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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 ..... re, 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 - 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. Whether the respondent No.3 was justified in provisionally attaching the stock lying at the factory premises and the attachment of sundry debtors? - HELD THAT:- The authority should ensure that the attachment does not hamper the normal activities of the taxable person. It has been clarified that the raw materials and input required for the production or finished goods should not normally be attached by the department - In the case on hand, it is not approved that the provisional attachment of the goods, stock and receivables, more particularly, when the entire stock and receivables have been pledged and a floating charge has been created in favour of the Kalupur Commercial Bank Limited for the purpose of availi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness 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 The facts giving rise to this writ application may be summarized as under: 3 The writ applicant is a limited liability partnership firm and is engaged in the business of procuring various type of M.S. Scrap used for the manufacturing of the TMT bars. The writ applicant is duly registered under the Goods and Services Tax Act. Its principal place of business is at Rajkot. 4 On 19th November 2021, the officials of the GST Department undertook search proceedings at the registered premises of the writ applicant and also at the residential premises of one of the partners namely Niraj Jaydev Arya under Sub-section (2) of Section 67 of the Central Goods and Services Tax Act, 2017 [for short, "the Act, 2017"]. The search proceedings were undertaken on the allegation that the writ applicant has availed Input Tax Credit on the basis of fake in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,71,840 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 50,94,965 5795400000772 90,94,966 5795400000775 50,92,970 5795400000814 (Mortgaged) 16,71,684 5795400000815 (Mortgaged) 25,07,527 057CF100003665 27,25,000 057CF100003682 28,00,000 057CF100003692 96,75,000 057CF100003791 10,100,000 057CF100003796 1,58,25,000 TOTAL AMOUNT OF ATTACHMENT 45,90,22,566 7 Being aggrieved by the aforesaid action on the part of the respondent No.3, the writ applicant is here before this Court with the present writ application. 8 We have heard Mr. Avinash Poddar, the learned counsel appearing for the writ applicant, Mr. Utkarsh Sharma, the learned A.G.P. appearing for the State respondents and Ms. Mohini Bhavsar, the learned advocate for Mr. Bharat Jani, the learned advocate appearing for the respondent Bank. 9 We propose to focus on three issues : (i) Form GST D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, where any firm is liable to pay any tax, interest or penalty under Act the firm and each of the partners of the firm shall, jointly and severally, be or such payment: Provided that where any partner retires from the firm, he or the firm, shall intimate the date of retirement of the said partner to the Commissioner by a notice in that behalf in writing and such partner shall be liable to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on that date: Provided further that if no such intimation is given within one month from the date of retirement, the liability of such partner under the first proviso shall continue until the date on which such intimation is received by the Commissioner. Explanation to chapter XVI provides that Explanation. For the purposes of this Chapter;- (i) a &qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent 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 to the offences by company. Subsection (3) of Section 137 of the Act provides that where an offence under the Act has been committed by a taxable person being a partnership firm or a limited liable partnership or a Hindu Undivided Family or a Trust, the partner or Karta or Managing Trustee would be deemed to be guilty of such offence and would be liable to be proceeded against and punished accordingly. 16 Section 83 of the Act reads thus: "83. Provisional attachment to protect revenue in certain cases. (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 writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker; (iii) the expression "special category States" shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution." 20 Section 24 of the Act reads thus: "24. Compulsory registration in certain cases.- Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,-- (i) persons making any inter-State taxable supply; (ii) casual taxable persons making taxable supply; (iii) persons who are required to pay tax under reverse charge; (iv) person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner." 25 In the case of Her Highness Maharcmi Mandalsa Devi vs. H. Ramnarain Private Ltd. reported in 65 B.L.R. 31, it has been laid down by the Supreme Court that a partnership firm is to be treated as a corporate body only for the purpose of Order XXX of the Code of Civil Procedure. The legal fiction created by Order XXX cannot be carried too far. The partnership firm has no legal entity. The persons, who are individually called partners, are collectively called a firm, and the name under which their business is carried on is called the firm name. Therefore, a suit against the firm is really a suit against all the partners of the firm, and therefore, a decree passed in such a suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 is found to be in default, issue a certificate for recovery and forward it to the Tax Recovery Officer specifying the amount of arrears due from the assessee. The