Stay on bank account attachments ordered; revenue to notify respondent and banks must comply on production of order

HC directed notice and required Revenue to inform the respondent official of the Court's order. The HC stayed the impugned orders dated 6 March 2025 and 18 April 2025 that had attached the petitioner's bank accounts; banks must comply with the stay on production of a copy of the order. The matter was listed for further hearing on 18 August 2025.

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ISSUES PRESENTED AND CONSIDERED

1. Whether attachment of bank accounts under Section 83 of the CGST/HGST Acts and liability provisions including Section 122(1A) can be effected after the adjudication order, once an appeal under Section 107 has been filed with the mandatory pre-deposit under Section 107(6), and whether such filing operates as an automatic stay under Section 107(7).

2. Whether the High Court has territorial jurisdiction to entertain writ relief against orders of an authority outside the territorial seat of the Court where part of the cause of action (attachment of bank accounts and registration) is said to have arisen within the Court's territorial jurisdiction.

3. Whether the factual matrix of a newly incorporated entity with common directors/shareholders and overlapping suppliers/recipients, alleged to be formed to evade tax and attract director liability under Section 89, justifies attachment of bank accounts pending adjudication/appeal.

ISSUE-WISE DETAILED ANALYSIS - Issue 1: Attachment after filing of appeal with pre-deposit; operation of Section 107(7)

Legal framework: Section 107(6) requires a mandatory pre-deposit for filing an appeal under Section 107; Section 107(7) provides for stay of demand on compliance with pre-deposit; Section 83 authorises provisional attachment of property (including bank accounts); Section 122(1A) and related provisions govern recovery and liability.

Precedent Treatment: The Court noted the statutory interplay between the appeal/pre-deposit provisions and attachment powers but did not cite binding authority to conclusively resolve the legal point; it recognized the necessity to examine whether attachment under Section 83 can be exercised once an appeal with pre-deposit is pending under Section 107.

Interpretation and reasoning: The Court observed that an appeal filed with the mandatory pre-deposit under Section 107(6) may trigger the statutory protection under Section 107(7), and therefore whether further coercive steps (attachments under Section 83 or recoveries under Section 122(1A)) are permissible requires consideration. The Court treated the matter as one of statutory construction and factual assessment - whether the protective effect of Section 107(7) is absolute or subject to exceptions where attachment is necessary to prevent dissipation or frustrate recovery.

Ratio vs. Obiter: The observation that the interaction between Sections 83, 107(6) and 107(7) required legal consideration is a ratio for interim relief (stay granted). Detailed resolution of the legal question was left open (obiter that merits determination on fuller hearing).

Conclusions: The Court stayed the impugned attachment orders pending consideration of these issues and issued notice. The Court concluded that these questions are substantial and require adjudication before attachments are allowed to be given effect.

ISSUE-WISE DETAILED ANALYSIS - Issue 2: Territorial jurisdiction to entertain writ where part of cause of action arises within Court's territory

Legal framework: Writ jurisdiction under Article 226 contemplates examination of the bundle of facts constituting the cause of action and allows filing where part of the cause of action arises within the territorial jurisdiction of the Court.

Precedent Treatment: The Court relied on a High Court decision holding that where a petitioner is a registered entity in the forum and the impugned attachment affects property/accounts within the forum, a writ petition is maintainable even if the order originates from a different territorial authority. The Court followed that approach in principle.

Interpretation and reasoning: The Court accepted that cause of action is a bundle of facts; where bank accounts or registration situate/domicile are within the Court's territory, a part of the cause of action arises locally and supports exercise of jurisdiction. The factual matrix showing registration in the Court's territory and bank accounts in adjoining district informed the Court's view of maintainability.

Ratio vs. Obiter: The conclusion on territorial jurisdiction is ratio for permitting the writ to proceed in the Court; it underpins the grant of interim relief. Any wider pronouncement on inter-se territorial competence was not made and remains obiter.

Conclusions: The Court proceeded to exercise jurisdiction, issued notice and stayed the attachment orders, treating the petition as maintainable on territorial grounds.

ISSUE-WISE DETAILED ANALYSIS - Issue 3: Sufficiency of factual matrix (new company, common directors, overlapping operations) to justify attachment and director liability

Legal framework: Liability of directors under statutory provisions (Section 89) and recovery measures under Sections 74, 122 and related provisions permit action where companies/directors are used to evade tax; attachment under Section 83 may be premised on reasonable satisfaction regarding dissipation or evasion.

Precedent Treatment: The Court did not finally adjudicate whether the pleaded facts suffice to invoke director liability or justify attachment; it acknowledged the departmental findings in the adjudication order alleging incorporation of a new entity to avoid tax, common directors/shareholders, similar modus operandi and common suppliers/recipients.

Interpretation and reasoning: The Court recognized that the adjudicatory authority had recorded specific findings suggesting the new registration followed initiation of inquiry and that the same individuals were directors/shareholders, constituting a prima facie case for invoking provisions dealing with evasion and director liability. However, the Court emphasized that these findings must be examined in appeal proceedings and cannot be the sole basis for immediate and continuing attachment in light of the appeal and pre-deposit (see Issue 1). The Court balanced the State's interest in recovery against the statutory protection afforded by the appellate scheme.

Ratio vs. Obiter: The Court's acceptance that the adjudicating authority recorded relevant observations is not a final ratio on liability; rather, the requirement that such factual allegations be tested in appellate proceedings is ratio for granting interim relief. Any suggestion that these facts would not, as a matter of law, justify attachment is obiter and left for final adjudication.

Conclusions: The Court did not deny the relevance of the department's findings but held that, in view of the pendency of an appeal with pre-deposit and the need for considered adjudication of the statutory interplay and facts, attachments would be stayed. The banks were directed to comply with the Court's order on production of the order.

FINAL DISPOSITION (Interim)

The Court issued notice, stayed the impugned attachment orders pending hearing on the substantive questions identified above, directed communication to the departmental respondents, and listed the matter for further consideration. The stay is interim and predicated on the need to examine the statutory interaction between appeal-related protections and attachment/recovery provisions and the sufficiency of the factual matrix to justify continued attachment.

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