Second Provisional Attachment Notice Lacking Fresh Reasons Is Arbitrary: Allahabad High Court

The Division Bench of Justices Shekhar B. Saraf and Manjive Shukla observed that “the department cannot be allowed simpliciter to issue a second notice, and thereafter, third and fourth and continue with the provisional attachment for four to five years without giving any fresh reason for the said provisional attachment. If the same was allowed, Sub-section 2 of Section 83 of the Central Goods and Service Tax Act, 2017 would become otiose and have no relevance whatsoever.”

Section 83(1) of the Central Goods and Service Tax Act, 2017 allows the Commissioner to provisionally attach any property, including a bank account, if they believe it is necessary to protect government revenue during the pendency of proceedings under sections 62, 63, 64, 67, 73, or 74. This attachment must be done through a written order.

Section 83(2) of the Central Goods and Service Tax Act, 2017 imposes a time limit on the provisional attachment. It specifies that the provisional attachment will automatically cease to have effect after the expiry of one year from the date of the order.

Facts of the case:

The bank account of the assessee/petitioner was provisionally attached through an order dated 16^th February, 2023. After the expiry of the one-year period, the assessee filed a writ petition seeking the removal of the attachment. Following the filing of the petition, the attachment was removed. However, just ten days after the order, a new notice was issued on 16^th May, 2024, provisionally attaching the account for the second time without offering any fresh reasons for the attachment.

The assessee has filed the writ petition before the Allahabad High Court challenging the provisional attachment order dated 16^th May, 2024 passed by the respondent under Section 83 of the Central Goods and Service Tax Act, 2017.

Observations of the High Court:

The bench stated that “Surprisingly, ten days after passing the order by the coordinate Bench of this Court, a verbatim notice has been issued on May 16, 2024 without providing for any fresh reason for provisional attachment of the account for the second time. This notice even does not mention the fact that this attachment is being done for the second time. Furthermore, no specific reasons have been provided for requirement of the Department for fresh provisional attachment of the bank account.”

The bench after looking into Sub-section 2 of Section 83 of the Central Goods and Service Tax Act, 2017, opined that such provisional attachment shall cease to have effect after the expiry of a period of one year. The department cannot be allowed simpliciter to issue a second notice, and thereafter, third and fourth and continue with the provisional attachment for four to five years without giving any fresh reason for the said provisional attachment. If the same was allowed, Sub-section 2 of Section 83 of the Act would become otiose and have no relevance whatsoever.

“The legislature never intended this provision to be read in a casual manner, as the provision for provisional attachment is a drastic measure that the Department takes even before assessing the liability of the petitioner. This provision is in the nature of preventive detention in criminal cases where one detains a person without any offence having been committed,” added the bench.

The bench pointed out that it becomes extremely necessary for the Department to justify the reasons for such a provisional attachment and without such justification being provided by the Department, by way of specific reasons, such provisional attachment would be illegal and arbitrary.

In view of the above, the bench allowed the petition.

Counsel for Petitioner/ Assessee: Srijan Pandey and Swetashwa Agarwal

Counsel for Respondent/ Department: Parv Agarwal

Case Title: M/S R D Enterprises v. Union Of India And 3 Others

Case Number: WRIT TAX No. - 978 of 2024