Bombay High Court: GST authorities cannot freeze a payment aggregator's bank accounts on mere suspicion

The Bombay High Court has quashed provisional attachment orders that froze the bank accounts of a Reserve Bank-licensed payment aggregator, holding that the power under Section 83 of the Central Goods and Services Tax Act, 2017 was exercised without the material the law requires. The GST intelligence wing had attached the company's accounts, including an escrow account holding merchant settlement funds, suspecting it of helping an online money-gaming syndicate route funds to evade GST. Justices M. S. Karnik and Sandesh D. Patil found the attachment orders contained only vague statements about an ongoing investigation and did not show any GST liability of the company itself, nor any material indicating it was a 'taxable person' under the Act.

Applying the Supreme Court's test in Radha Krishan Industries v. State of Himachal Pradesh, the Court held that Section 83 is a draconian power to be strictly construed: the Commissioner must form an opinion based on tangible material showing a live link between the need to attach and the risk to government revenue, not merely suspicion or administrative convenience. The Court also noted that escrow funds belonging to third-party merchants are held in trust and are not the taxpayer's own property, so they could not be attached on this footing. The writ petition was allowed and the attachment orders set aside, with no order as to costs.