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TMI Blog2022 (2) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... premises Dated 25/11/2021; (iv) Form GST DRC 22 for attachment of Bank Current Accounts and FDs Dated 25/11/20 21; (v) Form GST DRC 22 for attachment of Sundry Debtors (Utkarsh Bars Pvt. Ltd.) Dated 26/11/2021; (vi) Form GST DRC 22 for attachment of immovable property of Mr. Niraj Jaydev Arya dated 27.11.2021; (b) To issue a writ of mandamus or any other appropriate writ, order or direction, directing the Respondent No.4 to allow the petitioner to utilize its drawing power and allow the petitioner to conduct business operations on the ground that the risk of respondent no.4 is sufficiently covered and secured; c) To issue a writ of mandamus or any other appropriate writ, order or direction, as an ad-interim relief, to release the provisionally attached stock and the debtors so as to enable the petitioner to run his business smoothly and other ad-interim relief as the Court deems fit; d) To issue order(s), direction(s), writ(s) or any other relief(s)) as this Hon'ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice; e) To award Costs of and incidental to this application be paid by the Respondents." 2 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Water Treatment Plant 17,33,850 Weigh Bridge 7,14,327 3. 66KVA Substation (Mortgaged with Bank authorities) 66KVA Substation including Transformer & Capacition Bank 4,88,06,680 4. Stock Lying At Factory Premises Plot No.718 & 719, GIDC, Bamanbore, Village : Bamanbore (Mortgaged with Bank authorities) Raw Material of Waste and Scrap including Remelting Scrap, SilicoMngenize, Sponze, Store & Consumable 1,91,41,848 5. Bank Current A/C Bank Current A/C with SBI No.39683832171 1,92,617 Bank Current A/C with Kalupur Commercial Bank - 5720100141 1,18,374 Bank Current A/C with Axis Bank No.- 91700077787324 58,017 6. FD with Kalupur Commercial Bank (Mortgaged with Bank authorities) 5795100000142 (Mortgaged) 12,85,760 12,70,15,036 5795100000143 (Mortgaged) 25,70,000 5795100000144 1,15,71,840 5795100000145 58,59,546 5795100000164 (Mortgaged) 58,59,546 5795100000589 (Mortgaged) 36,05,838 5795100000760 25,48,813 5795400000761 25,48,812 5795400000763 50,96,960 5795400000764 50,96,959 5795400000765 50,96,294 5795400000766 50,96,295 5795400000767 50,95,630 5795400000768 50,95,631 5795400000771 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state that Niraj Jaidev Arya is the person who is responsible to execute this huge scam of showing fake purchase transactions in the books accounts of Utkarsh Ispat LLP and thereby availing ineligible input tax credit and all retained the benefits arising out of such offence. Total liabilities of the M/s. Utkam Ispat LLP till the date of search completed is amounting to Rs. 68,91,70,54 Whereas total property attached of firm is 55,30,22,566/- which is not sufficient cover government revenue. Assessee's contention that Firm is LLP and property partner cannot be provisionally attached is not tenable as attachment made is in t with provisions of the law. CHAPTER XVI contains provision Liability to pay in certain cases. Section and 137 of the CGST Act, 2017 are the sections that discuss liabilities of Partner case of recovery of taxes, interests and penalties for offences. It is to be noted these sections have override effects over other law related to LLP and LLP's Part Provisions of Section 90 and section 137 of GST Act is as below 90. Liability of partners of firm to pay tax. Notwithstanding any contract to the contrary and any other law for the being in force, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. Explanation.- For the purposes of this section,-(i) "company" means a body corporate and includes a firm or other association of individuals; and (ii) "director", in relation to a firm, means a partner in the firm. Provisional attachment of Immovable Property of partner is made in tune with provision and is inevitable to secure government revenue." 12 Thus, from the aforesaid, what we have been able to understand is that the respondent No.3 took the aid of Sections 90 and 137 resply of the Act. 13 It appears that there is a reason why the respondent No.3 took the aid of Sections 90 and 137 respectively of the Act. 14 Section 90 fixes the liability of partners of a firm to pay tax. Section 90 provides that in a case where any firm is liable to pay any tax, interest or penalty under the Act, the firm and each of the partners of the firm shall jointly and severally be liable for such payment. 15 Section 137 is with respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under an existing law, shall be liable to be registered under this Act with effect from the appointed day. (3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession. (4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, demerger of two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court or Tribunal. Explanation.