Roshni Sana Jaiswal vs Commissioner Of Central Taxes , Gst ... on 12 May, 2021

Judgment Summary: Roshni Sana Jaiswal vs Commissioner Of Central Taxes

1. Outcome
The Delhi High Court allowed the writ petition and quashed the provisional attachment orders dated 07.12.2020 issued against the petitioner's bank accounts. Consequently, the subsequent order dated 19.04.2021, which had disposed of the petitioner's objections, was also rendered invalid as the initial action was without jurisdiction.

2. Core Issue
The central legal issue before the Court was whether the GST authorities can, under Section 83 of the CGST Act, 2017, provisionally attach the personal bank accounts of an individual (a shareholder and mentor/advisor) when the investigation for fraudulent Input Tax Credit (ITC) is pending against the company (the "taxable person").

3. Key Facts
* The Petitioner: Ms. Roshni Sana Jaiswal is a shareholder (14.33%) and a mentor/advisor to a company named Milkfood Ltd. She was a director of the company between 2006 and 2008 and received a salary of ₹1.50 crores in FY 2019-2020 for her advisory role.
* The Investigation: The GST Department (Respondent) initiated an investigation under Section 67 of the CGST Act against Milkfood Ltd. for allegedly availing fraudulent ITC of approximately ₹85 crores based on fake invoices.
* The Impugned Action: Following the recording of the petitioner's "voluntary statement," the Respondent, on 07.12.2020, issued orders under Section 83 of the CGST Act to provisionally attach several of the petitioner's personal bank accounts.
* Petitioner's Challenge: The petitioner challenged these attachment orders through a writ petition, arguing that the action was without jurisdiction.

4. Arguments

• Petitioner's Counsel (Mr. Harsh Sethi):

  • Lack of Jurisdiction: The proceedings under Section 83 are void ab initio as the petitioner is not the "taxable person." Milkfood Ltd. is the taxable person under investigation, and Section 83 only permits the attachment of property belonging to the taxable person.
  • Absence of Pre-requisites: The Respondent failed to form a valid opinion that attaching the petitioner's accounts was necessary for protecting the interests of the revenue, which is a mandatory pre-condition for invoking the drastic power under Section 83.
  • Applicability of Precedent: The principles laid down by the Supreme Court in the Radha Krishan Industries case squarely apply.

• Respondent's Counsel (Mr. Harpreet Singh):

  • Alternate Remedy: The writ petition should be dismissed as the petitioner had already availed the alternate remedy of filing objections under Rule 159(5) of the CGST Rules.
  • Investigation is Ongoing: The investigation against Milkfood Ltd. is still pending.
  • Precedent Not Applicable: The Radha Krishan Industries case is distinguishable as, in that matter, an adjudication order had already been passed, whereas this case is at the investigation stage.

5. Court’s Reasoning
The High Court found merit in the petitioner's arguments and rejected the respondent's contentions on the following grounds:

• Jurisdiction is Paramount: The Court held that the availability of an alternate remedy is a self-imposed restriction and does not bar the Court from exercising its writ jurisdiction under Article 226, especially when the impugned action is prima facie without jurisdiction.
• Petitioner is Not the "Taxable Person": The Court's reasoning was centered on the clear language of Section 83(1), which explicitly permits the attachment of property "belonging to the taxable person."
  • The Court referred to the definition of "taxable person" under Section 2(107) of the CGST Act, which means a person who is registered or liable to be registered.
  • It was undisputed that the petitioner did not fall under this definition. The respondent’s own attachment orders identified Milkfood Ltd. as the taxable person.
  • Therefore, the action of attaching the petitioner's personal bank accounts was fundamentally without jurisdiction and failed on this ground alone.
• No Material to Justify Attachment: The Court noted that the respondent failed to present any material to demonstrate that the Commissioner had formed an objective opinion that attaching the petitioner's accounts was necessary to protect revenue. The petitioner's voluntary statement merely confirmed her role as a mentor and did not link her to the alleged fake invoice transactions.
• "Draconian" Nature of Power: The Court characterized the power of provisional attachment under Section 83 as "draconian" and emphasized that it cannot be used to attach any and every property, particularly those of persons other than the taxable person, without a concrete and justifiable basis.

6. Statutory References
* Central Goods and Services Tax Act, 2017:
* Section 2(107): Definition of "taxable person"
* Section 67: Power of inspection, search, and seizure
* Section 83: Provisional attachment to protect revenue in certain cases
* Sections 62, 63, 64, 73, 74: Various assessment and proceeding-related sections under which Section 83 can be invoked.
* Central Goods and Services Tax Rules, 2017:
* Rule 159(5): Provision for filing objections against provisional attachment.
* Constitution of India:
* Article 226: Power of High Courts to issue writs.

7. Precedents Cited
* M/s Radha Krishan Industries vs. State of Himachal Pradesh & Ors., 2021 SCC OnLine SC 334: Relied upon by the petitioner to argue against the arbitrary use of Section 83. The respondent attempted to distinguish it on facts.
* Calcutta Discount Co. Ltd. vs. ITO, AIR 1961 SC 372: Cited by the Court to justify exercising its writ jurisdiction in a case where the authority's action was without jurisdiction, notwithstanding the existence of an alternate remedy.