Provisional Attachment of Bank Account Under CGST Act, 2017- Current Scenario

Yash Aggarwal, Advocate

Introduction:

The Goods and Services Tax (GST) is one of the most significant tax reforms in India’s economic history. Introduced on July 1, 2017, GST replaced a complex web of indirect taxes previously levied by the central and state governments, including VAT, service tax, excise duty, and more. By unifying the country into a single, streamlined market, GST aimed to simplify tax compliance, reduce the cascading effect of taxes, and promote ease of doing business.

Section 83 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the provisional attachment of property to protect the interests of revenue during the pendency of certain proceedings under the Act. It empowers tax authorities to provisionally attach a taxpayer’s property — including bank accounts — when they believe it is necessary to safeguard government revenue. While this provision serves as a powerful tool for preventing tax evasion, it also raises concerns regarding taxpayer rights, procedural fairness, and potential misuse. This article explores the scope, implications, judicial interpretations, and recent developments related to Section 83, shedding light on its critical role in GST enforcement.

Understanding the Statutory Provisions

Section 83. Provisional Attachment to protect revenue in certain cases.

(1)¹ Where, after the initiation of proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interests 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 scope of Section 83(1) of the CGST Act, 2017 has been widened, so as to provide for provisional attachment of property in case of any action being initiated by authorities pertaining to assessment, inspection, search, seizure & arrest and demand & recovery under Chapter XII, Chapter XIV or Chapter XV viz. from section 59 to 64, Section 67 to 72 and section 73 to 84 respectively. Whereas earlier, the attachment could only be made during pendency of any proceedings under specified sections viz., Section 62 or 63 or 64 or 67 or 73 or 74 of the CGST Act, 2017

Earlier the provisions listed were more of those undertaken to check tax evasions (inspection, search, seizure and adjudication of SCN), the amended provision provides for such coercive measure even in case of regular proceedings in case of regular taxpayers like scrutiny of returns, provisional assessment, access to business premises, etc. Further, such power can now be exercised even at the stage of summon.

Meaning of ‘is of the opinion’

Hon’ble High Court of Madras in the matter of M/s Mutharaman & Co. Vs. DGGI and others [W.P. 32 of 2021] stated that the reference to ‘opinion’ in Section 83, cannot be mere lip service and cannot be satisfied by the officer by merely stating that, in his opinion this is a case where the interests of the revenue are to be protected. Further, the power conferred upon an authority under section 83 is substantial and with great power comes great responsibility. The authority concerned must justify the invocation of the coercive and intrusive recovery proceedings against the assessee, even prior to determination of liability and passing of an assessment order.

Hon’ble Supreme Court in landmark case of M/s Radha Krishan Industries Vs State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (S.C.)] observed that the formation of an opinion by the Commissioner u/s 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue.

Manner and Mode of Attachment

The manner and mode of attachment to be carried out under Section 83 of the CGST Act has been prescribed under Rule 159 of the CGST Rules. Rule 159 of the CGST Rules reads:

“Rule 159. Provisional attachment of property. –

Renewal of Provisional Attachment After One year is Invalid

If we talk about statutory conferment of power, there is 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. Relevant judicial pronouncements are as follows:

1. Additional Director General, DGGI Kochi v. Ali K. (2025) 27 Centax 209 (Ker.)

The Hon’ble High Court of Kerela while stating that fresh attachment order cannot be issued observed that Although Section 83 of the CGST Act was amended by the Finance Act, 2021, sub-section (2) remained untouched, thereby reflecting the legislative intent to restrict the validity of a provisional attachment order strictly to a period of one year. Consequently, upon the expiry of this period, the attachment automatically ceases to have effect and lapses into insignificance. The Hon’ble Court also observed that it is a settled principle of taxation law that no intendment can be imported into a taxing statute beyond its explicit language.

2. Kesari Nandan Mobile v. Office of Assistant Commissioner of State Tax (2025) 33 CENTAX 224 (S.C.)

The Hon’ble Apex Court in this case formulated a question of law that whether the CGST Act or any other law in force permits the issuance of a second provisional attachment order under sub-section (1) of Section 83 of the CGST Act after the initial provisional attachment order issued thereunder ceases, by reason of efflux of a year from the date of its issuance, in terms of sub-section (2) thereof.

The Hon’ble Apex Court held that conceding power to revenue to issue a fresh provisional order of attachment after initial order lapsed by operation of law or to renew same would render text of sub-section (2) of section 83 otiose. Therefore, the Hon’ble Court held that renewal of provisional attachment has no statutory backing and is therefore not permissible.

3. Smt. Lalita v. Union of India and Anr. (Writ Tax No. 4082 of 2025) The Hon’ble High Court of Allahabad in the light of the ratio laid down by Hon’ble Supreme Court in above-mentioned case quashed the Impugned Order which attached the bank account of the petitioner for the fourth time consecutively.

Provisional Attachment Ceases to Continue, Once Appeal is Filed Against Order in Original.

1. Radha Krishan Industries v. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (S.C.)]

The Hon’ble Apex Court while dealing with various issues related to provisional attachment also observed that once an Order in Original is passed against Show cause Notice issued u/s 74, the proceedings are deemed to be completed under section 74. Also, in this case the petitioner had filed an appeal against Order in Original after making mandatory pre-deposit. Therefore, the Apex Court was of the opinion that provisional attachment must cease to subsist since the proceedings under section 74 are completed.

2. M/s MJ Bizcrafts LLP v. Central Goods and Services Tax, Delhi South Commissionerate (2025) 32 Centax 451 (Del.)

The Hon’ble High Court of Delhi while de-freezing the bank account of the petitioner held that once an appeal is filed against Order in Original after making the mandatory 10% Pre-deposit, the provisional attachment order is not sustainable.

Bank Account of a Taxable Person can Only be Attached

1. Sakshi Bahl v. The Principal Additional Director general [W.P. (C) 3986/2023]

The Hon’ble High Court of Delhi held that power under section 83 of the CGST Act, to provisionally attach the assets or bank accounts is limited to attaching the bank accounts and assets of taxable persons and persons specified under section 122(1A) of the CGST Act. It is not open for the revenue department to attach the bank accounts of other persons on the mere assumption that the funds were owned by any taxable person.

CONCLUSION

The power to provisionally attach bank accounts under Section 83 of the CGST Act, 2017 is a drastic remedy that must be exercised with circumspection. Judicial forums have consistently emphasized that such action cannot be based on mere suspicion or mechanical reasoning. In Radha Krishan Industries v. State of Himachal Pradesh (2021) 6 SCC 771, the Supreme Court held that attachment requires tangible material indicating a real risk to government revenue. Similarly, the Gujarat High Court in Valerius Industries v. Union of India (2019) 70 GSTR 227 (Guj) clarified that the authority’s opinion must be supported by cogent reasons and remain open to judicial scrutiny.

While the legislature has provided this tool to secure legitimate tax dues, its use must be guided by the principles of fairness, proportionality, and necessity. Routine or arbitrary exercise of such powers not only fails the test of legality but also disrupts the taxpayer’s right to conduct business. The judicial approach makes it clear that provisional attachment is an extraordinary safeguard, to be invoked sparingly and only in exceptional circumstances.

Notes:

¹ Substituted vide the Finance Act, 2021 dated 28.03.2021 w.e.f. 01.01.2022