Provisional Attachment of Bank Account under GST: A
Case Analysis of M/S Rajat Infra Developers Private Ltd vs. Union of India
& Others
By Yogesh Verma (CS/LLB) / 2 min read / GST Case Law
Introduction
The provisional attachment of bank accounts under
Section 83 of the GST law is a significant power granted to tax authorities to
secure revenue in cases of suspected tax evasion. However, this power must be
exercised with due process and judicial oversight. The recent
judgment in M/S Rajat Infra Developers Private Ltd vs. Union of India &
Others by the Allahabad High Court sheds light on the legal
principles governing such attachments.
This article provides an in-depth analysis of the case,
covering the facts, arguments, court findings, and implications.
Case Details
- Case
Name: M/S Rajat Infra Developers
Private Ltd vs. Union of India & Others
- Case
Number: WRIT TAX No. 2300 of 2024
- Court: Allahabad High Court
- Judges: Hon'ble Shekhar B. Saraf, J. & Hon'ble Vipin
Chandra Dixit, J.
- Date
of Order: February 27, 2025
- Petitioner’s
Counsel: Ashish Srivastava, Atul
Srivastava
- Respondent’s
Counsel: A.S.G.I., Abrar Ahmad,
Dhananjay Awasthi, Parv Agarwal, R.V. Pandey
Background of the Case
Provisional Attachment under GST
The Goods and Services Tax (GST) Act provides for the
provisional attachment of bank accounts and property under Section 83 to
prevent taxpayers from evading tax liability. However, the power must be
exercised:
1.
Only in
cases where proceedings under Section 62, 63, 64, 67, 73, or 74 are pending.
2.
Only if
the Commissioner believes attachment is necessary to protect government
revenue.
3.
With an
opportunity for the taxpayer to file objections.
In this case, M/S Rajat Infra Developers Pvt. Ltd.
was subjected to provisional attachment of its bank account after it
allegedly failed to deposit collected GST.
Facts of the Case
Initiation of Action Against the
Petitioner
1.
Provisional
Attachment Order (July 8, 2024)
o The tax department provisionally attached the bank
account of M/S Rajat Infra Developers under Section 83 of the Uttar
Pradesh GST Act, 2017.
o The attachment was based on the alleged failure to
deposit GST collected from customers between July 2017 and September
2023.
2.
Petition
to High Court (October 15, 2024)
o The petitioner challenged the attachment before the Allahabad
High Court.
o The Court directed the department to consider the
petitioner’s objections and pass a reasoned order.
3.
Rejection
of Objections (October 30, 2024)
o The department rejected the petitioner’s objections,
maintaining that the attachment was necessary to secure revenue.
o The petitioner was found to have collected GST but not deposited
it with the government.
4.
Show Cause
Notice & Final Order (December 30, 2024)
o A show cause notice (SCN) was issued under Section
74 of the CGST Act on July 24, 2024.
o The final adjudication order under Section 74
confirmed:
§ CGST Liability:
₹2,23,73,267
§ SGST Liability:
₹2,23,73,267
§ Interest & Penalties:
Additional charges under Sections 50, 74, and 122 of the GST Act.
Arguments by the Petitioner
1.
Arbitrariness
of Provisional Attachment
o The petitioner argued that the attachment was unjustified
and violated principles laid down in the Supreme Court’s ruling in M/s Radha
Krishan Industries v. State of Himachal Pradesh (2021).
o The Supreme Court had ruled that provisional attachment
should not be used as a harassment tool and should only be exercised in
extreme cases.
2.
Violation
of Due Process
o The petitioner claimed that no proper reasoning was
provided for the attachment, violating natural justice.
o The attachment crippled business operations and
caused irreversible financial damage.
3.
Alternative
Remedy of Appeal
o The petitioner argued that since an appeal was being
filed against the final adjudication order, there was no need for the
attachment to continue.
Arguments by the Respondents (Tax
Authorities)
1.
Justification
of Provisional Attachment
o The tax authorities argued that the attachment was
necessary since the petitioner had failed to deposit GST collected
from customers.
o Section 83 of the GST Act
allows attachment to protect government revenue.
2.
Opportunity
Given to the Petitioner
o Unlike in the Radha Krishan Industries case, the
petitioner was given an opportunity to present objections.
o A reasoned order was passed after considering the
objections, justifying the attachment.
3.
Alternative
Remedy Available
o Since a final order under Section 74 was already passed,
the petitioner had a statutory right to appeal, making judicial
interference unnecessary.
Findings of the Court
1.
Provisional
Attachment Was Justified
o The court noted that the petitioner had failed to deposit
GST collected from customers, justifying the attachment.
o Section 83 allows attachment for one year, meaning the attachment was still valid.
2.
Due
Process Was Followed
o The petitioner was given an opportunity to file
objections, and the department passed a reasoned order.
o Unlike the Radha Krishan Industries case, the
petitioner was heard before rejection of objections.
3.
Alternative
Remedy Exists
o Since a final order was passed under Section 74, the
petitioner had the right to appeal, and the court would not interfere.
Judgment
- The
writ petition was dismissed.
- The
provisional attachment of the bank account was upheld.
- The
petitioner was granted liberty to file an appeal against the final
tax demand order.
Legal Analysis & Implications
1.
Provisional
Attachment Must Follow Due Process
o The case reaffirms that provisional attachment cannot be
imposed arbitrarily.
o Authorities must provide an opportunity for objections
and pass a reasoned order.
2.
Distinction
from Radha Krishan Industries Case
o The Supreme Court ruling in Radha Krishan Industries
was inapplicable because, in this case, the petitioner was given an
opportunity to be heard.
3.
Alternative
Remedy Principle in Taxation Cases
o Courts will generally not interfere when an alternative
remedy (appeal) is available.
o Taxpayers must exhaust statutory remedies before
approaching courts.
Conclusion
The judgment in M/S Rajat Infra Developers Pvt. Ltd vs.
Union of India is a significant ruling that reinforces the importance
of procedural safeguards in provisional attachment cases under GST
law.
While the tax authorities have the power to protect
revenue, this power must be exercised fairly. The case highlights
that taxpayers should challenge attachments through appeals rather than writ
petitions.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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