No Renewal of Provisional Attachment under GST after one year – Supreme Court

1. Background

The hon’ble Supreme Court has, in KESARI NANDAN MOBILE Versus OFFICE OF ASSISTANT COMMISSIONER OF STATE TAX (2), ENFORCEMENT DIVISION – 5 - 2025 (8) TMI 992 - Supreme Court, delivered an important ruling on provisional attachment under Section 83 of the Central Goods & Services Tax Act (‘CGST Act’), and in the process also clarified several related legal concepts.

The issue involved in the present case was whether GST authorities can issue a second or renewed provisional attachment order under Section 83(1) of the CGST Act, after the earlier order has lapsed after one-year expiration as per Section 83(2) of the CGST Act. The provision is reproduced below for the providing the necessary context to the discussion.

Section 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).

The GST authorities have, in several cases, renewed or issued a fresh provisional attachment order after expiry of the one year period specified in sub-section (2), referred above.

2. Draconian nature of power

The Supreme Court has, relying upon its earlier decision in M/s Radha Krishan Industries Versus State of Himachal Pradesh & Ors. - 2021 (4) TMI 837 - Supreme Court, reiterated its stand that the power of provisional attachment is a draconian one. The court has also noticed that the legislature was conscious of the draconian nature of the power and hence conditioned the exercise of power by employing specific statutory language.

“17.   The decision of this Court in M/s Radha Krishan Industries Versus State of Himachal Pradesh & Ors. - 2021 (4) TMI 837 - Supreme Court, was cited by the appellant before the Gujarat High Court. At the outset, adverting to the observations made in such decision is considered apposite. There, this Court considered the ambit of section 83 and while underscoring the draconian nature of the provision, observed thus:

49.    Now in this backdrop, it becomes necessary to emphasise that before the Commissioner can levy a provisional attachment, there must be a formation of “the opinion” and that it is necessary “so to do” for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency of the proceedings under the stipulated statutory provisions noticed earlier. An attachment which is contemplated in Section 83 is, in other words, at a stage which is anterior to the finalisation of an assessment or the raising of a demand. Conscious as the legislature was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, it conditioned the exercise of the power by employing specific statutory language which conditions the exercise of the power. The language of the statute indicates first, the necessity of the formation of opinion by the Commissioner; second, the formation of opinion before ordering a provisional attachment; third the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourth, the issuance of an order in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory preconditions by the Commissioner. While conditioning the exercise of the power on the formation of an opinion by the Commissioner that “for the purpose of protecting the interest of the government revenue, it is necessary so to do”, it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. (emphasis ours).

The Hon’ble Supreme Court reaffirmed that the power of provisional attachment under Section 83 of the CGST Act is severe in nature. Referring to its earlier ruling in Radha Krishan Industries (supra), the Court emphasized that this power should not rely on arbitrary discretion. It must be supported by a clear opinion that is directly related to protecting government revenue.

3. Ut res magis valeat quam pereat

Having noticed the draconian nature of the power, the Court referred to the age-old principle that interpretation should not lead to any provision to nullity.

30. That apart, having regard to the draconian nature of power conferred on the revenue by sub-section (1) of Section 83 of the CGST Act to levy a provisional attachment, the terms of the entire section have to be construed in a manner so that sub-section (2) of Section 83 is not effectively reduced to a dead letter. We are reminded of the maxim ut res magis valeat quam pereat. It is an interpretive doctrine that a legal text, specially a statute, should be interpreted in a way that gives the document force rather than makes it fail. Conceding power to the revenue to issue a fresh provisional order of attachment after the initial 30. That apart, having regard to the draconian nature of power conferred on the revenue by sub-section (1) of Section 83 of the CGST Act to levy a provisional attachment, the terms of the entire section have to be construed in a manner so that sub-section (2) of Section 83 is not effectively reduced to a dead letter. We are reminded of the maxim ut res magis valeat quam pereat. It is an interpretive doctrine that a legal text, specially a statute, should be interpreted in a way that gives the document force rather than makes it fail. Conceding power to the revenue to issue a fresh provisional order of attachment after the initial order has lapsed by operation of law or to renew the same would render the text of sub-section (2) of Section 83 otiose and accepting the reason assigned by the Gujarat High Court would permit the revenue to exercise a power which is not the statutory intendment. We, therefore, see no reason to read Section 83 in a manner to confer any additional power over and above the draconian power conferred by sub-section (1) and upon lapse as ordained by sub-section (2).

