Facts of the Case

The appellant, M/S S.R Traders, a partnership firm, had its immovable properties and bank accounts provisionally attached by the first respondent (Directorate General of GST Intelligence) under the CGST Act, on the ground that its case was under investigation with a show-cause notice under Section 74(1) quantifying a demand of approximately Rs.8.59 crores. A learned Single Judge dismissed the firm's writ petition, WP(C) 12591/2023, holding that the attachment orders were validly passed by an officer empowered to do so and that the appellant had an efficacious alternate statutory remedy of appeal, leading to the present writ appeal.

Issues Involved

  1. Whether provisional attachment of both the immovable properties and all bank accounts of a firm and its partners, pending adjudication of a large GST demand, could be sustained in full where it left the firm unable to carry on any legitimate business.
  2. Whether the existence of an efficacious alternate remedy barred interference by the Division Bench at the writ-appeal stage.

Petitioner's Arguments

  • The appellant argued that attaching all its bank accounts and those of its partners, on top of already-attached immovable properties, made it impossible to carry on any business during the pendency of the investigation, and that the immovable property attachment alone offered sufficient security for the revenue's interest.

Respondent's Arguments

  • The department's standing counsel opposed relaxation, pointing out that the show-cause notice quantified the demand at Rs.8.59 crores, that further liability by way of penalty was likely once adjudication concluded, and that ongoing investigation could result in further demands, so there was no warrant to interfere with the Single Judge's judgment.

Court Order / Findings

  • The Division Bench acknowledged that the attached immovable properties alone might not fully cover the demand in the show-cause notices, but held that the appellant could not be financially choked to the point of being unable to carry on legitimate business while simultaneously defending the proceedings.
  • The Court modified the Single Judge's judgment to the limited extent of directing lifting of the attachment on two specific bank accounts (a savings account of the managing partner and one of another partner), permitting the appellant to operate these two accounts pending finalisation of the adjudication proceedings, while leaving the attachment on the remaining accounts and the immovable properties, as well as the Single Judge's other findings, undisturbed.

Important Clarification

  • Provisional attachment under the CGST Act, while a legitimate revenue-protection measure during pending investigation/adjudication, must be tempered where its cumulative effect (attaching all bank accounts and immovable properties simultaneously) would financially choke the assessee out of conducting any legitimate business — appellate courts have modified such attachments to permit operation of a limited number of accounts, without disturbing the attachment as a whole or the underlying finding that an alternate statutory remedy exists.
  • This is a case-specific equitable modification rather than a ruling that provisional attachment itself is impermissible or that the alternate-remedy bar does not apply; the Single Judge's core findings on maintainability and validity of the attachment order were left undisturbed.

Sections Involved

  • Section 83 of the CGST Act, 2017 - empowers provisional attachment of property, including bank accounts, to protect revenue during pendency of certain proceedings.
  • Section 74(1) of the CGST Act, 2017 - the fraud/suppression provision under which the underlying show-cause notice was issued.

Decision – In Favour of

The writ appeal was partly allowed in favour of the Assessee, to the limited extent of permitting operation of two specific bank accounts; the balance of the attachment and the Single Judge's finding of an efficacious alternate remedy were left undisturbed, so the outcome remains substantially in favour of the Department subject to that narrow modification.

Case Details

High Court of Kerala at Ernakulam, WA No.1250 of 2023 (against the judgment in WP(C) 12591 of 2023); Coram: Hon'ble Mr. Justice A.K. Jayasankaran Nambiar and Hon'ble Mr. Justice Mohammed Nias C.P.; decided on 25 July 2023.

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