/** * The main template file * * This is the most generic template file in a WordPress theme * and one of the two required files for a theme (the other being style.css). * It is used to display a page when nothing more specific matches a query. * E.g., it puts together the home page when no home.php file exists. * * @link https://developer.wordpress.org/themes/basics/template-hierarchy/ * * @package WordPress * @subpackage Tally * @since 1.0.0 */ ?>
Provisional attachment on sub-contractor’s escrow account lifted as sub-contractor is not a taxable person
The Hon’ble Bombay High Court in Abhi Engineering Corporation Pvt. Ltd. And Anr. v. Union of India and Ors. [Writ Petition (L) No. 5842 of 2020 decided on February 9, 2021] held that where the proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) have been initiated against the principal contractor only, the sub-contractor’s share in escrow account cannot be attached since no action was taken against the sub-contractor and the sub-contractor was not the taxable person.
Facts:-
Abhi Engineering Corporation Pvt. Ltd. and Anr. (“the Petitioner”) is a contractor engaged in construction activities. Pursuant to tender floated by the Maharashtra State Power Generation Company Limited (“MSPGCL”) for landscaping and plantation work at various locations, Principal Contractor i.e., M/s Creative Business Associates (“the Respondent No. 3”) was declared as the successful bidder. The Respondent No. 3 appointed the Petitioner as sub-contractor in this regard.
One of the essential conditions of the sub-contractor agreement was that an escrow account shall be opened with a mutually agreed bank wherein MSPGCL shall transfer the amount pertaining to running account bills. Accordingly, a joint account was opened in this regard in the Bank (“the Respondent No. 4”) and it was agreed that out of the deposits made in the escrow account, 3% shall be transferred to the Respondent No. 3 and 97% shall be transferred to the Petitioner.
MSPGCL credited an amount of ₹ 81,96,823.00 in the escrow account. The Petitioner was entitled to 97% out of this receipt and therefore by letter informed the bank to transfer the amount to the Petitioner’s account. The Petitioner received a reply from the bank that the escrow account was blocked due to debit freeze instructions received from the Commissioner of Central Goods and Services Tax and Central Excise, Mumbai (“the Respondent No. 2”) in view of legal proceedings initiated by the Respondent No. 2 against the Respondent No. 3.
The escrow account was provisionally attached under instructions of the Respondent No. 2, dated September 27, 2019. Since one year had elapsed since passing of the provisional attachment order dated September 27, 2019, fresh provisional attachment order dated September 22, 2020 was passed by the Respondent No. 2 in respect of the said escrow account.
The present petition was filed to challenge the provisional attachment order dated September 22, 2020.
Petitioner’s Contentions:-
Respondent’s Contentions:-
Issue:-
Whether the provisional attachment of the Petitioner’s share in escrow bank account is valid in the eyes of law?
Held:-
The Hon’ble Bombay High Court in Writ Petition (L) No. 5842 of 2020 decided on February 9, 2021 has held as under:
Our Comments:
Section 83(1) of the CGST Act is proposed to be amended vide Clause No. 106 of the Finance Bill, 2021 to read as under:
“83. Provisional attachment to protect revenue in certain cases
(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.”
The scope of Section 83(1) of the CGST Act is proposed to be widened, so as to provide for provisional attachment of property in case of any action being initiated by authorities pertaining to assessment, inspection, search, seizure & arrest and demand & recovery, whereas, earlier, the attachment could only be made while during the pendency of any proceedings under specified Sections viz., Section 62 (assessment of non-filers of returns) or Section 63 (assessment of unregistered persons) or Section 64 (summary assessment in certain special cases) or Section 67 (power of inspection, search and seizure) or Section 73 (determination of tax in non-fraud cases) or Section 74 (determination of tax in fraud cases) of the CGST Act.
Thus, while earlier the provisions listed were more of those undertaken to check tax evasions (inspection, search, seizure, adjudication of SCN), the amended provision provides for such coercive measure even in case of regular proceedings in case of regular taxpayers like scrutiny of returns, provisional assessment, access to business premises etc. Further, such power can now be exercised even at the stage of summon.
Seemingly, such wide powers can increase the misuse of this provision by Revenue even more, when casual exercise of powers under Section 83 of the CGST Act is still under scanner of various High Courts which have time and again held in plethora of judgments that an order of provisional attachment cannot be as a matter of course. It is one of the drastic measures which the authority may be compelled to take if the situation demands for the purpose of protecting the interest of the Government Revenue. Recently, the Gujarat HC in Vinodkumar Murlidhar Chechani v. State of Gujarat [R/Special Civil Application No. 12498 of 2020 decided on February 3, 2021] has directed Government to issue appropriate instructions or guidelines at the earliest w.r.t to excise of power of provisional attachment under Section 83 of the CGST Act. Thus, some strict framework for exercising Section 83 needs to be put in place.
Relevant Provision:-
Section 83 of the CGST Act:
“(1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).”
DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.
For a good control over your inventory, you need to have best practices in place. In this blog, we will talk about the best inventory management practices you can introduce to your business to enhance
Read More
The Government of India has introduced many schemes and incentives to help micro, small, and medium enterprises (MSMEs). These schemes, such as UDYAM registrations, ensure that MSMEs get easy credit..
Read More
Excel spreadsheets are a ubiquitous tool used in businesses of all sizes. They are used to store and manage a wide variety of data, from customer records to financial data to inventory information and
Read More
A good dashboard is like your business's command center in today's data-driven business world. It helps you keep an eye on everything that matters. To truly understand how your company is doing, here.
Read More
Excel spreadsheets are a common tool used in businesses for managing a wide range of data, like customer info, finances, and inventory. They're the go-to format for sharing transaction details in.....
Read More