The Court also pointed to sub-section (2) of Section 83, stating that once a provisional attachment expires after one year, it cannot be revived or extended. Interpreting it differently would make sub-section (2) meaningless and render it a 'dead letter.' Following the principle that laws should be read to give effect to their provisions, the Court observed that statutes must be understood in a way that preserves their intent. The Court clearly held that no additional power over and above the draconian power conferred by sub-section (1) can be given to the revenue.

4. What cannot be done directly cannot be done indirectly

The Apex Court thereafter proceeded to refer to another settled legal principle that what cannot be done directly cannot be done indirectly.

“31. Moving further, fresh issuance of a provisional attachment order premised on substantially the same grounds as the earlier one would be in disregard to the safeguard provided in sub-section (2). The age old principle, that an act which cannot be done directly cannot be done indirectly, would apply in its entirety. To permit any other interpretation would result in an abuse of law and due process. If we were to accept the reason assigned by the Gujarat High Court in the impugned order that the law does not place any embargo, it would stand to reason that the authority - not stopping after the 1st renewal order ceases to have effect in terms of sub-section (2) of Section 83 - might continue to issue repeated renewal orders. Repeated or continuous issuance of a provisional attachment order under the garb of ‘renewal’ could lead to a serious anomaly. With no change in circumstances, repeated orders in the garb of renewal would be contrary to the plain reading of subsection (2) and akin to filling old wine in a new bottle.”

The Court also ruled that reissuing provisional attachment on the same grounds goes against the protection in Section 83(2) of the CGST Act. What cannot be done directly also cannot be done indirectly. Allowing repeated renewals of the order would lead to misuse of power. The court has held that with no change in circumstances, repeated orders in the grab of renewal would be contrary to the plain reading of sub-section (2) and akin to filling old wine in a new bottle.

5. Provisional attachment is a pre-emptive measure and not a recovery measure

Thereafter, the Supreme Court Proceeded to established that provisional attachment is a pre-emptive measure to protect the interest of the government revenue it cannot function as a recovery measure for which the statue has provided other provisions.

32. Besides, a reading of the statute in its entirety would reveal that the provisional attachment is a pre-emptive measure to protect the interests of government revenue. It cannot function as a recovery measure; for that, the statue has other provisions.

6. One year period is enough for authorities to conclude investigation

The Supreme Court thereafter said that a period of one year as ordained by the legislature is enough for the revenue authorities to conclude its investigation. If not, the legislature could have provided for a renewal on an extended. As in the Excise Act and Customs Actsub-section 2 of section 83 does not provide for any exception to this rule.

32……………….Certainly, a period of one year, as ordained by the legislature, is enough for the revenue authorities to conclude its investigation; if not, the legislature could have provided for a renewal or an extended period as in the Excise Act and the Customs Act. Sub-section (2) of Section 83 does not provide for any exception to the rule. Any explanation given by the respondent for issuing a renewal would be in the teeth of the established procedure.

Once the inquiry culminates into a final demand, recourse must be had to the provisions under the section which provide for recovery of the assessed tax, penalty, interest, etc. This also provides opportunity to the assessee to challenge the same before the appropriate authority. Short-circuiting the procedure by pursuing a provisional attachment as a means to recover the tax due, as a natural consequence, would frustrate the intent and purpose of the statute.”

