Provisional attachment in GST ceases after one year and re-issuance is ultra vires on same grounds

The Hon’ble Supreme Court in the case of KESARI NANDAN MOBILE Versus OFFICE OF ASSISTANT COMMISSIONER OF STATE TAX (2), ENFORCEMENT DIVISION – 5 - 2025 (8) TMI 992 - Supreme Court held that a provisional attachment under Section 83CGST Act, 2017 ceases by operation of law after one year and cannot be renewed or reissued on substantially the same grounds without disposing representations, absent express statutory authority.

Facts:

Kesari Nandan Mobile (“the Petitioner”) is a registered GST taxpayer, whose bank accounts were provisionally attached by the Respondent under Section 83(1) of the CGST Act, 2017(“the CGST Act”) to protect revenue. The initial attachment order was valid for one year as per Section 83(2), which mandates automatic lapse after expiry. Following the lapse, the Respondent, Office of Assistant Commissioner of State Tax (2), Enforcement Division – 5 (“the Respondent”), issued a second provisional attachment order on substantially the same grounds as the first.

The Petitioner submitted representations under Rule 159(5) challenging the attachment, which were not disposed of before issuance of the renewed attachment. The Petitioner contended that the second attachment was ultra vires, lacked statutory backing, and violated due process.

The Respondent contended that executive instructions and procedural mechanisms under Rule 159 justified the second attachment.

The Petitioner approached the Supreme Court through Civil Appeal challenging the legality of the re-issuance and seeking relief from the continuation of provisional encumbrance.

Issue:

Whether the Respondent can lawfully issue a second provisional attachment order after the expiry of the one-year period under Section 83(2)CGST Act, and whether re-issuance on substantially the same grounds without disposing representations under Rule 159(5) is permissible?

Held:

The Hon’ble Supreme Court in KESARI NANDAN MOBILE Versus OFFICE OF ASSISTANT COMMISSIONER OF STATE TAX (2), ENFORCEMENT DIVISION – 5 - 2025 (8) TMI 992 - Supreme Courtheld as under:

• Observed that, Section 83(2) of the Act provides that provisional attachments cease by operation of law after one year; no statutory provision allows extension, renewal, or re-issuance.
• Noted that, the nature of Section 83(1) requires strict compliance with statutory limits; permitting re-issuance would render Section 83(2) ineffective.
• Observed that, executive powers or instructions cannot override statutory text; absence of any instruction authorising renewal does not justify a second attachment.
• Noted that, issuing a fresh attachment on substantially identical grounds as a lapsed order would indirectly circumvent Section 83(2) and constitute abuse of power.
• Observed that, failure to dispose of the Petitioner’s representation under Rule 159(5) before re-issuance further violates statutory procedure and due process.
• Noted that, comparison with other statutes (Excise Act - Section 11DDA, Customs Act - Section 28BA) shows deliberate legislative choice under the CGST Act, 2017 not to allow renewal.
• Observed that, pending alignment of Rule 159 with Section 83(2), authorities must enforce the one-year lapse strictly and that procedural misalignment does not justify continued encumbrance.
• Held that, the Respondent cannot lawfully issue a second or renewed provisional attachment once the first order has lapsed and issuance on same grounds or without disposing representations is ultra vires and liable to be set aside.

Our Comments:

This judgment underscores the principle laid down in M/s Radha Krishan Industries Versus State of Himachal Pradesh & Ors. - 2021 (4) TMI 837 - Supreme Court that the formation of satisfaction for provisional attachment must strictly comply with statutory preconditions and must have a proximate, live nexus to the protection of government revenue. The Court deliberately departs from the approach adopted by the Gujarat High Court in Shrimati Priti Versus State of Gujarat - 2011 (3) TMI 1800 - GUJARAT HIGH COURT, which allowed re-issuance of provisional attachment orders even in the absence of an express statutory provision. By doing so, the Supreme Court clarifies that any attempt to circumvent the one-year statutory limitation under Section 83(2) is impermissible, reaffirming that executive convenience or procedural practice cannot override clear legislative intent. The decision also underscores the need for authorities to abide by procedural safeguards under Rule 159(5), aligning with principles of natural justice.

Relevant Provisions:

Section 83, CGST Act, 2017

“83. Provisional attachment to protect revenue in certain cases

(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub- section (1).”

Rule 159, CGST Rules, 2017

“159. Provisional attachment of property.

(1) Where the Commissioner decides to attach any property, including bank account in accordance with the provisions of section 83, he shall pass an order in FORM GST DRC-22 to that effect mentioning therein, the details of property which is attached.

(2) The Commissioner shall send a copy of the order of attachment in FORM GST DRC-22 to the concerned Revenue Authority or Transport Authority or any such Authority to place encumbrance on the said movable or immovable property, which shall be removed only on the written instructions from the Commissioner to that effect.

(3) Where the property attached is of perishable or hazardous nature, and if the person, whose property has been attached pays an amount equivalent to the market price of such property or the amount that is or may become payable by such person, whichever is lower, then such property shall be released forthwith, by an order in FORM GST DRC-23, on proof of payment. (4) Where such person fails to pay the amount referred to in sub-rule

(3) in respect of the said property of perishable or hazardous nature, the Commissioner may dispose of such property and the amount realized thereby shall be adjusted against the tax, interest, penalty, fee or any other amount payable such person.”

 (Author can be reached at [email protected])