--For the purposes of this section,-- (i) the expression "aggregate turnover" shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals; (ii) the supply of goods, after completion of job work, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 2 of the Companies Act, 2013; (h) any body corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to cooperative societies; (j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860; (m) trust; and (n) every artificial juridical person, not falling within any of the above;" 22 The respondent No.3, having realized that it is only the property belonging to a taxable person that can be provisionally attached under Section 83 of the Act and the partner of an LLP not being a taxable person in the case on hand, thought fit to take the aid of Section 90 and Section 137 resply of the Act for the purpose of provisionally attaching a property owned by the partner of the LLP. 23 The moot question is whether Section 90 of the Act has any application to the case on hand. 24 Section 90 of the Act is nothing, but the very same principle of law, as enunciated under Section 25 of the Partnership Act. Section 25 of the Partnership Act reads thus: "25. Liability of a partner for acts of the firm.-Every partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to proceed not only against the firm as a taxable person, but also against individual partner of the firm. 28 Section 137 of the Act has absolutely no application. Section 137 is a provision which fixes the vicarious liability of the partners in the event any offence is committed by a firm. 29 Sub-section (84) of Section 2 of the Act, 2017 defines the term "person" to include an individual, a Hindu Undivided Family, a company, a firm, a limited liability partnership, etc. Therefore, the Act recognizes a firm as a dealer and as a person. The legislature having treated an LLP as a taxable entity, distinct from the individual partners constituting it, it was not open for the respondent No.3 to provisionally attach the immovable property owned by a partner of the firm. 30 In the aforesaid context, a reference is made of the decision of the Supreme Court in the case of Kapurchand Shrimal vs. Tax Recovery Officer, Hyderabad and others [AIR 1969 SC 682] wherein the Supreme Court has held as under: "5. The scheme of the Income-tax Act, 1961, is to treat the assessee failing to pay the tax due within the period prescribed a defaulter. The Income-tax Officer may, where the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that account he cannot for the purpose of Section 222 of the Act of 1961 be deemed to be the assessee when the assessment is made against the Hindu undivided family and certificate for recovery is issued against the family." 31 Having regard to the principle enunciated in the above decision as well as in the light of the above discussion, this Court is of the view that the respondent No.3 was wholly unjustified in provisionally attaching a personal property owned by a partner of the firm under Section 83 of the Act, 2017. 32 In the aforesaid context, we may refer to and rely upon a Division Bench decision of the Bombay High Court in the case of Kaish Impex Private Limited vs. Union and others [Writ Petition No.3145 of 2019 decided on 17th January 2020], wherein the question that fell for the consideration of the Bombay High Court was whether the authority could have proceeded to provisionally attach the property owned by a person to whom just a summons under Section 70 of the Act was issued. In the said case, on the date of the provisional attachment of the bank account, only a summons under the Act was issued to the petitioner i.e. Kaish Impex Pvt Ltd. The Bombay High Court to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y emphasized that this power is not to be routinely exercised. Under Section 83, the legislature has no doubt conferred power on the authorities to provisionally attach bank accounts to safeguard government revenue, but the same is within well-defined ambit. Only upon contingencies provided therein that the power under section 83 can be exercised. This power is to be used in only limited circumstances and it is not an omnibus power. 