Case Law Details
MH Metal And Steels Vs Principal Commissioner (Madras High Court)
Material Facts: The petitioner challenged an order provisionally attaching its bank account under Section 83 of the Central Goods and Services Tax Act, 2017. The petitioner submitted that the impugned order referred to proceedings under Sections 74 and 122 of the CGST Act, although the show cause notice issued by the State GST authorities was issued only later on 02.04.2026. The petitioner relied upon the Madras High Court’s judgment dated 07.02.2025 in Kesar Jewellers vs. The Additional Director General, Directorate General of Goods and Services Tax Intelligence and another, W.P. No. 20967 of 2024.
Procedural History
The provisional attachment order was issued under Section 83 of the CGST Act. The petitioner challenged the attachment by filing the present writ petition before the Madras High Court.
Legal Issues
- Whether the provisional attachment of the petitioner’s bank account under Section 83 of the CGST Act satisfied the statutory requirements.
- Whether the impugned order disclosed the basis for formation of the Commissioner’s opinion that attachment was necessary to protect the interest of Government revenue.
Relevant Statutory Provisions
- Section 70 of the CGST Act, 2017
- Section 83 of the CGST Act, 2017
- Sections 74 and 122 of the CGST Act, 2017
- Rule 159(5) of the CGST Rules
Parties’ Submissions
Petitioner’s Submissions
The petitioner contended that the provisional attachment order referred to proceedings under Sections 74 and 122 even though such proceedings had not been initiated when the attachment order was issued. It relied upon the decision in Kesar Jewellers in support of its challenge.
Respondents’ Submissions
The respondents submitted that Rule 159(5) of the CGST Rules provided an alternative remedy. They argued that the petitioner could file objections to the attachment in Form GST DRC-22A, upon which the Commissioner was empowered to release the attached property through an order in Form GST DRC-23.
Observations
The Court examined Section 83 and observed that two prerequisites must exist before a provisional attachment order can be issued:
1. Initiation of proceedings under Chapters XII, XIV or XV.
2. Formation of the Commissioner’s opinion that provisional attachment is necessary for protecting the interest of Government revenue.
The Court observed that the provisional attachment had been preceded by summons issued under Section 70, which falls under Chapter XIV. Therefore, the first prerequisite stood satisfied.
The Court also noted that the impugned order incorrectly referred to proceedings under Sections 74 and 122, although those proceedings had not been initiated on the date of the attachment order.
With regard to the second prerequisite, the Court observed that the impugned order merely stated that the attachment was made “in order to protect the interest of revenue and in exercise of the powers conferred under Section 83 of the Act.” The Court held that this was only a mechanical reproduction of the language of Section 83.
Referring to its earlier decision in Kesar Jewellers, the Court noted that an order under Section 83 should disclose tangible material leading to the formation of the opinion that provisional attachment is necessary to protect revenue.
Findings: The Court found that the impugned order did not disclose any basis for the formation of the opinion that provisional attachment was necessary to protect the interest of Government revenue. In the absence of any rational basis for the decision, the Court held that the order was unsustainable.
Final Ruling: The Madras High Court quashed the provisional attachment order. It left it open to the first and second respondents to take action in accordance with law. The writ petition was disposed of, the connected miscellaneous petition was closed, and no order as to costs was made.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order of provisional attachment of the petitioner’s bank account under Section 83 of the CGST Act, 2017 is challenged in this writ petition.
2. Ms. Pooja Jain, learned Junior Standing Counsel, accepts notice on behalf of respondents 1 & 2.
3. Adverting to the impugned order of provisional attachment, learned counsel for the petitioner submits that said order refers to proceedings having been initiated against the petitioner under Sections 74 & 122, whereas even the show cause notice from the State GST authorities was issued later on 02.04.2026. She relies on the judgment of this Court dated 07.02.2025 in Kesar Jewellers vs. The Additional Director General, Directorate General of Goods and Services Tax Intelligence and another, W.P.No.20967 of 2024 (Kesar Jewellers).
4. In response, learned junior standing counsel for the first and second respondents refers to sub-rule (5) of Rule 159 of the CGST Rules to contend that an alternative remedy is available to the petitioner. If aggrieved, she submits that it is open to the petitioner to file an objection in relation to the attachment in Form GST DRC — 22A. If filed, she also points out that the commissioner is empowered to release the property from attachment by an order in Form GST DRC — 23.
5. Section 83 reads as under:
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).”
As is evident from the text of sub-section (1), there are two pre-requisites for making an order of provisional attachment under Section 83. They are: (1) the initiation of proceedings under chapters XII, XIV or XV; and (2) the formation of an opinion by the commissioner that it is necessary to make a provisional attachment of a property belonging to the taxable person or a person specified in sub-section 1(A) of Section 122 for the purpose of protecting the interest of Government revenue.
6. In the case at hand, the issuance of the provisional attachment order was preceded by summons under Section 70. Section 70 falls within chapter XIV. Therefore, the first pre-requisite stands satisfied. In this regard, it should, however, be noticed that the provisional attachment order erroneously draws reference to proceedings under Sections 74 & 122, whereas such proceedings had not been initiated as on the date of issuance.
7. Turning to the second pre-requisite, the order uses the expression “in order to protect the interest of revenue and in exercise of the powers conferred under Section 83 of the Act”. This, however, is merely a mechanical recitation of the language of Section 83 and does not satisfy the requirements for issuing an order of provisional attachment. In Kesar Jewellers, this Court examined Section 83 and concluded that the order should disclose tangible material leading to the formation of the opinion that provisional attachment is necessary for the purpose of protecting revenue interest.
8. The impugned order does not indicate any basis for the formation of the opinion that provisional attachment is necessary to protect revenue interest. In the absence of any rational basis for the decision, the order is unsustainable. Consequently, the order of provisional attachment is quashed by leaving it open to the first and second respondents to take action in accordance with law.
9. The writ petition is disposed of on the above terms. Consequently, connected miscellaneous petition is closed. There shall be no order as to costs.
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