FACTS OF THE CASE

  • The petitioner was a former director (2006–2008) and shareholder (14.33%) of Milkfood Ltd.
  • She received remuneration of ₹1.50 crore in FY 2019–2020 as a mentor/advisor.
  • The respondent initiated investigation under Section 67 CGST Act alleging fake ITC claims by Milkfood Ltd.
  • During investigation, petitioner’s statement was recorded.
  • Subsequently, her personal bank accounts were provisionally attached under Section 83 CGST Act.
  • Aggrieved, she filed the present writ petition before the Delhi High Court.

ISSUES INVOLVED

  1. Whether provisional attachment under Section 83 CGST Act can be invoked against a person who is not a “taxable person”?
  2. Whether existence of pending proceedings and formation of opinion by authority are mandatory preconditions?
  3. Whether attachment of personal bank accounts without material evidence violates jurisdictional limits? 

PETITIONER’S ARGUMENTS

  • The petitioner is not a taxable person, hence Section 83 cannot be invoked against her.
  • The taxable entity is Milkfood Ltd., not the petitioner.
  • Mandatory conditions under Section 83 were not fulfilled:
    • No valid pending proceedings
    • No formation of opinion regarding protection of revenue
  • Relied on Radha Krishan Industries v. State of Himachal Pradesh principles.

RESPONDENT’S ARGUMENTS

  • Investigation under Section 67 CGST Act was ongoing.
  • Milkfood Ltd. allegedly availed fake ITC worth approx. ₹85 crores.
  • ₹16 crores had already been recovered/deposited.
  • Petitioner had filed objections under Rule 159(5), hence alternate remedy existed.
  • Supreme Court judgment relied upon by petitioner was distinguishable.

COURT FINDINGS / ORDER

  • The Court held that Section 83 can only be invoked against a “taxable person”.
  • The petitioner was neither registered nor liable to be registered under GST.
  • Therefore, exercise of power was without jurisdiction.
  • No material was produced linking petitioner to fake ITC transactions.
  • Provisional attachment was termed a “draconian measure” requiring strict compliance.
  • The writ petition was allowed and attachment orders dated 07.12.2020 were quashed. 

IMPORTANT CLARIFICATION BY COURT

  • Provisional attachment cannot be exercised arbitrarily.
  • It must strictly satisfy:
    • Jurisdictional requirement (taxable person)
    • Pending proceedings
    • Formation of opinion to protect revenue
  • Authorities cannot attach assets of third parties unrelated to tax liability.

 Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:1576-DB/TWS12052021CW23482021_105439.pdf

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