The Madras High Court while quashing the attachment of Bank Accounts held that the attachment which adversely affects the right to Business can not be made.
The petitioner company, Marg Human Resources Pvt. Ltd. submitted that the respondent authority by the impugned attachment orders has completely strangled the business of the petitioner. It is submitted that the petitioner was employing about 15,000 employees with security guards who were deployed in various industrial units in and around Chennai and Karnataka. The allegation against the petitioner company is that the petitioner company had fraudulently availed input tax credit on fictitious invoices to discharge the GST liability. It is estimated that approximately, the fraud committed by the petitioner is for the sum of Rs.21 Crores, and investigation is still under progress.
Mr.B.Kumar, Senior Counsel on behalf of the petitioner submitted that apart from Rs.5.68 Corres which have been appropriated so far against the projected demand of Rs.21 Crores, the petitioner has agreed to pay another sum of Rs.1 Crore, within a period of one weeks’ time.
Mr. Kumar further submitted that Section 67 cannot be against the future receivables so as to strangulate the entire business module of the petitioner. It was further submitted that as against the bail order dated 19.02.2021 in Crl.O.P.Nos.2175 and 2176 of 2021, the Directors of the petitioner company have moved to the Hon’ble Supreme Court insofar as the condition, which mandates recovery/payment of the entire balance amount in four installments. It is submitted that the manner in which the entire recovery proceedings are being initiated is contrary to Section 73 and Section 74 of the CGST Act, 2017.
On the other hand, Mr.Rajinish Pathiyil, Senior Panel Counsel, submitted that the petitioner has indulged in large-scale fraud and therefore, the department was compelled to initiate proceedings under Section 67 of the CGST Act, 2017. He submits that under Section 83 of the CGST Act, 2017, the respondents are entitled to order provisional attachment of any assets to protect the interest of the revenue. He further submits that it is open for the petitioner to move to the appropriate authority under Rule 159 of the CGST Rules, 2017, against the impugned attachment orders. The attachment orders merely freeze the power to debit the account and there is no restriction for receiving the amount. He further submits that the Directors of the petitioner company had breached the bail order dated 19.02.2021. It is further submitted that for the last few months, the customers/clients of the petitioner company have directly paid the salaries/wages to the employees including the amount due under the Provident Funds Act, and therefore the continuance of the impugned attachment orders will be of no prejudice to the petitioner.
The single bench of Justice C.N.Saravanan held those attachment proceedings cannot be at the cost of the right of the provision under Article 19(1)(g) of the Constitution which provides the right to practice any profession or to carry on any occupation, trade, or business.
The court noted that the petitioner has already discharged 27% of the proposed and estimated tax due. There is a mechanism provided under the Act for proper adjudication of the tax due and determination under Sections 73 and 74 of the Act. Therefore, there is no meaning in attaching the bank accounts any further. The respondents have commenced the investigation in October 2020. The respondents can issue a notice under Section 73 of the CGST Act, 2017 and thereafter, determine the amount due and recover the amounts