Blog No. 16: attachment of escrow bank account to the extent of defaulting taxable person only

𝐅𝐚𝐜𝐭𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐂𝐚𝐬𝐞

1. An Escrow Account is opened in a ratio of 97:3 (Mr A and Mr B).
2. When 97% share was not transferred by Mr B, Mr A came to know that on account of some defaults, attachment proceedings have been initiated by the GST Department against Mr B.
3. GST Department has, therefore, blocked Escrow Bank Account as well.

𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧

1. Power conferred under Section 83 of the Act can be exercised only if any proceedings under provisions specified in sec 83 have been 𝐢𝐧𝐢𝐭𝐢𝐚𝐭𝐞𝐝 𝐚𝐠𝐚𝐢𝐧𝐬𝐭 𝐭𝐡𝐞 𝐭𝐚𝐱𝐚𝐛𝐥𝐞 𝐩𝐞𝐫𝐬𝐨𝐧.
2. So, provisional 𝐚𝐭𝐭𝐚𝐜𝐡𝐦𝐞𝐧𝐭 of the escrow account 𝐭𝐨 𝐭𝐡𝐞 𝐞𝐱𝐭𝐞𝐧𝐭 𝐨𝐟 𝟗𝟕% of the receipts received in the account belonging to the petitioner 𝐢𝐬 𝐧𝐨𝐭 𝐣𝐮𝐬𝐭𝐢𝐟𝐢𝐞𝐝 and is ex-facie arbitrary. 

Petitioner shall 𝐦𝐚𝐢𝐧𝐭𝐚𝐢𝐧 𝐛𝐚𝐥𝐚𝐧𝐜𝐞 𝐨𝐟 ₹ 𝟓,𝟎𝟎,𝟎𝟎𝟎 in escrow account till the further decision and 𝐫𝐞𝐦𝐚𝐢𝐧𝐢𝐧𝐠 𝐛𝐚𝐥𝐚𝐧𝐜𝐞 𝐨𝐟 𝐩𝐞𝐭𝐢𝐭𝐢𝐨𝐧𝐞𝐫 shall be 𝐭𝐫𝐚𝐧𝐬𝐟𝐞𝐫𝐫𝐞𝐝 𝐭𝐨 𝐡𝐢𝐬 𝐛𝐚𝐧𝐤 𝐚𝐜𝐜𝐨𝐮𝐧𝐭.
[Abhi Engineering Corporation Pvt. Ltd. and Anr. Versus UOI and Ors. reported as 2021 (2) TMI 392 – Bombay HC]