Delhi HC holds Provisional Attachment of Bank Accounts Unsustainable Upon Filing of GST Appeal with Pre-Deposit

The Hon’ble Delhi High Court in the case of Benito Operations And Technologies Pvt. Ltd. Versus Deputy Excise And Taxation Commissioner ST Gurgaon North. - 2025 (8) TMI 1202 - DELHI HIGH COURT held that once an appeal has been filed against an adjudication order, along with the mandatory pre-deposit as required under Section 107(6) of the CGST Act. The provisional attachment of bank accounts under Section 83 cannot be sustained and is to be set aside.

Facts:

Benito Operations and Technologies Pvt. Ltd. ('the Petitioner') is a company registered in Delhi, whose bank accounts in Gurgaon were provisionally attached by the Deputy Excise and Taxation Commissioner, Gurgaon North ('the Respondent') in connection with alleged wrongful availment of input tax credit (“ITC”) and consequent tax recovery efforts.

The Petitioner contended that the adjudication order forming the basis for the attachment had already been appealed under Section 107 of the CGST Act, and that the mandatory pre-deposit was made. As such, per Section 107(7), the filing of appeal resulted in an automatic stay on the recovery of the disputed demand and the attachment was legally unsustainable.

The Respondent contended that the allegations against the Petitioner involved deliberate ITC fraud and evasion, further asserting that the Petitioner’s registration and operations indicated a design to avoid liability imposed on a related entity being investigated for similar offenses. The attachment action was, therefore, proper, and the jurisdiction of the Delhi High Court was also questioned.

Aggrieved by the freezing of its bank accounts, the Petitioner approached the Court by writ petition under Article 226 of the Constitution, seeking relief against not only the recovery action but also the loss of business operations.

Issue:

Whether the provisional attachment of bank accounts to recover demand under an adjudication order can be sustained when an appeal has been filed with pre-deposit under Section 107 of the CGST Act, 2017?

Held:

The Hon’ble Delhi High Court in Benito Operations And Technologies Pvt. Ltd. Versus Deputy Excise And Taxation Commissioner ST Gurgaon North. - 2025 (8) TMI 1202 - DELHI HIGH COURT held as under:

• Observed that, under Section 107(7) of the CGST Act, once an appeal is filed with the requisite pre-deposit, recovery of the balance amount and all consequential enforcement actions are automatically stayed.
• Noted that in the present case, both the adjudication order and its subject matter have been challenged in appeal, and the Petitioner has complied with deposit requirements.
• Observed that similar principles were affirmed by the Calcutta High Court in M/s Arramva Corporation & Ors. Versus The Additional Director General & Ors. - 2023 (12) TMI 1054 - CALCUTTA HIGH COURTregarding territorial jurisdiction and the effect of appeal filing.
• Held that, the orders attaching the Petitioner’s bank accounts be, set aside and the banks were directed to allow operations by the Petitioner forthwith.

Our Comments:

The ruling reinforces the legislative intent of Section 107 of  CGST Act, which seeks to balance revenue interest with taxpayer rights to appeal, by providing an automatic stay on coercive recoveries once appellate pre-deposit is made. The Delhi High Court’s approach is consistent with Arramva Corporation v. Addl. Director General(supra) by the Calcutta High Court clarifies on cross-jurisdictional attachment. Divergence from this principle would undermine the effect of appellate remedies and prejudice business activity.

Relevant Provisions:

Section 107(6), 107(7) of the CGST Act, 2017:

“107. Appeals to Appellate Authority.-

(6) No appeal shall be filed under sub-section (1), unless the appellant has paid-

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.

Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty has been paid by the appellant.

(7) Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed.”

 (Author can be reached at [email protected])