Provisional Attachment of Bank Accounts Without Reasons Unsustainable Under GST Law: Bombay HC

The Bombay High Court has set aside provisional attachment orders ruling that tax authorities cannot attach bank accounts under the Maharashtra Goods and Services Tax (MGST) Act, 2017 without recording reasons or properly considering the taxpayer’s objections. The Bench of Justice G. S. Kulkarni and Justice Aarti Sathe relied on the Supreme Court’s ruling in Radha Krishan Industries v. State of Himachal Pradesh, which held that provisional attachment powers are “draconian in nature” and must be exercised strictly in compliance with statutory safeguards. The petitioner, Bajaj International Realty Private Limited, is engaged in redevelopment and construction of residential buildings, particularly projects involving cooperative housing societies. The dispute arose from a redevelopment project undertaken for Nityanand Nagar Vibhag IV Co-operative Housing Society. Under a redevelopment agreement executed on 9 May 2011, the developer agreed to construct residential units and hand over 168 flats to the existing society members without consideration. Additionally, 12 flats were handed over to the Maharashtra Housing and Area Development Authority (MHADA), which also occupied certain tenements in the society. Construction began in 2015 after obtaining the necessary approvals. Occupancy certificates for different sets of flats were issued between December 2022 and February 2024, and flats were handed over to existing members and MHADA between November 2022 and June 2025. Meanwhile, 128 free-sale flats constructed in the project were sold to buyers with applicable GST compliances. In June 2025, GST authorities initiated an investigation under Section 67 of the MGST Act and alleged that GST was payable on the construction services provided to the society members and MHADA even though the flats were transferred without consideration. Subsequently, on 26 August 2025, the department issued a pre-show cause notice estimating a tax liability of approximately ₹42.68 crore, including interest and penalty. The demand was based on the alleged taxable supply of construction services relating to flats handed over to the existing members and MHADA. The company denied the liability and filed detailed replies, contending that the flats were transferred free of cost and therefore did not constitute a taxable supply. During the pendency of proceedings, the Joint Commissioner of State Tax passed an order on 3 December 2025provisionally attaching the petitioner’s bank account under Section 83 of the MGST Act, which allows attachment of property to safeguard government revenue. The developer filed objections in Form GST DRC-22A, seeking release of the bank account. A hearing was conducted on 22 December 2025, but the authority rejected the objections through an order dated 29 December 2025. Shortly thereafter, a second attachment order dated 9 January 2026 was issued attaching another bank account of the petitioner. Aggrieved by these actions, the developer approached the High Court under Article 226 of the Constitution, challenging the legality of the attachment orders. The High Court noted that Section 83 confers a drastic power which must be exercised cautiously and only after forming a proper opinion that such attachment is necessary to protect government revenue. The Court found that the attachment orders did not record any reasons. The authority failed to deal with the detailed objections filed by the petitioner. Even the order rejecting objections did not explain why the taxpayer’s submissions were unacceptable. The Court held that a taxpayer whose property is attached has a statutory right under Rule 159 of the GST Rules to file objections and receive a reasoned order after a hearing. The Bench observed that the petitioner had submitted extensive replies challenging the attachment and explaining why no tax liability arose on flats handed over free of cost. However, the tax authority rejected the objections without providing any reasoning. According to the Court, such an approach violates the basic principles of natural justice and procedural safeguards under GST law. The Bombay High Court issued the various directions. The provisional attachment orders dated 3 December 2025 and 9 January 2026 were quashed. The matter was remanded to the Joint Commissioner of State Tax to reconsider the issue. The authority must grant a fresh hearing to the petitioner and pass a reasoned order in accordance with law. The Court clarified that it did not examine the merits of the GST demand or the pre-show cause notice, leaving those issues open for determination by the tax authorities. Case Details Case Title: Bajaj International Realty Private Limited Versus State of Maharashtra Citation: JURISHOUR-257-HC-2026(Kar) Case No.: WRIT PETITION NO.922 OF 2026 Date: 26 February 2026 Counsel For Petitioner: V. Laxmikumaran with Shanmuga Dev i/b. Sriram Sridharan Counsel For Respondent: Himanshu Takke, AGP Click Here To Read Order Read More: DGGI Chandigarh | Punjab & Haryana HC Grants Bail Fake ITC Case Citing Prolonged Custody

Provisional Attachment of Bank Accounts Without Reasons Unsustainable Under GST Law: Bombay HC

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