Facts of the Case:

In this case, the Petitioner was issued a show cause notice to which a reply was filed. However, the Petitioner did not attend the scheduled personal hearings, resulting in the passing of an Order-in-Original confirming tax, interest, and penalty. The Petitioner failed to file a statutory appeal within the prescribed limitation period under Section 107 of the CGST Act. Subsequently, recovery proceedings were initiated, including attachment of the Petitioner’s bank account. The Petitioner contended that the attached account was merely an overdraft (OD) account and therefore not liable for attachment, as the funds therein belonged to the bank. The Petitioner also sought liberty before the High Court to file a statutory appeal despite expiry of limitation, in order to contest the matter on merits.

Issue:

Whether attachment of an overdraft (OD) account by GST authorities is legally permissible.  Whether such relief can be granted subject to conditions such as deposit of disputed tax.

Held That:

The Court, taking note of its consistent approach in similar matters, exercised its writ jurisdiction to grant the Petitioner one more opportunity to avail the statutory remedy of appeal, despite expiry of the limitation period. The Court held that such indulgence can be granted to ensure that the matter is decided on merits rather than being shut out on technical grounds. However, to balance the interests of revenue, the Court imposed a condition that the Petitioner shall deposit 50% of the disputed tax as confirmed in the impugned order.

It was directed that such deposit be made in two instalments within two months, and upon compliance, the Appellate Authority shall entertain and decide the appeal on merits without raising the issue of limitation. The Court further clarified that if the Petitioner fails to comply with this condition, the appeal shall stand dismissed and the Department would be at liberty to proceed with recovery as per law.

On the issue of attachment, the Court held that the overdraft (OD) account cannot be attached, as the amounts in such account are essentially funds of the bank and not the Petitioner. Therefore, such attachment was impermissible in law. However, the Court clarified that the Department is not precluded from initiating recovery proceedings against other assets of the Petitioner, including secured assets, subject to the rights of the bank and outcome of the appeal.

Accordingly, the writ petition was disposed of by granting conditional liberty to file appeal, setting aside the effect of limitation upon compliance, and declaring that attachment of the OD account was not sustainable in law.

Case Name: Ratna Cafe v. Assistant Commissioner dated 02.02.2026

To read the complete judgement 2026 Taxo.online 368