2019 (2) TMI 425 - HC - GST

Provisional attachment of property - invocation of provisions of section 83 of the CGST Act against the directors of the petitioner-company - Held that - The reliance placed upon section 89 of the Act is thoroughly misconceived inasmuch the same relates to recovery of any tax, interest or penalty due from a private company in respect of supply of goods or services. Moreover, even if such amount cannot be recovered from the private company, the directors of the company do not ipso facto become liable to pay such amount and it is only if the director fails to prove that non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company, that the same can be invoked. However, in any case, at this stage, section 83 of the Act does not apply to the directors of the private company. The impugned orders of attachment, to the extent the same attach the bank accounts of the directors, as set out in the statement at page 8 and 9 of the petition, at serial No. 1, 2, 3, 4, 5, 10 and 11 are concerned, are totally without any authority of law - the respondents are directed to forthwith release the attachment of bank accounts - petition allowed.

Issues:
1. Provisional attachment of property under section 83 of the Central Goods and Services Tax Act, 2017.
2. Interpretation of the term "taxable person" under section 2(107) of the CGST Act.
3. Applicability of section 89 of the CGST Act in recovering dues from directors of a private company.
4. Legality of attaching bank accounts of directors of a private company under section 83 of the CGST Act.

Analysis:

1. The judgment addressed the issue of provisional attachment of property under section 83 of the CGST Act. The court noted that the Commissioner can attach any property, including bank accounts, belonging to a taxable person as per the provisions of the Act. However, it clarified that the provisions of section 83 could only be invoked against the registered taxable person, which in this case was the petitioner-company. The court emphasized that the directors of the company could not be subjected to such attachment under section 83.

2. The interpretation of the term "taxable person" under section 2(107) of the CGST Act was crucial in this case. The court highlighted that a taxable person is defined as someone registered or liable to be registered under specific sections of the Act. Since the petitioner-company was registered under the CGST Act, it qualified as a taxable person. This interpretation was essential in determining the scope of application of section 83 and the entities it could be enforced against.

3. The judgment delved into the applicability of section 89 of the CGST Act concerning the recovery of dues from directors of a private company. The court rejected the respondent's reliance on this section, stating that it pertains to the recovery of tax, interest, or penalty from a private company. The court clarified that even if the amount could not be recovered from the company, the directors do not automatically become liable. Directors would only be liable if they fail to prove non-recovery is not due to their neglect or breach of duty. The court emphasized that at the current stage, section 83 did not extend to the directors of the private company.

4. Lastly, the judgment scrutinized the legality of attaching the bank accounts of directors of a private company under section 83 of the CGST Act. The court declared that the orders of attachment were without legal authority concerning the directors. Consequently, the court directed the respondents to release the attachment of specific bank accounts belonging to the directors, as listed in the petition. This decision was based on the court's interpretation of the relevant provisions and the limitations on attaching the property of individuals not falling under the definition of a taxable person as per the Act.

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