Introduction
In order to safeguard the interest of revenue, wide-ranging powers have been conferred upon the authorities under Section 83 of the CGST/relevant SGST Act, enabling them to provisionally attach the property of a taxable person during the pendency of any proceedings. However, instances have been observed where, in the absence of any tangible material on record, bank accounts of taxpayers have been attached, causing severe disruptions to their business operations and reputational harm. The Hon’ble Bombay High Court recently adjudicated upon this issue in Goisu Realty Pvt. Ltd. v. State of Maharashtra & Ors. [2025:BHC – OS:1518], wherein the Court examined whether the provisional attachment order complied with the statutory requirements and the safeguards enunciated by the Hon’ble Supreme Court in Radha Krishan Industries [2021 (4) TMI 837 – Supreme Court].
Judgment of Hon’ble Bombay High court is analysed in this article to explain nuances of Section 83 of the Act.
Facts of the Case
The Petitioner, engaged in the business of real estate development, is a subsidiary of one of the largest foreign direct investment (FDI) investors in Maharashtra. With a paid-up share capital of Rs. 11,981 crores, the Petitioner is currently undertaking three projects valued at Rs. 8,000 crores without any external borrowings.
Investigation proceedings were initiated against the Petitioner under Section 67 of the Act. During the course of the investigation, it was alleged that the Petitioner had availed ineligible Input Tax Credit (ITC) amounting to Rs. 47 crores in violation of Section 17(5)(d) of the Act. The Petitioner was therefore directed to reverse the ineligible ITC, which it refused to comply with. Consequently, invoking powers under Section 83 of the Act, the authorities provisionally attached the bank account of the Petitioner, bringing its business operations to a standstill. Aggrieved by the attachment, the Petitioner approached the Hon’ble Bombay High Court by way of a writ petition.
Contentions of the Petitioner
The Petitioner contended that if it intends to sell the property before the issuance of an Occupancy Certificate (OC), it would be liable to pay GST on such transactions. Therefore, as a precautionary measure, the ITC was availed but not utilized. Furthermore, reliance was placed on the Hon’ble Supreme Court’s judgment in Safari Retreats to validate availment of ITC.
Stand of the Revenue
The Revenue argued that the Petitioner, not being a registered promoter under the Real Estate (Regulation and Development) Act, 2016 (RERA), was ineligible to claim ITC. Additionally, it was submitted that the GST Council had already recommended an amendment to the phrase “plant and machinery” in Section 17(5)(d) of the Act, in light of the Hon’ble Supreme Court’s ruling in Safari Retreats.
Legal Issue
The primary issue for consideration was whether the attachment of the bank account of the Petitioner satisfied the requirements stipulated under Section 83 of the Act, as interpreted by the Hon’ble Supreme Court in Radha Krishan Industries.
Observations and Findings of the Hon’ble Bombay Court
The Hon’ble Court noted that the dispute regarding the availment of ITC in the present case was a legal issue requiring adjudication. Relying on Supreme court judgment in Radha Krishan Industries, Bombay High Court reiterated that before exercising powers under Section 83, the Commissioner must form an opinion, based on tangible material, that the assessee is likely to defeat the demand, and that provisional attachment is necessary to protect the interest of the revenue.
Upon examining the impugned attachment order, the Court observed that it lacked any indication of the Commissioner’s formation of opinion regarding the necessity of the attachment to safeguard the revenue’s interest. The order failed to demonstrate the existence of material justifying the conclusion that the petitioner was likely to evade tax liability. Accordingly, the Court held that the attachment of the bank account constituted a colourable exercise of power and directed the authorities to allow the Petitioner to operate the account forthwith.
Our Comments
Authorities must exercise extreme caution while invoking the provisions of Section 83 of the Act. While the protection of government revenue is imperative, it must not come at the cost of violating statutory safeguards and judicial precedents.
The Hon’ble Supreme Court in Radha Krishan Industries has categorically held that the power to order provisional attachment, particularly of bank accounts, is draconian in nature. Consequently, the conditions prescribed under the statute for its valid exercise must be strictly adhered to. The formation of an opinion by the Commissioner under Section 83(1) must be supported by tangible material demonstrating the necessity of such attachment in order to protect government revenue. The expression “necessary so to do for protecting the government revenue” implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment.
In the present case, the attachment order appears to contravene the principles established by the Hon’ble Supreme Court on three counts: (i) the financial standing of the Petitioner was disregarded, (ii) the issue concerning the eligibility of ITC is a legal dispute requiring adjudication, and (iii) the Petitioner had merely availed ITC without any utilization, which does not inherently indicate an intent to defeat the demand.
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CA Jignesh Kansara | Founder Partner DAKSM & Co. LLP, Chartered Accountants
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