In a recent ruling, the Allahabad High Court quashed the provisional attachment of bank accounts belonging to M/s Soraza Recycling Private Limited, finding the action lacked sufficient reasoning and tangible evidence. The attachment, executed on July 23, 2025, was purportedly linked to proceedings under Section 74 of the CGST Act, which the petitioner argued were not actually pending. The petitioner contended that the attachment was arbitrary, lacking disclosure of any tangible material or reasoning that justified the necessity to protect revenue.
The court examined whether the provisional attachment under Section 83 was valid without clear evidence or a properly formed opinion demonstrating its necessity. The court emphasized that such measures should only be taken when there is a reasoned opinion based on tangible material, as reiterated in the Supreme Court’s decision in Radha Krishan Industries v. State of H.P. (2021). It was noted that merely citing "proceedings under Section 74" was inadequate without a proximate link to material evidence indicating a risk of revenue loss.
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Concluding that the attachment order was conclusory and lacked any substantive reasoning, the court found that no show-cause notice under Section 74 had been issued, which further weakened the basis for attachment. Consequently, the court ordered the provisional attachment to be quashed and directed the release of the attached bank accounts within 48 hours. Additionally, the court instructed the revenue department to conduct a hearing regarding the blocked credit ledger and issue a reasoned order within two weeks.
Date of Order: 22 September 2025
Parties: M/s Soraza Recycling Private Limited v. Union of India & Ors.
Facts –
- The petitioner’s two bank accounts were provisionally attached on 23.07.2025 through Form DRC-22 under Section 83 CGST Act, citing “proceedings under Section 74.” Additionally, the department blocked ₹1.95 crore in the petitioner’s electronic credit ledger.
- The petitioner contended that the attachment was arbitrary and that no proper proceedings under Section 74 were pending. It argued that the order did not disclose any tangible material or reasoning showing that attachment was necessary to protect revenue.
- Revenue defended the action, stating that attachment was justified during the course of investigation and was necessary to secure potential tax dues.
Issue –
- Whether provisional attachment under Section 83 is valid when the order does not disclose tangible material, specific reasons, or a proper formation of opinion on the necessity to protect revenue.
Order –
- The Court reiterated that provisional attachment is a draconian measure and must be exercised only where the Commissioner forms a reasoned opinion based on tangible material demonstrating the necessity to protect revenue interests.
- The Court relied on the Supreme Court’s ruling in Radha Krishan Industries v. State of H.P. (2021), holding that mere mention of “proceedings under Section 74” is insufficient — there must be a proximate link between material evidence and risk of revenue loss.
- The attachment order was found conclusory, lacking any reasoning or material basis. Moreover, no show-cause notice under Section 74 had been issued, undermining the stated basis of the attachment.
- The provisional attachment was quashed, and revenue authorities were directed to release the attached accounts within 48 hours. As to the blocked credit ledger, the department was directed to grant a hearing and pass a reasoned order within two weeks.
