*Sanjiv Kumar Mittal Vs DC(Trc)CGST Commissionerate Delhi South & Ors*
*Delhi High court*
*Date of order 06-11-2020*
*Subject- Validity of attachment of bank account of former director in relation to liability of service tax under Finance Act, 1994.*

The Delhi High court in the above case was dealing with recovery of service tax liability under the Finance Act, 1994 by attachment of personal bank account of the appellant herein who was the former director of the company namely Unickon Real Estate Private Limited by issuing notice/attachment order dated 08th June, 2020 under Section 87(b)(i) of the Finance Act read with Section 174(1) of the Central Goods and Services Tax, 2017 for recovery of service tax determined against the assessee-company. The appellant argued that there was no provision in the Finance Act making Directors personally liable for the tax liabilities of a company or empowering the respondent-authorities to recover such liabilities of the company from the personal assets of its Directors. *The Court noted that SECTION 87(b)(i) OF THE FINANCE ACT PROVIDES FOR A GARNISHEE ORDER ONLY – i.e. PROVIDES FOR ATTACHMENT OF FUNDS OF AN ASSESSEE LYING WITH THIRD PARTIES. THERE IS NO PROVISION IN THE FINANCE ACT MAKING AN EX-DIRECTOR, EVEN IF HAVING KNOWLEDGE OF AFFAIRS OF THE COMPANY, VICARIOUSLY OR JOINTLY LIABLE FOR THE DUES OF THE COMPANY* . It was also noted that though Section 174(2) of CGST Act saves any duty or tax that is due or may become due under the repealed Act including Chapter V of the Finance Act, yet there is no provision in the Finance Act making the Directors personally liable for service tax liabilities of a company. The court also clarified that Section 89 of the current CGST Act is confined only to liabilities assessed under the CGST Act and cannot be used to fasten personal liability on Directors for company dues determined under the Finance Act. Finally the court relying on the famous decision of Apex court In *Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay, AIR 1955 SC 74* held that in the absence of a specific provision and given a company’s separate legal personality, the petitioner/ex-Director, even if having knowledge of affairs of the company, is not vicariously or jointly liable for the dues of the company.

A landmark decision regarding the service tax liability which is being sought to be recovered from directors of the COmpany by apply the GST Act.

Ramesh Patodia
09-11-2020