CGST | Renewal of Lapsed Provisional Attachment Orders is Without Legal Sanction: Supreme Court Restrains Repeated Freeze of Bank Accounts

“Sub-section (2) of Section 83 Cannot Be Reduced to a Dead Letter by Allowing Fresh Orders on the Same Grounds”— Supreme Court of India decisively ruled that a second provisional attachment order cannot be issued after the first has lapsed under Section 83(2) of the CGST Act, 2017. The Court declared that the CGST Act does not empower revenue authorities to ‘renew’ attachment orders once they expire by operation of law after one year.

A bench comprising Justices Dipankar Datta and Augustine George Masih set aside fresh attachment orders issued by the Assistant Commissioner of State Tax, Enforcement Division-5, which sought to freeze the bank accounts of the appellant beyond the statutory one-year limit.

“Draconian Powers Must Be Exercised Within Statutory Limits, Not Repeatedly Without Fresh Grounds”

The appellant, Kesari Nandan Mobile, had challenged two orders of provisional attachment dated 13 November 2024 and 18 December 2024, which the tax department claimed were mere ‘renewals’ of earlier orders dated 17 October 2023 and 26 October 2023. As per Section 83(2) of the CGST Act, every provisional attachment order automatically ceases to have effect after one year. The appellant argued that the re-issuance of such orders on the same satisfaction notes was illegal and amounted to misuse of authority.

The Supreme Court agreed and observed: “To permit the issuance of a fresh provisional attachment order after the initial order has lapsed by operation of law, would render the text of sub-section (2) of Section 83 otiose.”

The Court held that allowing such ‘renewals’ or re-attachments on the same grounds would violate the principle that a “statutory authority can only do what the statute permits, not what it does not prohibit.”

“Provisional Attachment Cannot Be Used as a Recovery Tool—It is a Pre-emptive Measure”

Rejecting the respondent’s contention that the re-attachment was necessary to protect government revenue in view of alleged tax fraud, the Court reiterated that Section 83 is not a tool for recovery. It is intended only as a temporary and protective measure, not a means of coercion.

The Bench cautioned:

“Short-circuiting the procedure by pursuing a provisional attachment as a means to recover the tax due… would frustrate the intent and purpose of the statute.”

“Repeated or continuous issuance of a provisional attachment order under the garb of ‘renewal’ could lead to a serious anomaly... akin to filling old wine in a new bottle.”

The Court further relied on the principle “ut res magis valeat quam pereat”, affirming that interpretation must give effect to every provision of the law rather than rendering it meaningless.

“Absence of Statutory or Executive Power to Renew—Administrative Practice Cannot Supplant Legislative Intent”

The revenue department had claimed that since the CGST Act does not expressly prohibit the issuance of fresh attachment orders, it should be permitted. The Court categorically rejected this argument, holding:

“Not to speak of statutory conferment of power, there is a complete absence of any executive instruction… authorizing renewal of a lapsed provisional attachment order.”

The Court reinforced the rule that executive instructions can only supplement a statute, not override or contradict it.

“Kerala High Court’s View Approved—Gujarat High Court’s Reasoning Rejected”

The Gujarat High Court had upheld the re-attachment orders, holding that there was “no legal embargo” on issuing fresh orders post-lapse. The Supreme Court overturned this view and instead approved the contrary reasoning of the Kerala High Court in Ali K. v. Additional Director General, which held that:

“Re-issuing an order of attachment in respect of the same property after lapse is not permitted by the legislature.”

The Court also found support in its own prior interim order in RHC Global Exports Pvt. Ltd., where a similar bank account attachment was set aside due to the lapse of the one-year period.

“Even the GST Council Recognises the Issue—Rules Must Be Amended to Align with the Law”

Notably, the Supreme Court referred to minutes of the 53rd GST Council Meeting, which acknowledged the confusion caused by Rule 159(2) of the CGST Rules. The Council had proposed an amendment to clarify that:

“The provisional attachment shall cease to have effect… on expiry of one year from the date of issuance of the order.”

The Court remarked:

“Till such time the amendments are carried out, actions to provisionally attach properties of taxpayers must be implemented in strict compliance with the statute.”

Attachment Orders Set Aside, Bank Accounts to be De-Frozen Immediately

The Supreme Court held that the orders dated 13 November 2024 and 18 December 2024 were without authority of law. Consequently, it directed:

“The bank accounts attached by the respondent shall stand de-freezed and be made operable forthwith upon production of a copy of this judgment before the banks.”

Importantly, the Court clarified that this decision does not restrain the department from continuing its investigation under law, but only disallows misuse of Section 83 for repeated attachments.

Date of Decision: 14 August 2025