The Madras High Court has held that bank accounts cannot be attached in matters related to GST violation if it is at the cost of doing business. “It is made clear that the attachment proceedings cannot be at the cost of right of provision under Article 19(1)(g) of the Constitution of India,” a single bench of Justice C Saravanan said, while disposing the matter of Chennai-based Marg Human Resources Private Limited.

As a part of the Right to Freedom, Article 19(1)(g) says, “All citizens shall have the right to practice any profession, or to carry on any occupation, trade or business.”

Fraudulent ITC

The petitioner approached the Court after Director General of GST Intelligence (DGGI) issued an order attaching three bank accounts pursuant to a search and investigation ordered against the said company. The allegation against the company was that it had fraudulently availed of input tax credit on fictitious invoices to discharge the GST liability.

The petitioner submitted that the attachment orders have 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. It was also said that apart from the ₹5.68 crore which have been appropriated so far against the projected demand of ₹21 crore, the petitioner has agreed to pay another sum of ₹1 crore, within a week.

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Defending the action by the Tax Department, its counsel submitted that the petitioner has indulged in large scale fraud and therefore, the department was compelled to initiate proceedings under Section 67 (deals with inspection, search and seizure in case of violation) of the CGST Act, 2017. He emphasised that the law entitles the Department to order provisional attachment of any assets to protect the interest of the revenue. He also informed that the attachment orders merely freeze the power to debit the account and there is no restriction for receiving the amount.

‘No prejudice to petitioner’

The counsel said 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.” Tax Department also said that the Directors of the company breached the bail order. After going through all the arguments, the bench noted that nearly 27 per cent of proposed/estimated tax due has already been discharged.

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“After all, there is a mechanism provided under the Act for proper adjudication of the tax due and determination under Sections 73 and 74. Therefore, there is no meaning in attaching the bank accounts further,” the Bench said, while asking the I-T Department to complete the investigation and issue appropriate show cause notice.

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