High Asset

‘can’t Attach Personal Assets Of Llp Partner’ | Ahmedabad News – Times of India


Ahmedabad: In an important order, the Gujarat high court has said that the GST officials cannot provisionally attach personal properties of a partner of a partnership firm without final determination about the liability of the firm, which is accused of wrongly availing input tax credit (ITC).
The HC has also ruled that provisional attachment of goods, stocks, receivables can also be not approved of, when a floating charge in favour of a third party is created on it.
This is because the entire business of the company will come to a standstill and the Central Goods and Services Tax Act (CGST) does not envisage that a company’s business gets affected.
The case involved Rajkot’s Utkarsh Ispat LLP, which is engaged in the business of procuring MS Scrap for TMT bar manufacturing.
State GST officials carried out a search on November 19, 2021 on allegations that the firm availed ITC on the basis of fake invoices issued by fictitious firms without any movement of goods during May 2019 and November 2021.
During the search proceedings, the assistant commissioner of the state tax department ordered provisional attachment of the firm’s factory premises, plant and machinery and bank accounts including fixed deposits.
Orders for provisional attachment of personal properties of one of the partners, Niraj Jaydev Arya, were also issued under Section 83 of CGST Act.
When the authority realised that the property of only a taxable person can be attached under this provision, it resorted to Sections 90 and 137 of the Act.
After discussing the law, the bench of Justice J B Pardiwala and Justice Nisha Thakore was of the view that the assistant commissioner was “wholly unjustified in provisionally attaching a personal property owned by a partner of the firm under Section 83 of the Act, 2017.”
The court said that the partner of an LLP is not a taxable person, and the liability of the firm is yet to be determined.
“The day such liability is determined and fixed, it is open for the department to proceed not only against the firm as a taxable person, but also against the individual partner of the firm,” the court stated.
Besides, the officer concerned had also ordered provisional attachment of goods, stocks and receivables, which were pledged, and a floating charge created in favour of the Kalupur Commercial Bank Ltd for availing cash credit facility.
The court said it did not approve of such attachment and observed that the law itself makes it clear that the attachment should not hamper the normal activities of the taxable person.


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