Provisional attachment on sub-contractor’s escrow account lifted as sub-contractor is not a taxable person

Last updated: 25 February 2021

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Quick Summary

The Bombay High Court has ruled that a sub-contractor's share in an escrow account cannot be provisionally attached if the tax proceedings are initiated solely against the principal contractor. The court found that the sub-contractor was not the 'taxable person' in this instance, and therefore, the attachment was unlawful. The attachment was lifted, though a small portion of the funds belonging to the principal contractor remained attached.

Court :
Bombay High Court

Brief :
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.

Citation :
[Writ Petition (L) No. 5842 of 2020 decided on February 9, 2021]

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