Provisional bank attachment replaced with fixed deposits u/s83, securing alleged tax dues while adjudication continues

HC disposed of the writ petition concerning provisional attachment of petitioner's bank accounts under s.83, accepting petitioner's without-prejudice proposal as fair and proportionate. Petitioner offered two fixed deposit receipts aggregating to approximately Rs.14 crores for provisional attachment, covering the alleged tax liability of Rs.13.69 crores for the relevant period. HC directed petitioner to furnish these fixed deposits for attachment, holding that such security adequately safeguards the revenue while recognizing that the impugned order is only a provisional attachment with a statutory life of one year. Respondent was left free to complete adjudication proceedings in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the provisional attachment of a bank account under Section 83 of the MGST Act, 2017 can be substituted by attachment of specified fixed deposit receipts of equivalent or higher value.

1.2 Whether, in the context of a subsisting provisional attachment under Section 83 of the MGST Act, 2017, the adjudication proceedings pursuant to existing and proposed show cause notices should be directed to be completed within a time-bound schedule.

1.3 Whether the life and operation of a provisional attachment under Section 83 of the MGST Act, 2017 can extend beyond the statutorily prescribed maximum period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Substitution of provisional attachment on bank account with attachment of fixed deposit receipts

Interpretation and reasoning:

The Court noted that the petitioner's bank account had been provisionally attached under Section 83 of the MGST Act, 2017, affecting day-to-day business operations, including payment of salaries and other expenses. The petitioner, without prejudice, voluntarily offered two fixed deposit receipts aggregating to Rs. 14,99,99,999/- for provisional attachment in lieu of the attached bank account.

The alleged dues had been provisionally quantified by the authorities at Rs. 13,69,20,610/-. The Court considered that attachment of fixed deposits of almost Rs. 14 crores would sufficiently secure the provisionally quantified liability and would be proportionate to the objective of safeguarding revenue interests. The Court found the petitioner's offer to be "fair and reasonable" and in line with what the respondents sought to achieve through the provisional attachment mechanism.

Conclusions:

(a) The petitioner was directed to offer the two specified fixed deposit receipts for provisional attachment, consistent with its offer and prior written communication.

(b) The respondents were directed to attach these fixed deposit receipts in lieu of the petitioner's provisionally attached bank account.

(c) Upon such attachment of the fixed deposits, the attachment on the bank account was directed to cease, and the petitioner was to be allowed to operate and use the bank account for its activities.

Issue 2 - Time-bound completion of adjudication proceedings in the context of provisional attachment

Legal framework (as discussed):

The Court referred to the nature of a provisional attachment under Section 83 of the MGST Act, 2017, noting that such orders are provisional and subject to adjudication, and that they operate only for a limited period as prescribed in sub-section (2).

Interpretation and reasoning:

The petitioner expressed willingness not to press the challenge to the impugned provisional attachment order if adjudication of the show cause notice already issued, and six proposed show cause notices, was directed to be completed within a fixed time frame. The Court observed that the respondents could have no valid objection to completing adjudication expeditiously, particularly since the provisional attachment was only an interim protective measure pending such adjudication.

The Court considered that an early adjudication would enable the petitioner either to demonstrate that continued attachment was unwarranted or to avail of appellate remedies against the adjudication orders. The timeline imposed was meant to ensure that the provisional attachment regime does not indefinitely constrain the petitioner without a final determination.

Conclusions:

(a) The adjudication pursuant to the show cause notice dated 29 September 2025, and six further show cause notices proposed to be issued by the respondents, was directed to be completed "as expeditiously as possible" and in any event before 30 May 2026.

(b) The petitioner agreed, and the Court recorded, that if six further show cause notices are issued, the petitioner shall file its responses within four weeks of receipt, without seeking any extension of time.

(c) The Court clarified that all contentions of all parties on merits of the adjudication are kept open.

Issue 3 - Duration and effect of provisional attachment under Section 83(2) of the MGST Act, 2017

Legal framework (as discussed):

The Court referred to Section 83(2) of the MGST Act, 2017, noting that the life of a provisional attachment order is statutorily limited to one year.

Interpretation and reasoning:

While accepting the substitution of security and fixing a schedule for adjudication, the Court emphasised that the provisional attachment must remain subject to the maximum duration permitted by statute. The Court underscored that a provisional attachment, including that of the offered fixed deposit receipts, cannot be continued beyond the statutorily prescribed period and must ultimately abide by the outcome of adjudication and the statutory framework.

Conclusions:

(a) It was directed that the provisional attachment of the fixed deposit receipts will abide by the adjudication orders and/or the statutory time period.

(b) The Court expressly held that under no circumstances will the provisional attachment exceed the statutorily prescribed maximum period under Section 83(2) of the MGST Act, 2017.

(c) The Court clarified that its order does not preclude the respondents from taking any other action in accordance with law, if the situation so demands.

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