The Bombay High Court in Navin Vishwanathan Prop. of M/s. Oriental Facility vs. State of Maharashtra and Ors. held that recovery proceedings under Section 79 of the CGST Act cannot be initiated against a legal heir without first determining liability under Section 93 and affording an opportunity of hearing. The case involved attachment of the petitioner’s bank account to recover GST dues allegedly owed by his deceased father. The Court noted that the petitioner and his father possessed separate GST registrations and operated from distinct places of business, making them independent taxable persons. It observed that mere similarity in trade name cannot automatically establish continuation of business or successor liability. Since no show cause notice was issued and no adjudication under Section 93 had been undertaken before invoking Section 79, the recovery action suffered from a jurisdictional defect and violated principles of natural justice. Accordingly, the attachment order was quashed, the bank account was directed to be de-frozen, and liberty was granted to initiate fresh proceedings in accordance with law.
Facts:
Navin Vishwanathan Prop. of M/s. Oriental Facility (“the Petitioner”), engaged in labour supply services, carrying on an independent proprietorship business with a separate GST registration and distinct place of business.
State of Maharashtra and Ors. (“the Respondent”), who invoked Sections 79 and 93 of the CGST Act and issued Form GST DRC-13 dated March 21, 2025, attaching the Petitioner’s bank account for recovery of GST dues of approximately ₹4.15 crore allegedly payable by the Petitioner’s deceased father.
The Petitioner contended that his proprietorship is an independent taxable entity with a separate GSTIN and place of business, and mere similarity in trade name does not justify recovery. It was further contended that no proceedings under Section 93 were initiated to determine liability, and the attachment was effected without issuance of show cause notice or opportunity of hearing, thereby violating principles of natural justice.
The Respondent contended that substantial GST dues stood against the deceased father and since the Petitioner carried on business under the same trade name and had association with the father’s business, he should be treated as a successor or continuation of the business, justifying invocation of Sections 79 and 93 of the CGST Act, 2017. It was further contended that the petition was not maintainable due to alternate remedy.
Aggrieved by freezing of his bank account without prior notice or adjudication, the Petitioner filed a writ petition under Articles 226 and 300A of the Constitution challenging the attachment as illegal and violative of natural justice.
Issue:
Whether recovery proceedings under Section 79 of the CGST Act can be invoked against a legal heir without prior determination of liability under Section 93 of the Act?
Held:
The Hon’ble Bombay High Court in Writ Petition No. 8709 of 2025 held as under:
- Observed that, the impugned action proceeds on the premise that similarity of trade name implies continuation of business, which cannot automatically fasten liability under Section 93 of the CGST Act.
- Noted that, undisputed facts establish that both the Petitioner and his deceased father had separate GST registrations, distinct places of business, and each GSTIN constitutes an independent taxable person.
- Observed that, no show cause notice determining the Petitioner’s liability under Section 93 was issued prior to attachment of the bank account.
- Held that, recovery powers under Section 79 presuppose existence of an established liability, and determination under Section 93 requires notice, consideration of material, and hearing.
- Observed that, the Department straightaway invoked recovery proceedings and frozen the Petitioner’s bank account without first determining whether the Petitioner’s proprietorship is legally distinct; whether he has, in fact, continued the business of the deceased; or whether statutory conditions under Section 93 stand satisfied.
- Observed that, a bank account is “property” under Article 300A, and freezing it without notice results in deprivation of property without due process, leading to civil consequences.
- Held that, principles of natural justice mandate prior notice and opportunity of hearing before fastening liability and invoking coercive recovery.
- Concluded that, the impugned action suffers from jurisdictional error going to the root of the matter and warrants interference under Article 226.
- Directed that, the attachment order dated March 21, 2025 is quashed; the bank account be de-frozen forthwith; and grated the liberty to the Department to initiate appropriate proceedings under Section 93 in accordance with law.
Our Comments:
The Supreme Court in the case of Radha Krishan Industries v. State of Himachal Pradesh[(2021) 88 GSTR 228 (SC)]has held that the basic requirement to exercise powers under Section 83 would be to form an opinion based on tangible material so as to protect the interest of the Government revenue. Further it was held that provisional attachment under Section 83 is “draconian” and requires formation of opinion based on “tangible material” having a “live nexus” with protection of revenue. The present judgment applies this ratio to emphasize that attachment cannot precede determination of liability and must satisfy statutory preconditions.
Further the judgments in Galaxy International vs. Union of India [(2025) 32 Centax 212 (Bom)] and the judgment in Prasanna K Shetty vs. State of Maharashtra [(2024) 17 Centax 418 (Bom)], held that liability cannot be fastened on legal heirs without issuance of show cause notice and adjudication.
Relevant Provisions:
Section 79 of the CGST Act, 2017
“79. Recovery of tax.-
(1) Where any amount payable by a person to the Government under any of the provisions of this Act or the rules made thereunder is not paid, the proper officer shall proceed to recover the amount by one or more of the following modes, namely:-
(a) the proper officer may deduct or may require any other specified officer to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other specified officer;
(b) the proper officer may recover or may require any other specified officer to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the proper officer or such other specified officer;
(c) (i) the proper officer may, by a notice in writing, require any other person from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the Government either forthwith upon the money becoming due or being held, or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount;
(ii) every person to whom the notice is issued under sub-clause (i) shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary;
(iii) in case the person to whom a notice under sub-clause (i) has been issued, fails to make the payment in pursuance thereof to the Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Act or the rules made thereunder shall follow;
(iv) the officer issuing a notice under sub-clause (i) may, at any time, amend or revoke such notice or extend the time for making any payment in pursuance of the notice
(v) any person making any payment in compliance with a notice issued under sub-clause (i) shall be deemed to have made the payment under the authority of the person in default and such payment being credited to the Government shall be deemed to constitute a good and sufficient discharge of the liability of such person to the person in default to the extent of the amount specified in the receipt;
(vi) any person discharging any liability to the person in default after service on him of the notice issued under sub-clause (i) shall be personally liable to the Government to the extent of the liability discharged or to the extent of the liability of the person in default for tax, interest and penalty, whichever is less;
(vii) where a person on whom a notice is served under sub-clause (i) proves to the satisfaction of the officer issuing the notice that the money demanded or any part thereof was not due to the person in default or that he did not hold any money for or on account of the person in default, at the time the notice was served on him, nor is the money demanded or any part thereof, likely to become due to the said person or be held for or on account of such person, nothing contained in this section shall be deemed to require the person on whom the notice has been served to pay to the Government any such money or part thereof
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Section 93(1)(a) of the CGST Act, 2017
“93. Special provisions regarding liability to pay tax, interest or penalty in certain cases.-
(1) Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), where a person, liable to pay tax, interest or penalty under this Act, dies, then-
(a) if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act; and
(b) if the business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act, whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.”
Section 83 of the CGST Act, 2017
“83. Provisional attachment to protect revenue in certain cases.-
(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).”
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