The legislature intentionally limited its duration to one year on the basis that one year is enough to complete the investigation. If it had intended for renewal or extension, as seen in the Excise and Customs Acts, it would have stated this clearly. The Court observed that repeatedly using provisional attachment as a recovery method would undermine legislative intent and amount to misuse of power.

7. Absence of renewal/extension provision

According to Section 83(2) of the CGST Act, a provisional attachment order expires after a year and cannot be renewed or extended. Any attempt by authorities to reissue or renew a lapsed attachment is illegal and an abuse of their statutory authority.

“19.  A plain reading of sub-section (2) of Section 83 could leave none in doubt that any order of provisional attachment, issued under subsection (1), would cease to have any effect after a period of a year. The provision, as it stands, does not require employment of other interpretation rules beyond a literal interpretation to understand it. The appellant, thus, seeks a declaration that there being no provision for renewal, any such exercise is a nullity in law.

29.   Not to speak of a statutory conferment of power, there is a complete absence of any executive instruction consistent with the legislative policy and intendment of the CGST Act authorizing renewal of a lapsed provisional attachment order. Viewed from either angle, issuance of the provisional attachment orders by the respondent under challenge before the Gujarat High Court appears to be indefensible as rightly contended by Mr. Dave.

39.   The appellant's argument that the Parliament, being cognizant of other taxing statutes, deliberately chose not to incorporate an extension provision in the section, also carries considerable merit. The procedure of provisional attachment is not alien to tax jurisprudence. Such preemptive measure can be found in several statutes, including the Customs Act and the Excise Act, and the Income Tax Act, 1961 as well. Ergo, when the statue does provide for an extension, the authority thereunder is free to do so, subject to such restrictions as may be imposed. Conversely, when a statute does not provide for an extension, renewal, re-issuance, revival — whatever be the nomenclature — the executive cannot overreach the statute to do so.”

The Court ruled that Section 83(2) of the CGST Act is clear and direct. A provisional attachment automatically ends after one year, and there is no legal basis for renewal or extension. The Court pointed out that there is not only a complete lack of legislative approval, but also no executive instruction that supports such renewal in line with the CGST Act. The Parliament, recognizing similar provisions in the Excise Act, Customs Act, and Income Tax Act that explicitly allow extensions, intentionally left out such a process in GST law. Therefore, any effort by the authorities to renew, re-issue, or revive a lapsed attachment would go beyond their power and would not be justifiable, representing a misuse of their authority.

8. Powers of Statutory Authorities are limited by law

The Court thereafter commented upon powers of statutory authorities, in the following terms: -

“22.  THE STATE OF ODISHA & ANR. Versus SATISH KUMAR ISHWARDAS GAJBHIYE & ORS- 2021 (10) TMI 1473 - Supreme Court is not a decision relatable to powers of taxation but to holding of a preliminary inquiry, prior to initiation of disciplinary proceedings. However, we refer to this decision because it has approvingly quoted the dictum of the High Court at Calcutta of ancient vintage in Maniruddin Bepari Versus The Chairman Of The Municipal - 1935 (4) TMI 15 - CALCUTTA HIGH COURT. We prefer to quote the relevant passage from this Court’s decision hereunder:

12. ... A statutory authority can do only such acts which are permissible under the statute and the authority cannot be permitted to do something which is not provided in law. This principle was formulated by the Calcutta High Court nine decades ago in Maniruddin Bepari Versus The Chairman Of The Municipal - 1935 (4) TMI 15 - CALCUTTA HIGH COURT, in which it was inter alia held:

 “It is a fundamental principle of law that a natural person has the capacity to do all lawful things unless his capacity has been curtailed by some rule of law. It is equally a fundamental principle that in the case of a statutory corporation it is just the other way. The corporation has no power to do anything unless those powers are conferred on it by the statute which creates it.”   (emphasis ours)

The Court reaffirmed the principle that while natural persons can do all the acts which are not clearly restricted, a statutory authority can only act within the limits of the powers given by law.

