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of <h1>Bank attachment under GST treated as show-cause notice; petitioner allowed 30 days to file detailed representation</h1> <h3>Subir Ghosh Versus The Deputy Commissioner (ST) (FAC), The State Tax Officer, The Chief Manager/Bank Manager, ICICI Bank Ltd., Bangalore</h3> HC disposed the writ, directing respondents to treat the impugned bank attachment notice under the GST provisions as a notice to show cause for recovery ... Challenge to bank attachment notice issued u/s 79(1)(c) r/w Section 89(1) of the respective GST Enactments - recovery measures of arrears of tax of the Company - HELD THAT:- It is inclined to dispose this Writ Petition by directing the Respondents to pass a final order by treating the impugned notice as a notice to show cause as to why penalty, tax and interest should not be recovered from the Petitioner. The Petitioner may give a detailed representation within a period of 30 days from the date of receipt of copy of this order and thereafter, the 1st Respondent or any other officer authorised may adjudicate the same and pass appropriate orders on merits and in accordance with law within a period of two months thereafter. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the impugned bank attachment notice issued in Form GST DRC-13 under Rule 145(1) read with Section 79(1)(c) of the respective GST enactments can be sustained against a former director in respect of recovery of the company's arrears of tax when liability under Section 89 is under challenge. 2. Whether the petitioner, who claims resignation from the company prior to enforcement action and asserts immunity under Section 89(1) of the respective GST enactments, must be afforded an adjudicatory opportunity before recovery measures (bank attachment) are enforced. 3. Whether the attachment of the petitioner's bank account should be maintained pending final determination of the question of personal liability under Section 89 and related procedural safeguards. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of bank attachment under Rule 145(1) read with Section 79(1)(c) pending adjudication under Section 89 Legal framework: Attachment for recovery (Form GST DRC-13) is effected under Rule 145(1) read with Section 79(1)(c) of the respective GST enactments; Section 89(1) deals with recovery from persons responsible (including directors) for tax due by the taxable person. Precedent treatment: The judgment does not rely upon or cite any prior authority; no precedent was explicitly followed, distinguished, or overruled in the reasoning. Interpretation and reasoning: The Court recognizes that the bank attachment notice was issued under the statutory recovery provisions but observes that whether the petitioner can be made personally liable under Section 89 requires adjudication. Given that the attachment followed an assessment order against the company, and personal liability under Section 89 is a distinct legal determination, summary maintenance of the attachment without affording the petitioner an opportunity to be heard would bypass the statutory adjudicatory process concerning personal liability. Ratio vs. Obiter: The direction that the impugned notice be treated as a notice to show cause and the requirement of adjudication on Section 89 liability constitute the operative ratio insofar as they mandate procedural compliance before enforcement against a former director. Conclusion: The attachment cannot be sustained without treating the impugned notice as a show-cause notice and completing adjudication on personal liability under Section 89; adjudication must be carried out in accordance with law. Issue 2 - Right to be heard and treatment of representation asserting resignation and immunity under Section 89(1) Legal framework: Principles of natural justice and the statutory scheme envisioned by Section 89(1), which contemplates recovery from persons responsible for tax, require that affected persons be given an opportunity to explain why penalty, tax and interest should not be recovered from them. Precedent treatment: No judicial authorities were invoked; the Court's approach is based on statutory interpretation and procedural fairness. Interpretation and reasoning: The petitioner had submitted a representation (dated 17.08.2024) asserting resignation in 2023 and claiming immunity under Section 89(1). The Court treats that representation as an occasion to require formal adjudication: the impugned attachment notice is to be regarded as a notice to show cause and the petitioner is to be permitted to file a detailed representation within 30 days, after which the competent officer must adjudicate on merits. This preserves the petitioner's right to be heard before final recovery measures are confirmed. Ratio vs. Obiter: The procedural directions (treating the notice as a notice to show cause, a 30-day window for representation, mandatory hearing) are ratio as they constitute the Court's binding procedural determination in this matter. Conclusion: The petitioner must be afforded a full opportunity to be heard on claimed immunity under Section 89(1); the administrative authority must adjudicate the claim on merits and in accordance with law within a designated timeframe. Issue 3 - Interim relief: lifting of bank attachment and restrictions pending adjudication Legal framework: Courts may grant interim relief to preserve rights pending adjudication, subject to safeguards preventing defeat of final orders; enforcement provisions remain available if adjudication establishes liability. Precedent treatment: No authorities cited; the Court exercises its equitable and supervisory jurisdiction to balance enforcement against the right to be heard. Interpretation and reasoning: In light of the requirement for fresh adjudication on personal liability, the Court ordered the immediate lifting of the attachment on the petitioner's bank account, but imposed a protective condition prohibiting any unusual transfers from the account to defeat the recovery process. The direction aims to prevent irreparable prejudice to the petitioner while protecting the revenue's interests pending final determination. Ratio vs. Obiter: The conditional lifting of attachment pending adjudication is part of the operative relief and therefore forms part of the ratio of the decision. Conclusion: Attachment is to be lifted pending adjudication, subject to a restraint against unusual transfers to ensure the integrity of subsequent recovery if liability is established. Issue 4 - Interaction with company's separate challenge to assessment Legal framework: The company has separately challenged the assessment order; the determination of company liability and director's personal liability under Section 89 are distinct proceedings and outcomes in one may influence but do not automatically determine the other. Precedent treatment: No precedent analysis provided; Court treats the separate company challenge as relevant factual context but not determinative of the petitioner's individual adjudication. Interpretation and reasoning: The Court noted that the company has independently challenged the assessment, which underscores the pending nature of the underlying tax liability. Nevertheless, the Court confined its order to procedural directions for adjudication of the petitioner's claim and interim relief, without resolving the substantive correctness of the company's assessment. The petitioner's right to contest both the assessment (by the company) and personal liability (by the petitioner) is preserved. Ratio vs. Obiter: Observations about the company's parallel challenge are obiter to the extent they provide context; the operative directions do not adjudicate substantive company liability. Conclusion: The petitioner's adjudication proceeds independently of the company's challenge; findings in the separate company proceeding do not preclude the statutory requirement of adjudicating personal liability under Section 89 with opportunity to be heard. Overall Conclusion and Directions The Court directed that the impugned bank attachment notice be treated as a notice to show cause as to why penalty, tax and interest should not be recovered from the petitioner; the petitioner is to file a detailed representation within 30 days; the adjudicating officer must hear the petitioner and pass a reasoned order on merits and in accordance with law within two months thereafter. Pending such adjudication the attachment on the petitioner's bank account is to be lifted, subject to a prohibition on unusual transfers. No costs were awarded.
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