Renewal or Second of Provisional Attachment u/s 83 CGST Act Not Permissible Beyond One Year: Supreme Court [Read Order]

The Supreme Court of India ruled that renewal or issuance of a second provisional attachment order under Section 83 of the CGST Act, 2017 is not permissible beyond one year, and that such attachment cannot be used as a tool for recovery.

Kesari Nandan Mobile, the appellant, challenged the provisional attachment orders issued by the tax department on 13 November 2024 and 18 December 2024. Earlier orders dated 17 October 2023 and 26 October 2023 had already lapsed after one year by operation of Section 83(2) of the CGST Act.

The appellant argued that the law clearly provides that provisional attachment ceases to have effect after one year and there is no provision for renewal, the department could not have re-issued fresh orders on the same grounds.

The Gujarat High Court had dismissed the appellant’s writ petition holding that there was no bar on issuing fresh orders after expiry of earlier ones if required to safeguard revenue. Dissatisfied, the appellant brought the matter before the Supreme Court.

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The appellant’s counsel argued that unlike the Excise Act and Customs Act, which specifically allow extensions of attachment, the CGST Act deliberately omitted such a provision. Reliance was also placed on the Kerala High Court’s judgment in Ali K., which held that renewal of attachment beyond one year was impermissible.

On the other hand, the revenue counsel argued that the appellant was involved in large-scale tax fraud and that renewal of the attachment was necessary to protect the government’s revenue. They argued that the CGST Act does not expressly prohibit re-issuance and the department’s action was valid.

The bench comprising Justices Dipankar Datta and Augustine George Masih observed that the power of provisional attachment under Section 83(1) is draconian in nature and must be strictly construed. The court explained that Section 83(2) clearly states that every such attachment ceases after one year, and any interpretation allowing renewal would render this safeguard meaningless.

It pointed out that permitting repeated re-issuance would amount to indirectly doing what the law directly prohibits, leading to potential abuse. The court further observed that provisional attachment is meant only as a protective measure and not as a recovery tool.

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The court held that the orders dated 13 November 2024 and 18 December 2024 were without authority of law because the earlier attachments had lapsed. It directed that the appellant’s bank accounts be de-frozen immediately.

The court clarified that the revenue is not prevented from continuing its investigation or taking further steps in accordance with law. The civil appeal was allowed.

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