2025 (6) TMI 1253 - HC - GST

Provisional attachment of cash credit account of the Petitioner with ICICI Bank - whether on a reading of Section 83 of the MGST Act a cash credit account can be provisionally attached by exercising power under the said Section? - HELD THAT - Section 83 of the MGST Act provides for provisional attachment of any property including bank account belonging to the taxable person . The cash credit account is a liability which an account holder owes to the bank for availing the loan facility and therefore by no stretch of imagination cash credit account can be construed as a property belonging to the account holder/Petitioner. The phrase including bank account following the phrase any property would mean a non cash-credit bank account. Therefore a cash credit account would not be governed by Section 83 of the MGST Act. The Petitioner has rightly relied upon the decisions of the Gujarat High Court in the case of Manish Scrap Traders Vs Principal Commissioner 2022 (1) TMI 751 - GUJARAT HIGH COURT J.L. Enterprises Vs Assistant Commissioner 2023 (6) TMI 945 - CALCUTTA HIGH COURT and J.L. Enterprises Vs Assistant Commissioner 2025 (3) TMI 322 - CALCUTTA HIGH COURT in support of his submissions that in these decisions provisional attachment under Section 83 of cash credit account has been quashed. There are no judgment contrary to the above referred decisions. In any case for the reasons stated above cash credit account cannot be treated as property of the account holder which can be consider under Section 83 of the Act. Conclusion - Cash credit accounts being liabilities do not qualify as property and hence cannot be attached under Section 83. It is directed to hold adjudge and declare that the impugned order dated 08.05.2025 passed by the Respondent No. 1 under Section 83 of the Maharashtra Goods and Services Act 2017 (Exhibit F) is wholly without jurisdiction arbitrary and illegal - petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the Court was whether a "cash credit account" held by the Petitioner with a bank can be provisionally attached under Section 83 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act). Specifically, the issue was whether the term "any property, including bank account" in Section 83(1) of the MGST Act encompasses a cash credit account, which is essentially a liability account, for the purpose of provisional attachment to protect government revenue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Can a "cash credit account" be provisionally attached under Section 83 of the MGST Act?

Relevant Legal Framework and Precedents: Section 83 of the MGST Act empowers the Commissioner to provisionally attach "any property, including bank account" belonging to a taxable person where necessary to protect government revenue. The phrase "including bank account" follows "any property," suggesting that only bank accounts constituting property of the taxpayer are attachable. The Court also considered precedents from other High Courts, notably the Gujarat High Court in Manish Scrap Traders Vs Principal Commissioner, and the Calcutta High Court in J.L. Enterprises cases, which held that provisional attachment of a cash credit account under similar provisions was impermissible. Additionally, a coordinate Bench of the Bombay High Court in M/s. Sargam Foods Pvt. Ltd. & Anr. Vs State of Maharashtra & Ors. interpreted a similar provision in the Navi Mumbai Municipal Corporation Act, concluding that a cash credit account is not an asset or property of the account holder.

Court's Interpretation and Reasoning: The Court emphasized the nature of a cash credit account as a liability owed by the account holder to the bank, not an asset or property belonging to the account holder. It reasoned that the phrase "including bank account" in Section 83 must be read in the context of "any property," and thus excludes accounts representing liabilities such as cash credit accounts. The Court held that a cash credit account cannot be construed as "property" for the purposes of provisional attachment under the MGST Act.

Key Evidence and Findings: The undisputed fact was that the attached account was a cash credit account. The Court relied on the legal characterization of such accounts as liabilities and the absence of any contrary judicial authority. The petitioner's reliance on binding precedents from other High Courts and the coordinate Bench of this Court further supported the conclusion.

Application of Law to Facts: Applying the legal principle that only property belonging to the taxable person can be attached, and recognizing that a cash credit account is a liability, the Court found the provisional attachment order dated 8 May 2025 to be without jurisdiction and legally untenable.

Treatment of Competing Arguments: The Respondents did not produce any judgment or authority contrary to the cited precedents. The Court noted the absence of any persuasive argument to treat a cash credit account as property. The Petitioner's submissions and supporting case law were accepted as correctly interpreting the scope of Section 83.

Conclusions: The Court concluded that a cash credit account is not "property" of the account holder and therefore cannot be provisionally attached under Section 83 of the MGST Act. The impugned provisional attachment order was quashed as arbitrary, illegal, and without jurisdiction.

3. SIGNIFICANT HOLDINGS

The Court held:

"The cash credit account is a liability which an account holder owes to the bank for availing the loan facility and therefore by no stretch of imagination cash credit account can be construed as a property belonging to the account holder/Petitioner."

"The phrase 'including bank account' following the phrase, 'any property' would mean a non cash-credit bank account. Therefore, in our view, a 'cash credit account' would not be governed by Section 83 of the MGST Act."

"The impugned order dated 08.05.2025 passed by the Respondent No. 1 under Section 83 of the Maharashtra Goods and Services Act, 2017 is wholly without jurisdiction, arbitrary and illegal."

Core principles established include:

• Provisional attachment under Section 83 of the MGST Act is limited to property belonging to the taxable person, including bank accounts that constitute property.
• Cash credit accounts, being liabilities, do not qualify as property and hence cannot be attached under Section 83.
• Orders of provisional attachment that contravene this principle are without jurisdiction and liable to be quashed.

The Court directed immediate withdrawal of the attachment communication and clarified that this ruling does not preclude recovery of dues by other lawful means. The petition was allowed with directions to the Respondents to act accordingly.