9. Executive actions to supplement the law and not to supplant it

The Court has recognised that the inherent executive power could be exercised to supplement the statutory law and not to supplant it. The said observation is as follows: -

26.   We understand the law to be clear that not all laws are provided by statutory enactments and law making could extend to orders passed by the executive in relation to matters where the Parliament/a State Legislature has the authority to enact laws, and the Parliament or a State Legislature, as the case may be, has even not enacted any such law; but, importantly, the inherent executive power cannot be exercised, in respect of any matter covered by statutory law/rules, in a manner inconsistent therewith. While so, law is also well-settled that the inherent executive power could be exercised to supplement the statutory law, but not supplant it.

28.   Bearing these principles in mind, we now proceed to answer the question noted in paragraph 14 above based on our understanding that for an authority to exercise a power, it must either be empowered by the statute or authorized by executive instructions; if the power is not conferred by statute, executive instructions or any other instrument which is law within the meaning of Article 13, it cannot be justified by arguing that the exercised power is neither prohibited by the statute nor by executive instructions.

29.    Not to speak of a statutory conferment of power, there is a complete absence of any executive instruction consistent with the legislative policy and intendment of the CGST Act authorizing renewal of a lapsed provisional attachment order. Viewed from either angle, issuance of the provisional attachment orders by the respondent under challenge before the Gujarat High Court appears to be indefensible as rightly contended by Mr. Dave.”

It pointed out that in some cases, executive power can support legislation if the legislature is able to act but has not yet taken action. However, this power cannot replace, contradict, or go beyond statutory provisions. Therefore, any executive action must find its legitimacy in the statute itself, valid executive instructions, or another recognized source of law under Article 13 of the Constitution. In this case, the Court observed that there was no statutory authority or executive instruction allowing the renewal of a lapsed provisional attachment under Section 83. Consequently, the revenue’s attempt to justify the re-issuance of attachment orders based on the argument that the law does not prohibit it was rejected. The Court deemed the action as beyond jurisdiction and legally indefensible.

10. Discussions of the GST Council

The Court has analysed the discussions of GST Council of that time as follows: -

“37. Prior to ending our discussion, it would be necessary to notice that the challenge of the present nature has been recognised not just by the constitutional courts but has been sought to be addressed by the GST Council too in the agenda framed for its 53rd meeting…………..

The Council while being conscious of the difficulties, has recommended necessary amendments to align the extant procedure under Rule 159 of the CGST Rules with the law. What is notable is the consciousness of the Council too that a provisional attachment order would have no life after a year. Nonetheless, it stands to reason that till such time the amendments are carried out, actions to provisionally attach properties of taxpayers must be implemented in strict compliance with the statute.”

The Court also analysed the agenda of 53rd GST Council meeting and pointed out that even the GST Council has recognized that the provisional attachments automatically lapse after one year.

11. The Court held:

The Court finally ruled as follows: -

“41. For the foregoing reasons, the question in paragraph 14 is answered in the negative. We hold that the respondent could not have issued the impugned provisional attachment orders dated 13th November, 2024 and 18th December, 2024 upon the previous ones having ceased to have any effect by operation of law after a year of its issuance. The bank accounts attached by the respondent shall stand de-freezed and be made operable forthwith upon production of a copy of this judgment before the banks where the appellant maintains its accounts.

43. Before parting, it is necessary to observe that since the investigation by the respondent is still underway, this order shall not preclude it from conducting or taking further steps in accordance with law, and the present order shall be restricted to the issue agitated herein.”

The Hon’ble Court held that:

• renewing expired provisional attachments is not sustainable, declaring the disputed orders invalid;
• ordered the immediate defreezing of the appellant's bank accounts;
• it stated that this ruling is specific to this issue and does not prevent the authorities from continuing their investigation or taking legal actions afterward.

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Mr. Kamal Aggarwal.

Co-Author : Ms. Aditi Vishnoi