• Dated 30^th June, 2025

Bombay High Court Rules Provisional Attachment of Cash Credit Account under GST Law as Without Jurisdiction

Brief Facts:

The Assessee, Skytech Rolling Mill Pvt. Ltd. maintained a cash credit account with ICICI Bank, which served as a borrowing facility rather than a deposit account. On 8th May 2025, the Joint Commissioner of State Tax, Raigad Division, issued an order under Section 83 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act), provisionally attaching the said cash credit account on the ground of protecting the interests of revenue during pending GST proceedings. Following this, the bank was directed to freeze the facility, which adversely impacted the Assessee's operations. The Assessee asserted that the cash credit account was not its "property" but rather a liability, as the funds in such an account are advanced by the bank and not owned by the account holder. Aggrieved by the attachment, and claiming that the action was without jurisdiction and contrary to law, the Assessee approached the Bombay High Court seeking appropriate relief.

Assessee's Contention:

The Assessee argued that a cash credit account cannot be treated as "property" under Section 83 of the MGST Act because it does not represent funds belonging to the taxpayer but rather a borrowing limit sanctioned by the bank. Relying on judicial precedents, including Manish Scrap Traders v. Principal Commissioner (Gujarat High Court), J.L. Enterprises v. Assistant Commissioner (Calcutta High Court), and Sargam Foods Pvt. Ltd. v. State of Maharashtra (Bombay High Court), the Assessee emphasized that similar attachments of cash credit accounts had already been held illegal by other High Courts. It was asserted that attaching a liability account is beyond the scope of Section 83 and such action is without jurisdiction and arbitrary.

Department's Contention:

The Department contended that the attachment was made under Section 83(1), which permits attachment of "any property including bank account" of the taxable person. It maintained that the power was exercised to protect revenue interests and was within its statutory authority. However, the Department did not provide any judicial support to justify the attachment of a cash credit facility specifically, nor did it counter the Assessee's reliance on settled case law.

Decision:

The Bombay High Court held that Section 83 of the MGST Act allows attachment of "any property including bank account" only if it truly belongs to the taxable person. A cash credit account, being a borrowing facility and not an asset, cannot be considered the property of the account holder. The Court reaffirmed the legal position taken by other High Courts that such facilities cannot be attached under GST laws. Consequently, the Court directed the tax authorities to immediately withdraw the attachment order issued to ICICI Bank and notify the bank within 24 hours. The Court clarified that this order does not preclude the Department from initiating lawful recovery by other permissible means.

BTA's Comment:

This decision is a critical reaffirmation of the limited scope of coercive recovery powers under GST legislation. The judgment draws a clear line between what constitutes a taxpayer's property and what does not, thereby preventing undue hardship to businesses. By holding that cash credit accounts are outside the scope of Section 83, the Hon'ble Bombay High Court aligns itself with other judicial pronouncements and ensures consistency in GST enforcement. This decision will be particularly beneficial for taxpayers facing arbitrary attachments and strengthens safeguards against overreach by tax authorities.

Case Reference: Skytech Rolling Mill Pvt. Ltd. v. Joint Commissioner of State Tax, Writ Petition No. 1928 of 2025, Bombay High Court (2025)

Author: Debanjan Ranu

Edited by: Shaily Gupta