Attachment of Overdraft Account for GST Recovery Impermissible as No Actual Funds Available | HC

Case Details: Ratna Cafe vs. Assistant Commissioner - [2026] 184 taxmann.com 555 (Madras)

Judiciary and Counsel Details

• C. Saravanan, J.
• Raghav Rajeev for the Petitioner.
• Sai Sruajan Tayi, Sr. Standing Counsel & Mrs Ananda Gomathy for the Respondent.

Facts of the Case

The petitioner was issued a show cause notice (SCN) under the CGST Act and the Tamil Nadu GST Act, to which a reply was filed but no personal hearing was attended. Thereafter, an Order-in-Original was passed confirming tax, interest, and penalty. The petitioner did not file a statutory appeal within the prescribed limitation period, and subsequent recovery proceedings were initiated. It was submitted that the bank account attached was merely an overdraft (OD) account and therefore not liable for attachment under recovery provisions. The petitioner further sought liberty to file a statutory appeal despite expiry of limitation. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that where a statutory appeal was not filed within the limitation period, the assessee could be granted liberty to file such appeal within 30 days, subject to deposit of 50% of the disputed tax in two instalments within two months, upon which the appellate authority under Section 107 of the CGST Act shall adjudicate the appeal on merits without reference to limitation. It was held that attachment of an overdraft account under recovery proceedings initiated under Section 79 of the CGST Act was impermissible, as such account does not represent actual funds of the assessee. It was held that recovery could be pursued against available secured assets, subject to the bank’s rights and the outcome of the appeal. Accordingly, the petitioner was granted relief with permission for a conditional appeal.