Madras HC Orders Fresh Adjudication on Former Director’s Liability for Company’s GST Dues, Treats Bank Attachment as SCN [Read Order]

In a recent ruling, the Madras High Court directed proper adjudication on whether a former director can be held liable for a company’s tax arrears and treated the bank attachment issued against him as a show-cause notice.

Subir Ghosh, the petitioner, filed a writ petition challenging the bank attachment notice dated 29 July 2024 issued by the Deputy Commissioner (ST), Tambaram Zone, under Section 79(1)(c) read with Section 89(1) of the GST Acts.

The attachment was made against his ICICI Bank account in Bangalore for the recovery of tax arrears owed by EWIE Services India Pvt. Ltd., a company in which he had served as a director.

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The petitioner explained that the company, which supplied goods to Ford India, had ceased operations in 2019 and that he had formally resigned as director in 2023. The counsel argued that he could not be held personally liable for the company’s dues under Section 89(1) since there was no finding of neglect, misfeasance, or breach of duty on his part.

They further pointed out that the company itself had already challenged the assessment order dated 26 April 2024 in a separate writ petition pending before the High Court. The petitioner also submitted that he had made a representation on 17 August 2024 seeking release of his bank account, but it was not considered.

The government counsel argued that under Sections 79 and 89 of the GST Acts, the petitioner, being a director during the relevant tax period, was jointly responsible for the company’s arrears. It was contended that the bank attachment was issued in accordance with the law and that the petitioner’s liability must be determined based on the provisions of the statute.

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The single-judge bench comprising Justice C.Saravanan observed that the bank attachment issued under Section 79(1)(c) required a proper adjudication to decide whether the petitioner could be made liable for the company’s tax arrears under Section 89 of the GST Act.

The court explained that the petitioner’s representation needed to be considered, and the department must first decide the question of liability after giving him an opportunity to be heard.

The court directed the authorities to treat the impugned bank attachment notice as a show-cause notice and permitted the petitioner to submit a detailed representation within 30 days. It further directed the Deputy Commissioner to pass a final order on merits within two months after providing a personal hearing.

The court ordered that the bank attachment be lifted in the meantime but instructed that the petitioner should not make any unusual transfers to frustrate the proceedings. The writ petition was disposed of with these directions, and there was no order as to costs.

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