OD Bank A/c Cannot be Attached for GST Dues: Madras HC allows Appeal Filing with 50% Deposit in Two Instalments [Read Order]

The Madras High Court has held that an Overdraft (OD) bank account cannot be attached for recovery of GST ( Goods and Services Tax) dues, as the funds in such an account belong to the bank and not the assessee.

M/s. Ratna Cafe filed a petition before the high court challenging an Order-in-Original passed under Section 73 of the CGST/TNGST Acts for the period 2019-20 and the attachment of its bank account by the GST department.

The demand order confirmed CGST, SGST, IGST, interest and penalties based on mismatch between GSTR-1 outward supplies and GSTR-3B tax liability.

The petitioner’s counsel Adv. Raghav Rajeev submitted that it became aware of the order only after the department attached its bank account. Therefore, they sought liberty to file an appeal despite expiry of the limitation period.

The bank clarified that the account attached by the department was an OD account and the balances were bank funds extended as credit. It submitted that they are not liable for attachment.

Justice Krishnan Ramasamy, accepting submission of the bank, held that an OD account cannot be attached for GST recovery.

At the same time, considering that the appeal period had expired, it directed the petitioner to file an appeal after depositing 50% of disputed tax in two instalments within 2 months.

While lifting the attachment on the OD account, the Court also allowed the GST department to proceed against other movable or immovable assets offered as security.

However, the same is subject to the bank’s rights and the outcome of the appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates