Provisional Attachment Under GST: Madras HC Strikes Down Arbitrary Bank Account Freeze for Want of Tangible Material

Prefatory Note

In Kesar Jewellers v. Additional Director General[i], the Madras High Court delivered a significant judgment on the limitations and procedural safeguards governing the exercise of provisional attachment under s. 83 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’).

The case questioned whether such attachment can be sustained in the absence of specific reasons and tangible material justifying the invocation of this draconian power. The judgment reinforces the primacy of procedural fairness and transparency in GST enforcement, underscoring that technical constraints, such as limitations in uploading detailed reasons in Form DRC-22 or the non-filing of objections by the taxpayer in Form DRC-23, cannot override the substantive rights of taxpayers.

Facts of the Case

• Kesar Jewellers (‘petitioner’), a proprietary concern engaged in the trading of gold bullion and jewellery since 2008, was registered under the CGST Act and had been filing GST returns and paying taxes regularly.

• Investigations were initiated by the Directorate General of GST Intelligence (DGGI), which issued summons under s.70 of the CGST Act in June 2023. Pursuant to the summons, two separate searches were conducted on 30.06.2023 and 18.01.2024 at the business premises of the petitioner.

• In the course of these searches, documents, gold bars, cash, computers, and mobile phones were seized. Following the second search, the petitioner was arrested on 19.01.2024 and was granted bail by the Sessions Court, Chennai on 13.02.2024.

• On the same date as the grant of bail, the DGGI provisionally attached the petitioner’s multiple bank accounts by issuing Form GST DRC-22, invoking powers under s.83 of the CGST Act. The petitioner challenged this order on the ground that it lacked any disclosure of tangible material or reasons to justify such a drastic measure.

• It was further contended that the petitioner was not afforded a real opportunity to object to the attachment, and the representations made by him through letters were not considered solely because they were not submitted in the prescribed Form DRC-23.

• The respondent, in turn, justified the attachment by citing allegations of clandestine removal of bullion, fictitious suppliers, and fraudulent availment of ITC, and claimed that limitations in the online portal prevented disclosure of reasons in the attachment order.

Decision of the High Court

• The Madras High Court allowed the writ petition. It set aside the order of provisional attachment, holding that the impugned action suffered from a manifest lack of jurisdiction and procedural impropriety.

• The Court found that the attachment was not preceded by the formation of a valid opinion based on tangible material, as mandated by s.83 of the CGST Act. The High Court, relying extensively on the principles laid down in Radha Krishan Industries v. State of H.P.[ii] emphasized that the power under s.83 must not be exercised mechanically or pre-emptively, and must instead be supported by cogent material indicating that attachment is necessary to protect the interest of revenue.

• The Court further noted that s.83 confers a draconian power that may only be invoked where it is ’necessary’ to protect the interest of revenue. This necessitates a clear and reasoned opinion by the Commissioner, based on tangible material, demonstrating that provisional attachment is the only means to safeguard revenue. The impugned order, however, contained only a mechanical reproduction of statutory language and made no reference to specific facts, materials, or risk of revenue loss, thereby failing to satisfy the jurisdictional prerequisites for exercising such power.

• The Court rejected the respondent’s explanation that the GST portal’s limitations or format constraints in Form DRC-22 justified non-disclosure of reasons. It held that technological limitations cannot dilute statutory safeguards and natural justice. If the digital form did not permit full disclosure, the authority ought to have communicated reasons through alternate legally permissible modes under s.169 of the CGST Act, such as postal delivery.

• Further, the Court censured the respondent’s disregard of the petitioner’s objections, which were submitted via multiple letters. The Court held that dismissing these on the ground that they were not in Form DRC-23 amounted to an overly technical and unjustified denial of the petitioner’s right to be heard. It emphasized that mere procedural informality cannot override the duty to consider objections on their merits, particularly when the right to file such objections under r. 159(5) of the CGST Rules, 2017 is a vital post-decisional safeguard.

• Accordingly, the High Court quashed the impugned attachment order and disposed of the writ petition in favour of the assessee.

Our Analysis

This judgment is a compelling reaffirmation of the principle that extraordinary powers under fiscal statutes must be exercised with restraint and due adherence to procedural safeguards. The Court has, with considerable clarity, reiterated that s.83 of the CGST Act is not a tool of pre-emptive enforcement, but a narrowly tailored power to be invoked only when truly necessary to protect government revenue, and not merely when investigations are pending.

One of the most salient aspects of the ruling is its emphasis on the requirement of tangible material, which is not a matter of administrative discretion but a jurisdictional fact; a condition precedent to the exercise of power. The decision thus affirms that an order passed without proof of this jurisdictional fact is null and void, regardless of the administrative convenience or digital form constraints cited by the department.

Equally significant is the Court’s rejection of form-over-substance justifications. By refusing to treat the petitioner’s objections as invalid simply because they were not in the prescribed form, the Court has emphasized that natural justice cannot be sacrificed at the altar of procedural rigidity. The ruling thus protects taxpayers against arbitrary and opaque actions by revenue authorities and upholds the fundamental constitutional values of fairness and accountability in fiscal administration.

The judgment also carries systemic implications, cautioning authorities against using provisional attachment as a coercive or default mechanism and reiterating that such a measure must be the last resort. It demands that authorities move beyond template-based orders and engage in a reasoned, fact-sensitive decision-making process, thereby raising the bar for lawful enforcement under the GST framework.

This ruling rebalances the scales in favour of reasoned administrative conduct, ensures procedural integrity, and upholds the rights of registered persons to meaningful participation and fair hearing, even amidst serious investigations.

End Notes

[i] 2025 SCC OnLine Mad 2351 dated 07.02.2025.

[ii] (2021) 6 SCC 771.

Authored by Sanyam Aggarwal, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.