16. It is therefore not possible to accept the submission of the Respondents that even though specified proceedings have been launched against one taxable person, bank account of another taxable person can be provisionally attached merely based on the summons issued under section 70 to him." 33 It appears that the respondent No.3 also overlooked the guidelines issued by the Central Board of Indirect Taxes and Customs dated 23rd February 2021 for the provisional attachment of property under Section 83 of the Act. We may remind the respondent No.3 of what has been stated in Clause 3.4.3, which reads thus: "It may be noted that the provisional attachment can be made only of the property belonging to the taxable person, against whom the proceedings m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue;" 37 It would be apposite at this stage to also look into the guidelines issued by the Central Board of Indirect Taxes and Customs, Government of India dated 23rd February 2021 for provisional attachment of property under Section 83 of the Act, 2017. We quote the guidelines as under: "CBEC-20/16/05-2021-GST/359 Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes and Customs GST Policy Wing ***** New Delhi, dated 23rd February , 2021 To, The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners / Commissioners of Central Tax (All) The Principal Director (Generals/Director Generals (All) Madam / Sir, Subject: Guidelines for provisional attachment of property under section 83 of the CGST Act, 2017-Reg. I am directed to refer to the section 83 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "the Act"). This section provides for provisional attachment of property for the purpose of protecting the interest of revenue during the pendency of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings referred in section 83 are pending, may dispose of or remove the property, if not attached provisionally. 3.1.4 The basis, on which, Commissioner has formed such an opinion, should be duly recorded on file. 3.1.5 It is reiterated that the power of provisional attachment must not be exercised in a routine/mechanical manner and careful examination of all the facts of the case is important to determine whether the case(s) is fit for exercising power under section 83. The collective evidence. based on the proceedings/ enquiry conducted in the case, must indicate that prima-facie a case has been made out against the taxpayer, before going ahead with any provisional attachment. The remedy of attachment being, by its very nature, extraordinary, has to be resorted to with utmost circumspection and with maximum care and caution. 3.2 Procedure for provisional attachment of property 3.2.1 In case, the Commissioner forms an opinion to attach any property, including bank account. of the taxable person in terms of section 83, he should duly record on file the basis, on which he has formed such an opinion. He should, thereafter, pass an order in FORM GST DRC-22 with proper Docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustable against the tax, interest, penalty, fee or any other amount payable by the taxable person. Further, the sale proceeds thus obtained must be deposited in the nearest Government Treasury or branch of any nationalised bank in fixed deposit and the receipt thereof must be retained for record, so that the same can be adjusted against the amount determined to be recoverable from the said taxable person. 3.3 Cases fit for provisional attachment of property 3.3.1 As mentioned above, the remedy of attachment being, by its very nature, extraordinary. needs to be resorted to with utmost circumspection and with maximum care and caution. It normally should not be invoked in cases of technical nature and should be resorted to mainly in cases where there is an evasion of tax or where wrongful input tax credit is availed or utilized or wrongfully passed on. While the specific facts of the case need to be examined in detail before forming an opinion in the matter, the following are some of type of cases, where provisional attachment can be considered to be resorted to, subject to specific facts of the case: Where taxable person has: a. supplied any goods or services or both w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tached, such movable property may be released if taxable person offers, in lieu of movable property, any other immovable property which is sufficient to protect the interesa of revenue. Such immovable property should be of value not less than the tax amount in dispute. It should also be free from any subsisting charge, liens, mortgages or encumbrances, property tax fully paid up to date and not involved in any legal dispute. The taxable person must produce the original title deeds and other necessary information relating to the property, for the satisfaction of the concerned officer. 3.5 Attachment Period 3.5.1 Every provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the provisional attachment order. 3.5.2 Besides, the provisional attachment order shall also cease to have effect if an order in FORM GST DRC-23 for release of such property is made by the Commissioner. 3.6 Investigation and Adjudication As the provisional attachment of property is resorted to protect the interests of the revenue and may also affect the working capital of the taxable person, it may be endeavored that in all such cases, the investig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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