GST Update – Provisional Attachment of Cash Credit Account Not Valid

Case Title:
Skytech Rolling Mill Pvt. Ltd. v. Joint Commissioner of State Tax, Nodal, Raigad Division & Ors.
Writ Petition No. 1928 of 2025 | Judgment Date: 10.06.2025 | Bombay High Court

Background of the case

Skytech Rolling Mill Pvt. Ltd. filed a petition before the High Court of Bombay against the provisional attachment of the cash credit account of the company in the banks of ICICI Bank. This attachment was done by the GST department under Section 83(1) of the Maharashtra Goods and Services Tax (MGST) Act, 2017, with an aim to secure revenue during the continuance of the investigation.
The department intended to secure its dues by provisionally freezing the cash credit account of the petitioner, which it assumed to be the "property" of the taxpayer.

Core Legal Issue:

The central legal question that the court examined was:
“Can a cash credit account be treated as the ‘property’ of the assessee and be attached under Section 83(1)?”
Petitioner’s Stand:
The petitioner argued that a cash credit account is not an asset but a loan facility—essentially a borrowing arrangement provided by the bank. Since the funds belong to the bank and not the account holder, such an account cannot be classified as “property” under Section 83(1) and should not be subject to provisional attachment.
In support of this argument, the petitioner cited the following judicial precedents:
Manish Scrap Traders v. Principal Commissioner [(2022) 141 taxmann.com 153 (Guj.)]

J.L. Enterprises v. Assistant Commissioner [(2023) 152 taxmann.com 278 (Cal.)]

Sargam Foods Pvt. Ltd. v. State of Maharashtra [WP No. 4313 of 2008]

These rulings have consistently held that loan or credit facilities do not form part of the taxpayer’s attachable property and hence cannot be treated as recoverable revenue.

Findings of the Bombay High Court:

After reviewing the submissions and legal precedents, the Bombay High Court held:

• A cash credit account is a liability, not an asset. It represents funds borrowed from the bank, and therefore, the balance in the account does not constitute the taxpayer’s property.
• While Section 83(1) allows provisional attachment of “property including bank accounts,” this does not apply to loan or credit facilities, as the taxpayer does not have actual ownership over such funds.
• The term “bank account” in the Act refers to accounts where the taxpayer has deposited their own money, not to borrowing limits or credit lines extended by a bank.

As a result, the Court concluded that the attachment of a cash credit account is not legally valid, as it mischaracterizes the nature of the account.

Court’s Decision & Directions:

The Bombay High Court declared the provisional attachment illegal and in violation of natural justice. It emphasized that the taxpayer was wrongly denied access to a working capital facility critical for its business operations.
The Court directed the GST department to:
Withdraw the attachment within 24 hours of the judgment date.

Ensure that Section 83 is applied correctly in the future and that only legally attachable assets are considered as "property."

Conclusion:

This judgment establishes a vital legal principle: loan facilities such as cash credit accounts are not assets and cannot be attached under Section 83 of the GST law. The ruling protects businesses from unjust freezing of borrowed funds and reinforces the need for lawful and fair application of provisional attachment provisions by tax authorities.