Introduction:

In a significant affirmation of statutory protection for taxpayers under the Central Goods and Services Tax (CGST) Act, 2017, the Delhi High Court bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta has held that once an assessee files an appeal under Section 107 of the CGST Act along with the required pre-deposit, there is an automatic stay on the operation of the impugned order that raised the tax demand, thereby precluding any coercive recovery action including attachment of bank accounts. The ruling came in the writ petition M/S MJ Bizcrafts LLP Through Partner Rajender Kumar v. CGST Delhi South Commissionerate & Ors. [W.P.(C) 9061/2025], where the petitioner challenged the provisional attachment of its bank and fixed deposit accounts by the GST department, arguing that it had already preferred an appeal against the impugned demand and made the requisite statutory pre-deposit, hence, coercive measures were impermissible.

Arguments:

The petitioner contended that under Section 107(7) of the CGST Act, upon filing an appeal and paying the 10% of the disputed tax amount as mandated, a statutory stay is triggered and continues until the appellate authority adjudicates the matter. The petitioner’s legal team, led by Senior Advocate Mr. R.P. Singh and others, emphasized that any provisional attachment pending appeal defeats the objective of the law, especially when the pre-deposit condition has been met. They relied on the precedent set in Unity Traders v. Principal Additional Director, DGGI & Anr (2025), where the High Court ruled that attaching bank accounts before the resolution of allegations related to tax evasion unjustly prejudices the taxpayer’s right to carry on business. Another key precedent cited was Radha Krishnan Industries v. State of Himachal Pradesh (2021), where the Supreme Court ruled that once the required 10% pre-deposit is made, recovery of the balance amount must be automatically stayed and any continuing attachment must cease.

Counsel for the GST authorities argued that the attachment was made in line with Section 83 of the CGST Act, which empowers the department to provisionally attach property, including bank accounts, for securing revenue.

Judgement:

However, the Court firmly held that such power cannot override the automatic stay granted under Section 107 once a valid appeal is filed and pre-deposit is complied with. The Bench scrutinized Section 107(7) and the legislative intent behind it, noting that the entire structure of appellate redress under the GST regime is premised on providing a protective mechanism to genuine assessees who challenge disputed demands by complying with the pre-deposit requirement. The judges ruled that permitting simultaneous recovery actions would render the appellate remedy illusory. As such, the Court ordered ICICI Bank to immediately defreeze both the current and fixed deposit accounts of the petitioner. It directed all respondents, including the GST Department, to ensure that no further recovery steps are initiated while the appeal remains pending, provided the pre-deposit stands fulfilled. The writ petition was accordingly disposed of with a reiteration of the taxpayer’s rights to statutory appeal and relief from coercive measures during the pendency of such appeals. Through this ruling, the Court has reinforced legal clarity on the interplay between Section 107 (appeals) and Section 83 (attachment) of the CGST Act, ensuring that taxpayers who exercise their appellate rights are not penalized through premature recovery tactics.