2025 (8) TMI 1202 - HC - GST

Provisional bank account attachment orders set aside after respondent declined to pursue attachment following appeal

Benito Operations And Technologies Pvt. Ltd. Versus Deputy Excise And Taxation Commissioner ST Gurgaon North.

HC held that provisional attachment orders on the petitioner's bank accounts could not be sustained after the respondent, noting that an appeal had been ... Provisional attachment of petitioner's bank account - Respondent has reverted with instructions and submits that in view of the fact that the appeal has been filed, the Department does not press for any attachment of the bank accounts - HELD THAT:- The orders of provisional attachment of bank accounts would not sustain and are, accordingly, set aside. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether provisional attachment of the petitioner's bank accounts under Section 83 of the CGST/HGST Act, 2017 can be sustained where an appeal against the adjudication order has been filed under Section 107 of the CGST Act, 2017 together with the mandatory pre-deposit under Section 107(6). 2. Whether an attachment under Section 122(1A) (read with Section 83) can be carried out once an appeal with mandatory pre-deposit is pending and thereby the order under appeal is stayed under Section 107(7). 3. Whether the writ court has territorial jurisdiction to entertain a challenge to attachment of bank accounts located within the court's territorial limits when the adjudicating authority that ordered attachment is located elsewhere. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of provisional attachment under Section 83 after filing of appeal with mandatory pre-deposit (Sections 107(6) & 107(7)) Legal framework: Section 107(6) of the CGST Act requires a mandatory pre-deposit for preferring an appeal; Section 107(7) provides that once an appeal is filed along with the mandatory pre-deposit, the order under appeal is stayed. Section 83 authorises provisional attachment of property including bank accounts to protect revenue pending adjudication/realisation of tax demand; Section 74 (and Section 50) concern demand, interest and penalty for suppressed/erroneous claims. Precedent treatment: No binding precedent in the judgment is overruled. The Court relied upon the statutory interaction between Sections 107 and 83. A decision of another High Court on territorial jurisdiction is cited (treated as persuasive on the jurisdiction point - see Issue 3). Interpretation and reasoning: The Court observed that filing of an appeal with the mandatory pre-deposit under Section 107(6) operates to stay the adjudication order by virtue of Section 107(7). Given that the order under appeal is automatically stayed, the rationale for provisional attachment under Section 83 (to secure recovery under the adjudication order) is undermined where the order itself is stayed. The Court noted that the Department may not have been aware of the pendency of the appeal and pre-deposit at the time attachment was directed; however, once informed, continuing the attachment would be inconsistent with the statutory stay. The Court therefore treated the continuation of provisional attachment as unsupportable while the appeal and pre-deposit remain in place. Ratio vs. Obiter: Ratio - where an appeal under Section 107 is filed along with the mandatory pre-deposit under Section 107(6), the automatic stay under Section 107(7) precludes sustaining provisional attachment under Section 83 directed to secure the disputed demand; provisional attachment in such circumstances cannot be maintained. Obiter - observations about the Department's knowledge or lack thereof of the appeal are ancillary. Conclusions: Orders of provisional attachment of the bank accounts could not be sustained and were set aside; the accounts were ordered to be released for operation pending the appeal proceedings where the mandatory pre-deposit has been made. Issue 2 - Whether attachment under Section 122(1A) can be effected once appeal with pre-deposit is filed (interaction of Section 122(1A) and Section 83 with Sections 107(6)/(7)) Legal framework: Section 122(1A) (penal/realisation provisions) and Section 83 (provisional attachment) permit attachment to protect revenue and effect recovery. Sections 107(6) and 107(7) provide for pre-deposit and automatic stay of the adjudication order on appeal. Precedent treatment: The Court did not refer to contrary binding authority that permits attachment despite the statutory stay; it applied statutory interpretation to reconcile the provisions. Interpretation and reasoning: The Court framed the question whether attachment under Section 122(1A) could be carried out in the face of an appeal with mandatory pre-deposit. It concluded that the statutory scheme contemplates that filing the appeal with pre-deposit results in stay of the order and thereby diminishes the basis for attachment to secure the very order stayed. The Court treated the attachment as inconsistent with the statutory stay absent exceptional circumstances (none shown). The Department's concession that it would not press for attachment once the appeal and pre-deposit were brought to its attention further supported release. Ratio vs. Obiter: Ratio - provisional attachments under Section 122(1A)/Section 83 should not be continued where the adjudication order is stayed by an appeal filed with mandatory pre-deposit under Section 107(6)/(7), absent specific and demonstrable reasons to the contrary. Obiter - the Court's general observations on modus operandi and common suppliers/directors are contextual facts not essential to the legal holding on attachment. Conclusions: Attachment under Section 122(1A)/Section 83 cannot be carried forward once the appeal with mandatory pre-deposit operates to stay the underlying adjudication order; the provisional attachment orders were quashed and bank accounts released. Issue 3 - Territorial jurisdiction of the writ court to entertain challenge to attachment of accounts held within its territorial limits when the adjudicating authority is in another territorial area Legal framework: Writ jurisdiction under Article 226 permits challenge where part of the cause of action arises within the territorial jurisdiction; cause of action may be a bundle of facts. Precedent treatment: The Court relied on a High Court decision which held that a writ petition is maintainable where part of the cause of action (e.g., attachment of a bank account) arose within the territorial jurisdiction, even if the adjudicating authority is located elsewhere. That decision was treated as persuasive authority supporting territorial maintainability. Interpretation and reasoning: The Court accepted the submission that because the petitioner is registered in Delhi and the bank accounts subjected to attachment were located in Gurgaon (within the Court's territorial ambit for the challenge), a part of the cause of action arose within the Court's jurisdiction. The cited decision was used to support the proposition that challenging attachment of local bank accounts in the writ court is permissible despite the originating authority being from another location. Ratio vs. Obiter: Ratio - where an impugned attachment affects property within the territorial jurisdiction of the writ court and part of the cause of action arises therein, the writ petition challenging the attachment is maintainable in that court. Obiter - broader commentary on territorial jurisdiction beyond the facts at hand is not central to the disposal. Conclusions: The Court exercised territorial jurisdiction to adjudicate the challenge to attachment of the bank accounts and directed release of the accounts; the maintainability of the writ petition on territorial grounds was affirmed in the circumstances. Ancillary Findings and Directions 1. The Court noted factual allegations in the adjudication order regarding common directors, timing of incorporation to avoid liability, and similar modus operandi; these factual observations informed the Department's grounds for attachment but did not override the statutory stay arising from the filed appeal with mandatory pre-deposit. 2. The Department, when informed, declined to press for attachment; the Court ordered concerned banks to give immediate effect to release of accounts on production of the order, and directed communication to the relevant departmental authorities. 3. Disposal: The writ petition and pending applications were disposed of by setting aside the provisional attachment orders and permitting free operation of the specified bank accounts pending the appeal process.