Madras High Court Quashes Bank Account Attachment Under GST For Lack Of Tangible Material

The Madras High Court on 8 July held that a provisional attachment of a taxpayer's bank accounts under Section 83 of the Central Goods and Services Tax (CGST) Act cannot be sustained merely by reproducing the statutory language without disclosing any tangible material or reasons to justify the action.

Section 83 of the CGST Act empowers the Commissioner to provisionally attach a taxpayer's property, including bank accounts, to protect government revenue during the pendency of specified proceedings under the Act.

Justice Senthilkumar Ramamoorthy allowed the writ petition filed by MH Metal and Steels, challenging the provisional attachment of its bank accounts ordered on 26 February 2025. He held:

“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.”

The petitioner contended that the attachment order incorrectly recorded that proceedings under Sections 74 and 122 of the CGST Act had already been initiated, despite the State GST authorities issuing the show cause notice only on 2 April 2026. It also relied on the Madras High Court's decision in Kesar Jewellers v. Additional Director General, DGGI, which held that an order under Section 83 must disclose tangible material demonstrating the necessity of provisional attachment.

Opposing the petition, the GST Department argued that an alternative remedy was available under Rule 159(5) of the CGST Rules. Under this provision, a person aggrieved by a provisional attachment may file objections in Form GST DRC-22A seeking release of the attached property.

While examining the validity of the attachment order, the Court observed that Section 83 requires satisfaction of two conditions before exercising the power of provisional attachment. First, proceedings under Chapters XII, XIV or XV of the CGST Act must have been initiated. Second, the Commissioner must form an opinion that attachment is necessary to protect government revenue.

The Bench held that the first requirement was satisfied since summons had been issued under Section 70 of the CGST Act, which falls under Chapter XIV. However, it noted that the attachment order incorrectly referred to proceedings under Sections 74 and 122, even though such proceedings had not commenced when the order was passed.

On the second requirement, it found that the order failed to disclose any factual basis for the Commissioner's satisfaction. It observed that merely stating that the attachment was necessary “to protect the interest of revenue” amounted to a mechanical reproduction of the statutory language.

Referring to its decision in Kesar Jewellers, the Bench reiterated that an order under Section 83 must contain reasons and indicate the tangible material on the basis of which the Commissioner forms the opinion that provisional attachment is necessary. It observed:

“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.”

Accordingly, the High Court quashed the provisional attachment order, while clarifying that the GST authorities would remain at liberty to initiate fresh action in accordance with law, if warranted.

For Petitioner: Ms. Vipula DS, Advocate

For Respondent: Ms. Pooja Jain, Junior Standing Counsel