Conditional Lifting of Bank Account Attachment Allowed to Ensure Business Continuity.

Issue

Can a provisional attachment of bank accounts under Section 83 of the CGST Act be lifted to allow a business to continue its operations, provided that the interest of the revenue is secured by the taxpayer giving a binding undertaking not to withdraw the balance that existed at the time of attachment?

Facts

The GST department provisionally attached the petitioner’s bank accounts under Section 83, freezing a cumulative balance of approximately ₹10 lakhs.
The attachment was based on an ongoing investigation into alleged unbilled sales and wrongful availment of Input Tax Credit (ITC).
The petitioner challenged the attachment, arguing that it was causing disproportionate prejudice to their business operations, especially since no formal demand had been quantified yet.
To secure the department’s interest, the petitioner provided a formal undertaking to the court that they would not withdraw the existing balance of ₹10 lakhs but sought permission to operate the account for future transactions.
The Revenue department contested this, alleging the petitioner had admitted to the wrongdoing, a claim the petitioner disputed.

Decision

The High Court, without getting into the controversy of whether an admission was made, adopted a pragmatic approach and ruled in favour of the assessee.
It accepted the petitioner’s binding undertaking to maintain the existing balances in the attached accounts.
Subject to this undertaking, the court ordered the lifting of the provisional attachment, thereby allowing the petitioner to resume normal operations of the bank accounts.
The banks were directed to ensure that the account balances did not fall below the level that existed on the date of the hearing.
The court clarified that this order did not prevent the department from pursuing other recovery actions against different properties in accordance with the law.

Key Takeaways

Balancing of Interests: The judgment strikes a crucial balance between protecting the revenue’s interest and preventing the complete paralysis of a business. It acknowledges that provisional attachment should not become a tool for shutting down a taxpayer’s operations.
Undertaking as a Legal Safeguard: A formal, binding undertaking given to a court can serve as an effective alternative to a full attachment. It secures the disputed amount for the revenue while allowing the business necessary liquidity to function.
Proportionality is Key: The court’s action implies that the measure of attachment should be proportionate to the objective. Freezing future transactions when the existing balance is sufficient to cover a potential demand can be seen as disproportionate and causing undue hardship.
Operational Freedom: The decision provides a pathway for businesses facing similar situations to seek partial relief, ensuring their day-to-day operations are not crippled during the investigation phase, which can often be lengthy.

HIGH COURT OF BOMBAY

Shree Momai Enterprises Mannequins Cosmetic India

State of Maharashtra

M.S. Sonak and Advait M. Sethna, JJ.

WRIT PETITION (L) NO. 10638 OF 2025

SEPTEMBER 29, 2025

Rajiv Chavan, Sr. Adv., Ms. Bhairavi Waravdekar, Ms. Asmi Desai, Ms. Sonam Pandey and Ms. Rashmi Tiwari for the Petitioner. Amar Mishra, AGP for the Respondent.

JUDGMENT

M.S. Sonak, J. – Heard learned Counsel for the parties.

2. Rule. The Rule is made returnable immediately at the request of and with the consent of the learned Counsel for the parties.

3. The challenge in this Petition is to the order of attachment of the Petitioner’s bank accounts as detailed in prayer clause (a) of the Petition.

4. Mr Chavan, the learned Senior Advocate for the Petitioner, on instructions, states that the cumulative amount in the above-referred bank accounts is approximately Rs. 10,00,000/- as on the date of attachment and consequently as on today.

5. On instructions, Mr Chavan states that the Petitioner will not touch these amounts, or any amounts lying in the attached bank accounts as of today. However, he submits that the attachment needs to be lifted because otherwise, the Petitioner is precluded from operating these accounts. He points out that, due to the attachment order, the Petitioner is unable to accept remittances or make any further payments from the remittances received, thereby causing disproportionate prejudice to the Petitioner.

6. Mr Chavan states that no show cause notice has been issued to the Petitioner, quantifying any demand for GST liability. He relies on the decision of this Court in the case of AJE India (P.) Ltd. v. UOI GST 397/54 GSTL 144 (Bombay)/(2021) 88 GSTR 433 and the decision of the Hon’ble Supreme Court in the case of Radha Krishan Industries v. State of Himachal Pradesh 26/48 GSTL 113/86 GST 665 (SC)/(2021) 6 SCC 771 in support of his submissions.

7. Mr Mishra the learned Counsel for the Respondents submits that this is a case involving selling cigarettes without invoices and claiming wrongful ITC. He submits that during the Panchanama, which was carried out, the Petitioner’s representatives admitted their liability to the extent of almost Rs. 37 Crores. He submitted that, out of this, the Petitioner also paid an amount of approximately Rs. 26 Crores towards the discharge of such liability. He submits that the balance of Rs. 11 Crores was not being paid; therefore, attachment orders were issued by invoking the provisions of Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act).

8. By way of rejoinder, Mr Chavan submits that there was no admission of liability as such, and what is recorded in the Panchanama is contested.

9. At this stage, we do not propose to enter into any controversy of whether there was any admission of liability or not.

10. 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.

11. The above statement will, to some extent, protect the interests of the Revenue. This is because, even after determining liability, it is likely that the Petitioner will be able to recover only this amount from these bank accounts. For the balance, the Respondents will have to proceed against the Petitioner’s property or take such other coercive but legal means as may be allowed under the law.

12. 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. Mr Chavan 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.

13. Accordingly, without adverting to the other contentions raised on behalf of the learned Counsel for the parties, we dispose of this Petition by passing the following order:

:: ORDER ::

(a)

The Petitioner’s statement that whatever the amounts in the attached bank accounts detailed in prayer clause (a), 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.

(b)

Subject to the above statement, the attachment orders are lifted, thereby allowing the Petitioners to operate the above-referred bank accounts for all other purposes.

(c)

The Canara Bank and the Kotak Mahindra Bank should take note of this order and ensure that the Petitioner is not allowed to reduce their balance in these bank accounts to the level at which they were at the time of issuance of the attachment order or as of today.

(d)

The rival contentions regarding liability and admission of liability etc., are left open for determination by the Respondent authorities in accordance with law.

(e)

Nothing in this order will preclude the Respondents from attaching any other properties of the Petitioner in terms of Section 83 of the CGST Act by following the prescribed procedure;

(f)

The concerned Respondents must, within three days from today, write to the Canara Bank and Kotak Mahindra Bank about this order and furnish them an authenticated copy of this order.

14. The Rule in this Petition is disposed of in the above terms without any costs order. All concerned must act on an authenticated copy of this order.