Provisional Attachment Under GST: Bombay High Court Sets Aside Provisional Attachment of Bank Account for Procedural Lapses

Introduction

Recently, the Bombay High Court (‘BHC’), in M/s. Shubh Corporation vs. State of Maharashtra & Ors.[i], addressed the exercise of provisional attachment powers under Section 83 of the Maharashtra Goods and Services Tax Act, 2017 (‘MGST Act’). The ruling raised important questions about the scope and powers of officers under the MGST Act to attach a bank account, as well as the procedural safeguards that must guide such action. Highlighting the significance of forming a reasoned opinion supported by tangible material, the Court examined whether the attachment order met the statutory preconditions and procedural fairness required under the MGST framework.

Brief Facts

• M/s. Shubh Corporation (‘Petitioner’), a partnership firm engaged in the business of procuring and exporting heavy machinery such as JCBs and Excavators, operated in Mumbai and Raigad and was a registered GST assessee.

• On 16.10.2024, the officers of the State Tax Department conducted a search at its business premises under s. 67 of the MGST Act. A simultaneous search was also conducted at its additional location in Shedung, Raigad. The authorities reportedly found two Backhoe Loaders during the operation.

• The Petitioner claimed to have fully cooperated with the authorities, providing documents and explanations from the financial years 2020–21 to 2023–24. It was asserted that the search concluded on 18.10.2024, and after November 2024, no further summons or correspondence followed.

• However, on 27.01.2025, the Petitioner was surprised by a communication issued by the Joint Commissioner of State Tax directing the provisional attachment of its bank account with the State Bank of India under s. 83 of the MGST Act via Form GST-DRC-22.

• The Petitioner responded with a representation dated 03.02.2025, requesting disclosure of the reasons and materials on which the attachment order was based. Allegedly, no such details were furnished. It was the case of the Petitioner that no show-cause notice had been issued, nor had any tax liability been determined to date.

• Consequently, the Petitioner approached the BHC seeking relief by filing a writ petition to quash the attachment and permit operation of its account.

Held

• The BHC quashed the impugned provisional attachment order dated 27.01.2025 and permitted the Petitioner to operate its attached bank account.

• The Court found the order to be unsustainable in law, holding that there was no material on record justifying the need to attach the Petitioner’s account under s. 83 of the MGST Act. The Court emphasized that the order lacked the foundational requirement of a reasoned opinion by the Commissioner, backed by tangible material.

• It was observed that while the attachment was purportedly based on proceedings under s. 67 of the MGST Act, such proceedings had already concluded on 18.10.2024, and no follow-up action to determine tax liability was shown.

• The Court stressed that the power under s. 83 of the MGST Act is drastic in nature and should not be exercised routinely or mechanically. It reiterated that before imposing an attachment, the authority must form an opinion based on concrete material that such an attachment is necessary to protect the government revenue and mere assumptions or vague apprehensions are insufficient.

• The BHC further noted that despite a specific written request, the Respondents did not disclose the reasons or supporting material for forming such an opinion, in violation of the procedural safeguards laid down by the Supreme Court in Radha Krishan Industries v. State of Himachal Pradesh[ii].

• While allowing the writ petition, the Court made it clear that it had not adjudicated on the substantive liability of the Petitioner and that the GST department was at liberty to initiate proceedings as per law, including issuing show-cause notices for recovery of any dues.

Our Analysis

One of the most glaring defects highlighted by the BHC was the failure of the Respondents to provide the Petitioner with the reasons and material upon which the order of attachment was based. Despite a clear and written request, no response was furnished. The format-based order (Form GST-DRC-22) merely stated that proceedings under s. 67 of the MGST Act had been initiated without explaining why attachment was necessary. The BHC correctly observed that such power cannot be based on vague apprehensions or without any concrete material. It must follow a reasoned decision reflecting an objective satisfaction that revenue interests are indeed at risk.

The decision of the BHC is in line with the principle laid down by the Supreme Court in Radha Krishan Industries (supra), which case has also been cited in the present case.

By granting relief, the BHC reinforced the position that such coercive measures cannot be resorted to as a matter of routine or based on assumptions. The authority’s opinion must be demonstrably reasoned and proportional to the risk sought to be mitigated.

Finally, the Court undertook a balanced approach and did not foreclose the right of the authorities to recover any dues legitimately owed. It clarified that this order would not prevent future action, including issuing show-cause notices. This reflects a balanced judicial approach of providing relief against unlawful executive action while preserving the State's right to recover taxes, if proven due.

This ruling reflects a broader judicial trend: since GST is still evolving, courts across the country are actively using their writ jurisdiction to check excessive or mechanical exercise of powers by GST officers. Recently, the Madras High Court, in Kesar Jewellers v. Additional Director General[iii] reiterated that the power under s. 83 must not be exercised mechanically or pre-emptively but must rest on cogent material showing that attachment is necessary to protect revenue interests.

End Notes

[i] Writ Petition No. 5183 of 2025.

[ii] (2021) 6 SCC 77.

[iii] 2025 SCC OnLine Mad 2351.

Authored by Neil Moondra, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.