'. - HELD THAT: - Section 83 authorises provisional attachment only of property 'belonging to the taxable person.' The Act's definition of 'taxable person' is confined to a person who is registered or liable to be registered. The impugned orders themselves identify Milkfood Ltd. as the taxable person and do not aver that the petitioner was registered or liable to be registered. Consequently the condition precedent for assuming jurisdiction under Section 83 was absent and the exercise of provisional attachment power against the petitioner was without jurisdiction. The Court therefore entertained the writ despite availability of an alternate remedy because the action taken was jurisdictionally infirm. [Paras 5]Impugned provisional attachment orders dated 07.12.2020 quashed for want of jurisdiction.Protection of Government revenue - Material linking third party to taxable person s fraudulent transactions - Availability of alternate remedy and writ jurisdiction - Even if proceedings against the taxable person were pending, attachment of the petitioner s accounts was unsustainable in the absence of material linking her to the alleged fake invoices or an application of mind showing necessity to protect revenue. - HELD THAT: - Beyond the jurisdictional defect, the respondent failed to produce material demonstrating that the petitioner was connected to the alleged fraudulent invoices or that the officer had applied his mind to the requirement that attachment was necessary to protect revenue. The counter-affidavit relied only on the petitioner s 'voluntary' statement that she received payment in FY 2019-2020 for advisory services and on her shareholding; nothing in that statement established involvement in the purported illegal transactions. The Court held that attachment is a draconian step and cannot be resorted to in the zeal to protect revenue without specific material linking the third party to the taxable person s wrongdoing. Consequently, the disposal of the petitioner s objections under Rule 159(5) also collapses as it proceeded from jurisdictionally invalid action. [Paras 5, 6]Attachment set aside for lack of material and failure to satisfy the statutory requirement of necessity to protect revenue; order disposing objections also collapses.Final Conclusion: Writ petition allowed; provisional attachment orders dated 07.12.2020 quashed and banks to be so informed; consequential order disposing the petitioner s objections also set aside as proceedings against the petitioner were without jurisdiction. Issues involved:1. Jurisdictional challenge to provisional attachment of bank accounts by respondent.2. Application of Section 83 of the Central Goods and Services Tax Act, 2017.3. Interpretation of the definition of 'taxable person' under Section 2(107) of the Act.4. Compliance with procedural requirements before invoking Section 83.5. Relevance of voluntary statement made by the petitioner in the investigation.Comprehensive Analysis:Issue 1: Jurisdictional challenge to provisional attachmentThe petitioner challenged the jurisdiction of the respondent in provisionally attaching bank accounts, contending that she was not a 'taxable person' under the Act, with Milkfood Ltd. being the taxable entity. The Court held that the petitioner not being a taxable person was a crucial jurisdictional aspect. The impugned orders clearly identified Milkfood Ltd. as the taxable person, thereby indicating the lack of jurisdiction in attaching the petitioner's bank accounts.Issue 2: Application of Section 83 of the CGST ActThe Court emphasized that provisional attachment under Section 83 can only be ordered concerning property belonging to the taxable person. Since the petitioner did not meet the definition of a taxable person, as per Section 2(107) of the Act, the proceedings were deemed to fail on this ground alone. The Court highlighted that the respondent failed to establish that the petitioner was either registered or liable to be registered under the Act.Issue 3: Compliance with procedural requirementsThe Court noted that the respondent did not provide any material demonstrating that the officer had applied his mind to the necessity of protecting the revenue before invoking Section 83. The absence of a link between the petitioner and the alleged illegal transactions of Milkfood Ltd. indicated that the provisional attachment of the petitioner's bank accounts was unsustainable, being a 'draconian' step without proper justification.Issue 4: Relevance of voluntary statementThe voluntary statement made by the petitioner, where she acknowledged receiving payment for mentoring services to Milkfood Ltd., did not establish her involvement in the purported illegal activities. The Court concluded that the respondent's actions lacked substantiated material linking the petitioner to any wrongdoing, rendering the provisional attachment unjustified.Conclusion:The Court allowed the writ petition, quashing the provisional attachment orders dated 07.12.2020. The respondent was directed to inform the concerned banks accordingly. The order disposing of the petitioner's objections was also deemed to collapse entirely due to the proceedings being without jurisdiction. All parties were instructed to act on a digitally signed copy of the judgment, and the pending application was closed.