amount due may be recovered by resort to any one or more of the four modes prescribed by Sec. 222 of the Act. If the defaulter fails to comply with a notice issued by the Tax Recovery Officer requiring the defaulter to pay the amount within fifteen days from the date of the service of the notice, proceedings for recovery may be taken against the assessee for recovery of the tax. But under the scheme of the Act and the Rules, the assessee alone may be treated in default. The Act and the Rules contemplate that the notice for payment of the tax arrears may be issued against the assessee, and proceedings for recovery of the tax may be taken ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration 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 took notice of the fact that Section 70 has not been mentioned in Section 83 of the Act. The Bombay High Court also took notice of the fact that no proceedings were pending against the petitioner therein under Sections 62, 63, 64, 73 and 74 respectively of the Act. In such circumstances, it was contended on behalf of the petitioner therein that the power under Section 83 could not have been invoked against the petitioner. The Bombay High Court proceeded to hold as under: "13. Primary defence of the Respondents is that even if section 62, 63, 64, 67, 73 and 74 mentioned in section 83 of the Act are not referable to the case of the Petitioner, since a summons is issued to the Petitioner in pursuant to the inquiry initiated against M/s. Maps Global under section 67 of the Act, by the issuance of summon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 mentioned under Section 83 of the Act are pending." 34 We now proceed to consider whether the respondent No.3 was justified in provisionally attaching the stock lying at the factory premises and the attachment of sundry debtors. 35 Before we proceed to consider the aforesaid, we must try to understand the scope and applicability of Section 83 of the Act. 36 In the aforesaid context, we must look into a very pronouncement of the Supreme Court in the case of M/s. Radha Krishan Industries vs. State of Himachal Pradesh and others [Civil Appeal No.1155 of 2021 decided on 20th April 2021]. Justice Dr. Dhananjaya Y. Chandrachud, speaking for the Bench, laid down the following proposition: 72 For the above reasons, we hold and conclude that (i) The Joint Commissioner while ordering a provisional att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any proceeding under section 62 or section 63 or section 64 or section 67 or section 73 or section 74 of the Act. 2. Doubts have been raised by the field formations on various issues pertaining to provisional attachment of property under the provisions of section 83 of the Act read with rule 159 of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the "CGST Rules"). Besides, in a number of cases, Hon'ble Courts have also made observations on the modalities of implementation of provisions of section 83 of the Act by the tax officers. In view of the same, the following guidelines are hereby issued with respect to the exercise of power under section 83 of the Act. 3.1 Grounds for provisional attachment of property 3.1.1 Section 83 of the Act is rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 Document Identification Number (DIN) mentioning therein the details of property being attached. 3.2.2 A copy of the order of attachment should be sent to the concerned Revenue Authority or Transport Authority or Bank or the relevant Authority to place encumbrance on the said movable or immovable property. The property, thus attached, shall be removed only on the written instructions from the Commissioner. 3.2.3 A copy of such attachment order shall be provided to the said taxable person as early as possible so that objections, if any, to the said attachment can be made by the taxable person within the time period prescribed under rule 159 of the CGST Rules. If such objection is filed by the taxable person, Commissioner should provide an opportunity of being heard to the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax 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 without issue of any invoice, in violation of the provisions of the Act or the rules made there under, with an intention to evade tax; or b. issued any invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made there under; or c. availed input tax credit using the invoice or bill referred to in clause (b) or fraudulently availed input tax credit without any invoice or bill, or d. collected any amount as tax but has failed to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; or e. fraudulently obtained refund; or f. passed on input tax credit fraudulently to the recipients but has not paid the commensurate tax 3.3.2 The above list is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides, 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 investigation and adjudication are completed at the earliest, well within the period of attachment, so that the due liability of tax as well as interest, penalty etc. arising upon adjudication can be recovered from the said taxable person and the purpose of attachment is achieved. 3.7 Share in property Where the property to be provisionally attached consists of the share or interest of the concerned taxable person in property belonging to him and another as co-owners, the provisional attachment shall be made by order to the concerned person prohibiting him from transferring the share or interest or charging it in any way. 3.8 Property exempt from attachment All such property as is by the Code of Civil Procedure, 1908 (5 of 1908), exempted from attachment and sale for exe ..... 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