Provisional Attachment Of Bank Accounts Cannot Be Done Merely Upon Issue Of Show Cause Notice U/S 74 GST Act: Allahabad High Court

Referring to the judgment of the Supreme Court in Radha Krishan Industries v. State of H.P.

and its earlier judgment in R.D. Enterprises v. Union of India, the bench of Justice Shekhar B. Saraf and Justice Praveen Kumar Giri held

“If the reason that provisional attachment is being done as proceedings have been initiated under Section 74 of the Act is allowed to stand, then in all proceedings wherein show cause notice is issued under Section 74, provisional attachment would become valid. The law as laid down in the abovementioned judgements makes it patently clear that a proper opinion has to be formed based on adequate reasons for such a draconian action to be taken.”

Petitioner approached the High Court against provisional attachment of its bank accounts under Section 83 on grounds that no proceedings under Section 74 of the GST Act had been initiated. It was pleaded that the by application of the 'draconian' provision, the business of the petitioner had come to a halt.

Section 83 of the GST Act empowers the Commissioner to provisionally attach any property, including bank account, belonging to the taxable person if he is of the opinion that the same is necessary to protect the interest of the Government during the pendency of proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74.

The Court observed that the order for provisional attachment has to be made in writing and with reasons, as lack of reasons for the stepping on rights of the assesee will lead to quashing of the provisional attachment.

In Radha Krishna Industries, the Apex Court held that the provisional attachment of bank account by the Commissioner is a 'draconian power' and must be exercised only after formation of opinion based on tangible material and necessity to protect the revenue.

Perusing the letter issued to the petitioner regarding provisionally attaching it's account, the Court observed that the only reason that was given was that proceedings under Section 74 have been initiated against the assesee, but no material regarding formation of opinion for provisionally attaching the bank accounts was given.

Holding that sufficient reason was not given for formation of opinion to provisionally attach the bank accounts, the Court quashed the notices provisionally attaching the accounts of the petitioner.

Case Title: M/S Soraza Recycling Private Limited Versus Union Of India And 4 Others [WRIT TAX No. - 4630 of 2025]

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