Order of Attachment of Bank Account to Be Set Aside as There Is No Material Available to Form an Opinion That Assessee Was Likely to Defeat Demand

Centax Editorial Board

March 1, 2025

• 2 min. read

Case Details: Goisu Realty Pvt. Ltd. Versus State of Maharashtra & Ors. (2025) 27 Centax 152 (Bom.)

Judiciary and Counsel Details

B.P. Colabawallaa & Firdosh P. Pooniwalla, JJ.
Shri V. Sridharan, Senior Adv. a/w Ms Aditi Jain for the Petitioner
Ms Jyoti Chavan, Adv. Addl. G.P. & Roopali Barkund, Deputy Commissioner of State Tax for the Respondent.

Facts of the Case

The assessee, engaged in real estate development, was investigated for allegedly availing ineligible Input Tax Credit (ITC) under Section 17(5)(d) of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act). Based on this allegation, the Joint Commissioner of State Tax invoked Section 83 of the MGST Act to provisionally attach the assessee’s bank account. The attachment order cited a GST Council recommendation proposing an amendment to Section 17(5)(d) to clarify ITC eligibility for plant and machinery. However, this amendment had not yet been incorporated into law at the time of the attachment. The assessee challenged the attachment before the Bombay High Court, contending that the order was arbitrary, lacked material justification, and failed to establish any likelihood of defeating the demand. The Revenue defended the attachment, asserting that it was necessary to protect government revenue and that the proposed amendment reinforced its position regarding ITC restrictions.

High Court Held

The Hon’ble Bombay High Court held that the provisional attachment order under Section 83 of the MGST Act was unsustainable due to the absence of any material demonstrating the likelihood of revenue loss. The Court reiterated that provisional attachment is an extreme measure that must be exercised strictly within statutory limits and supported by tangible material forming a reasonable opinion. It further observed that a mere recommendation by the GST Council for a future amendment cannot constitute a valid basis for attachment unless the law has been amended accordingly. Citing Radha Krishan Industries v. State of Himachal Pradesh, the Court emphasized that the Commissioner must make an independent assessment based on existing legal provisions, rather than relying on prospective legislative changes. As the order lacked substantive justification and constituted a colorable exercise of power, the Court quashed the attachment and directed the immediate release of the assessee’s bank account.