2025 (10) TMI 321 - HC - GST

Petitioner undertakes not to withdraw approximately Rs.10,00,000 from attached bank accounts; petition disposed on that basis

HC accepted the Petitioner's undertaking that the cumulative funds in the attached bank accounts (approximately Rs. 10,00,000) will not be touched or ... Attachment of the Petitioner’s bank accounts - selling cigarettes without invoices and claiming wrongful ITC - HELD THAT:- If, the Petitioner’s statement that the cumulative amounts in all the attached bank accounts are approximately Rs. 10,00,000/-, then, we are prepared to accept Mr Chavan’s statement made on instructions that this amount or for that matter, any amount in the above-referred bank accounts as of today, will not be touched or withdrawn. This statement, made under instructions, is now accepted as an undertaking given to this Court, and the Petitioner will be required to abide by it. Suppose the attachment of the bank accounts continues despite the statement now made on behalf of the Petitioner. In that case, the Petitioner will be put to disproportionate prejudice inasmuch as they would not be able to operate these bank accounts even for receiving remittances or for expending any amounts from out of such remittances. It is pointed out that the festival season is around the corner, and payments have to be made to employees and workers, etc. He submitted that all operations would come to a standstill without any corresponding benefits to the Respondents. The Petitioner’s statement that whatever the amounts in the attached bank accounts, as on the date of issue of the impugned attachment orders and as of today, will be maintained and will not be touched, is accepted as an undertaking given to this Court. The Petitioner will have to abide by the same - petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether attachment of the petitioner's bank accounts under Section 83 of the CGST Act is sustainable in the absence of a quantified show-cause notice specifying GST demand. 2. Whether a judicially accepted undertaking by the taxpayer to not withdraw existing balances is an adequate basis for lifting attachment while protecting revenue interests. 3. Whether continuation of attachment causes disproportionate prejudice by preventing receipt and disbursement of funds necessary for business operations. 4. The extent to which relief by lifting attachment subject to conditions affects the respondent authority's power to determine liability and to pursue other assets under the CGST Act. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of attachment without quantified show-cause notice Legal framework: Section 83 of the CGST Act authorises attachment of property for recovery of tax dues; procedural safeguards include issuance of show-cause notices and assessment/quantification of demand by revenue authorities in accordance with law. Precedent treatment: Counsel relied upon prior decisions addressing procedures for attachment and requirement of notice/quantification (including decisions of this Court and the Supreme Court). The Court noted those authorities were cited but did not undertake any express overruling or extensive doctrinal analysis. Interpretation and reasoning: The Court observed that no show-cause notice quantifying GST liability had been shown to have been issued to the petitioner. While the Court refrained from deciding contested facts (e.g., alleged admissions in the panchanama), it treated absence of quantification as a material factor militating against continuing an onerous attachment that impedes operations. Ratio vs. Obiter: The observation that attachment without quantification is problematic operates as a ratio insofar as it informed the Court's decision to lift attachment on conditions; however, the Court expressly left open the rival contentions on liability for determination by revenue authorities, so this does not amount to a definitive ruling on legal sufficiency of attachment in all circumstances. Conclusion: The Court declined to sustain the continued freezing of bank accounts in the factual matrix where quantification was not shown and where less intrusive measures could protect revenue; the point is left open for formal determination by the respondent authorities. Issue 2 - Adequacy of an undertaking to preserve existing balances as basis for lifting attachment Legal framework: Courts have discretion to impose conditions when granting interlocutory relief; undertaking given to the Court can be enforced and serves as an interim protective measure for interests of both parties. Precedent treatment: Authorities cited by petitioner were noted as supportive of relief where adequate protection of revenue is secured; the Court accepted those submissions for purposes of interim disposal without revisiting the full scope of precedents. Interpretation and reasoning: The petitioner provided an unequivocal undertaking that existing amounts in the attached accounts would not be touched. The Court accepted this undertaking as a binding obligation, reasoning that it secures the revenue's immediate monetary interest (limited to current balances) while removing disproportionate hardship on the petitioner. Ratio vs. Obiter: The holding that an accepted undertaking to preserve balances can justify conditional lifting of attachment is part of the operative ratio of the order (subject to factual limitation that the undertaking covers amounts as of the date of attachment and of the order). Conclusion: An undertaking to maintain and not withdraw existing balances was held sufficient to justify lifting the attachment subject to strict conditions and banks ensuring balances are not reduced below the stated levels. Issue 3 - Disproportionate prejudice from continued attachment and operational consequences Legal framework: Principles of proportionality and balance of convenience govern interim relief; attachment that disables ordinary business receipts and payments may impose irreparable or disproportionate prejudice. Precedent treatment: The Court referenced submissions on proportionality and prior case law supporting relief when attachments impede business operations; no precedent was overruled. Interpretation and reasoning: The Court found that continuation of attachment would prevent receipt of remittances and payments to employees, causing disproportionate prejudice without corresponding incremental protection to revenue given the undertaking and limited balances available in the accounts. Ratio vs. Obiter: The conclusion that attachment would cause disproportionate prejudice in the present factual matrix is a fact-specific ratio supporting the order; it does not establish a universal rule against attachments that impair operations. Conclusion: Balancing prejudice and protection of revenue, the Court lifted attachment subject to the undertaking and bank safeguards to avoid disproportionate hardship. Issue 4 - Effect of conditional lifting on respondent's powers to determine liability and pursue other assets Legal framework: Revenue retains statutory powers to determine liability, issue notices, and attach other properties under the CGST Act following prescribed procedure. Precedent treatment: The Court preserved previous rulings' allocation of rights between judicial relief and administrative enforcement; no precedent was displaced. Interpretation and reasoning: The Court explicitly left open all rival contentions on liability, permitting respondent authorities to proceed to determine and quantify liability and to attach other properties or take coercive but lawful measures under Section 83, subject to statutory procedure. Ratio vs. Obiter: The statement preserving revenue's statutory avenues is part of the operative order and ratio, clarifying that interim relief did not curtail substantive powers of tax authorities. Conclusion: Conditional lifting of attachment does not preclude the respondents from determining liability or pursuing recovery through other lawful means; banks were directed to enforce the undertaking and the respondents to notify banks with authenticated orders.