Facts of the Case

The petitioner, a proprietary works contractor, was performing borewell drilling and pipeline installation work for the Directorate of Jal Jeevan Mission, with certain payments for completed work yet to be released. On 24.12.2024, the State Tax authorities conducted a raid at the petitioner's office and subsequently initiated proceedings under Section 74 of Chapter XV of the CGST Act, 2017, alleging evasion of about Rs. 2 crore (later revised to about Rs. 13 crore). The petitioner's bank account was attached, and by an impugned letter dated 21.03.2025, the tax authority further directed the Jal Jeevan Mission not to release any payment due to the petitioner for the tendered work.

Issues Involved

  1. Whether the impugned direction to the Jal Jeevan Mission to stop payment to the petitioner, issued without recording reasons, was sustainable in law.
  2. Whether such a direction, being akin to a provisional attachment, was required to satisfy the safeguards laid down for provisional attachment under the GST Act.

Petitioner's Arguments

  • Despite the petitioner's bank account already being attached, the respondent additionally directed the Jal Jeevan Mission not to pay the petitioner, without assigning any reason.
  • Relying on Radha Krishan Industries v. State of Himachal Pradesh & Others (2021) 6 SCC 771, it was submitted that the power to levy a provisional attachment is draconian and requires a formed opinion that it is necessary to protect the interest of government revenue; since no reason was recorded for the payment-stoppage direction, it ought to be set aside.

Respondent's Arguments

  • Proceedings under Section 74 of the CGST Act had been initiated, and it was found that the petitioner had evaded approximately Rs. 2 crore, subsequently revised to about Rs. 13 crore, justifying the impugned direction and warranting dismissal of the petition.

Court Order / Findings

  • The Court observed that it was a sorry state of affairs that the GST Department issued notices without mentioning the relevant provisions or the grounds for so doing; the impugned letter did not show under which provision it was issued or the reasons for directing stoppage of payment.
  • Extracting paragraphs 49 and 50 of Radha Krishan Industries, the Court reiterated that a provisional attachment is a draconian power that can only be exercised upon a specific formation of opinion that it is necessary (not merely expedient) to protect the interest of government revenue, following a strict and punctilious observance of statutory preconditions.
  • Since no reason was assigned by the respondent as to why the payment-stoppage direction was necessary, the impugned notice was found to be against the law laid down by the Supreme Court and was quashed.
  • Liberty was, however, left with the respondent to take steps in accordance with law for stoppage of payment, if so advised, presumably after recording proper reasons.

Important Clarification

  • A direction stopping payment due to a taxpayer from a third party, issued in the course of Section 74 proceedings, is functionally akin to a provisional attachment and must be tested against the same safeguards laid down in Radha Krishan Industries – a specific, recorded formation of opinion that the measure is necessary to protect government revenue, not merely a general allegation of evasion.
  • Quashing such a direction for want of reasons does not foreclose the Department from issuing a fresh, properly reasoned direction if the statutory pre-conditions are satisfied.

Sections Involved

  • Section 74, CGST Act, 2017 (Chapter XV) – provision under which proceedings alleging tax evasion were initiated against the petitioner.
  • Section 83, CGST Act, 2017 – provisional attachment provision, the principles under which (as explained in Radha Krishan Industries) were applied by analogy to the payment-stoppage direction.

Decision – In Favour of

The petition is allowed in favour of the Assessee. The impugned unreasoned notice directing stoppage of payment is quashed, with liberty to the Department to act afresh in accordance with law.

Case Details

  • Court: High Court of Chhattisgarh at Bilaspur
  • Case No.: WPT No. 141 of 2025
  • Neutral Citation: 2025:CGHC:48939
  • Coram: Hon'ble Shri Justice Naresh Kumar Chandravanshi
  • Date of Order: 24.09.2025

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