Supreme Court Clarifies GST Summons vs Proceedings
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GST cash credit account relief – Section 83 GST attachment struck down by Bombay HC
1. Issue Involved
- The central issue before the Bombay High Court was whether a cash credit account can be provisionally attached under Section 83 of the Maharashtra Goods and Services Tax (MGST) Act, 2017, for protecting government revenue.
- The Court examined whether such an account qualifies as “property belonging to the taxable person” as mentioned in the provision.
Facts of the Case
- The petitioner, Skytech Rolling Mill Pvt. Ltd., filed a writ petition under Article 226 of the Constitution of India challenging an order of provisional attachment passed by the Joint Commissioner of State Tax Nodal – Raigad Division.
- On 8 May 2025, the Respondent issued an order under Section 83 of the MGST Act attaching the petitioner’s cash credit account maintained with ICICI Bank.
- The petitioner argued that such an attachment was illegal, arbitrary, and without jurisdiction, as a cash credit account is essentially a loan facility provided by the bank and not an asset of the petitioner.
- Hence, they sought the quashing of the attachment order and release of the account.
3. Observations of the Court
- The Court examined Section 83 of the MGST Act, which allows the Commissioner to attach “any property, including a bank account, belonging to the taxable person”. The Court observed that this provision intends to attach property owned by the taxpayer to safeguard revenue interests.
- However, a cash credit account represents a borrowing arrangement from the bank, and the amounts therein are not funds belonging to the taxpayer but funds lent by the bank.
- The Court clarified that the phrase “including bank account” must be interpreted in the context of “any property”, meaning non-loan accounts like savings or current accounts and not cash credit accounts. The Court relied upon similar rulings:
- Manish Scrap Traders v. Principal Commissioner (Gujarat High Court)
- J.L. Enterprises v. Assistant Commissioner (Calcutta High Court)
- Sargam Foods Pvt. Ltd. v. State of Maharashtra (Bombay High Court)
4. In all these cases, provisional attachments of cash credit accounts were quashed. The Respondents could not present any contrary judgments.
4. Judgment of the Court
- The Bombay High Court held that provisional attachment of a cash credit account under Section 83 is not permissible, as such an account is not the property of the taxpayer.
- The order dated 08.05.2025 attaching the petitioner’s cash credit account was quashed and set aside. The Court directed the Respondents to withdraw the attachment immediately and inform ICICI Bank within 24 hours.
- The Court further clarified that this order does not restrict the authorities from recovering dues through other lawful means. It also justified the exercise of writ jurisdiction, stating that the impugned action was wholly without jurisdiction and contrary to binding precedents.
5. Case Laws Relied Upon
- Manish Scrap Traders v. Principal Commissioner – (2022) 141 taxmann.com 153 (Gujarat High Court)
- J.L. Enterprises v. Assistant Commissioner – (2023) 152 taxmann.com 278 (Calcutta High Court) and (2025) 172 taxmann.com 266 (Calcutta High Court)
- Sargam Foods Pvt. Ltd. v. State of Maharashtra & Ors. – Writ Petition No. 4313 of 2008 (Bombay High Court).
6. Key Learnings from the Judgment
- This judgment reinforces that cash credit accounts are not assets of the taxpayer but liabilities owed to the bank, and thus cannot be provisionally attached under GST laws. Tax authorities must differentiate between taxpayer-owned property and borrowed funds when invoking Section 83.
- It also demonstrates that writ jurisdiction is available where departmental action exceeds jurisdiction or violates settled law.
7. Conclusion
The ruling conclusively establishes that cash credit accounts cannot be subjected to provisional attachment under Section 83 of the MGST Act.
This is consistent with multiple High Court decisions and ensures that taxpayers availing cash credit facilities are protected from unwarranted coercive actions, while still allowing the department to proceed with recovery through lawful means.
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