Provisional Attachment Under Section 83 Is An Extraordinary
Power, Available Only For A Maximum Of One Year: Madras High Court
1.
Introduction
The power of provisional
attachment of bank accounts under Section 83 of the CGST Act, 2017 has
often been a subject of judicial scrutiny. While the provision allows the tax
authorities to safeguard government revenue during investigation, it has also
been criticized for excessive use against taxpayers, causing undue hardship.
The Madras High Court, in its order dated 06 August 2025 in M/s
Noordeen Enterprises vs. Commissioner of GST & CE & Anr. (W.P. No.
27110 of 2022), revisited this delicate balance between protecting revenue
interests and safeguarding taxpayers’ rights.
The Court categorically
held that once a provisional attachment order lapses after the statutory period
of one year, the bank account cannot remain frozen. If the department wishes to
extend or reinitiate such attachment, it must issue a fresh order in accordance
with law. By allowing the writ petition, the Court reaffirmed the principle
that provisional attachment is an extraordinary power and must strictly comply
with statutory timelines.
2. Case
Details at a Glance
- Case Name:
M/s Noordeen Enterprises vs. Commissioner of GST & CE & Anr.
- Court:
High Court of Judicature at Madras
- Coram:
Hon’ble Mr. Justice Krishnan Ramasamy
- Writ Petition No.:
27110 of 2022 with W.M.P. Nos. 26324 & 26326 of 2022
- Date of Judgment:
06 August 2025
- Petitioner:
M/s Noordeen Enterprises, represented by proprietor Mr. Shahul
Hameed Niaz, Chennai.
- Respondents:
1. Commissioner
of GST & Central Excise, Chennai Outer Commissionerate.
2. Axis
Bank Ltd., Chennai.
- Subject of Dispute:
Challenge to the attachment of the petitioner’s bank account by order
dated 13.09.2022 (DIN-20220959XL00007757BF) under Section 83 of the CGST
Act.
3. Factual
Background
The petitioner is a
proprietorship firm engaged in business at Chennai. In the course of GST
proceedings, the Commissioner of GST & CE, exercising powers under Section
83, issued an order of provisional attachment on 02 September 2021
against the petitioner’s bank account maintained with Axis Bank.
Under the law, such an
order is valid only for one year. Accordingly, this first attachment
order automatically expired on 01 September 2022. However, on 13
September 2022, the respondent again issued a fresh attachment order,
purportedly extending the attachment for another year.
By the express wording of
the order, the second attachment was to last until 12 September 2023.
Despite this period having lapsed, the petitioner complained that Axis Bank
continued to freeze the account, preventing it from carrying on normal business
operations.
Aggrieved by this, the
petitioner filed the present writ petition seeking to quash the attachment and
direct the bank to allow operations.
4.
Submissions of the Petitioner
The petitioner’s counsel,
Mr. G. Natarajan, advanced the following arguments before the Court:
1. Expiry
of Attachment: The first attachment dated 02.09.2021
automatically expired on 01.09.2022. The second attachment dated 13.09.2022 was
also valid only for one year, and thus ceased to exist after 12.09.2023.
2. No
Authority Beyond Statutory Period: Section 83 of the CGST
Act does not allow indefinite attachment. Once the one-year period lapses, the
attachment loses legal force. The authorities had not issued any fresh order
beyond 12.09.2023.
3. Bank’s
Unjustified Refusal: Despite expiry of the attachment, Axis
Bank continued to freeze the petitioner’s account, effectively crippling the
business. This action was wholly unjustified and violative of the petitioner’s
rights.
4. Right
to Trade and Business: Continuing a non-existent attachment
amounts to deprivation of the constitutional right to carry on business under Article
19(1)(g) of the Constitution of India.
The petitioner thus
prayed for quashing of the expired attachment order and directions to Axis Bank
to permit normal operation of the account.
5.
Submissions of the Respondents
On behalf of the
respondents, Mr. M. Santhanaraman, Special Panel Counsel, appeared and
submitted as follows:
1. Acknowledgment
of Expiry: The counsel candidly admitted that the attachment
order dated 13.09.2022 had already expired on 12.09.2023.
2. Nothing
Survives in Writ Petition: Since the attachment order itself
had lapsed by efflux of time, nothing survived for adjudication in the writ
petition.
3. Fresh
Consideration by Authorities: If required, the
authorities could initiate fresh proceedings in accordance with law, but as on
date, no operative attachment existed.
6.
Observations of the Court
After hearing both
parties, Justice Krishnan Ramasamy made the following observations:
1. Attachment
Orders are Time-Bound: Section 83 of the CGST Act clearly
prescribes that provisional attachment can subsist only for a period of one
year. Thereafter, unless a fresh order is passed, the attachment
automatically ceases.
2. Expiry
of the Impugned Order: In the present case, the impugned
attachment order dated 13.09.2022 was valid only until 12.09.2023. Admittedly,
this period had already expired. Hence, as on the date of hearing, no
attachment was legally in force.
3. Bank
Cannot Continue Freeze: Despite expiry, Axis Bank continued
to refuse the petitioner’s access to the account. The Court noted that such
conduct was unjustified once the attachment had lapsed. The bank could not act
on an order which no longer survived in law.
4. Need
for Fresh Consideration: The Court held that since the
earlier order had expired, the matter deserved to be remanded to the authority
for fresh consideration, if at all the department wished to proceed further.
7. Final
Judgment
The Court accordingly
passed the following directions:
1. The
impugned attachment order dated 13.09.2022 was set aside, as it had
expired by 12.09.2023.
2. The
matter was remanded back to the first respondent authority for fresh
consideration, if required.
3. The
second respondent bank (Axis Bank) was directed to permit the petitioner to
operate the bank account immediately upon production of this order.
4. The
Court clarified that the present decision was confined only to the validity of
the impugned attachment order and did not preclude the authorities from
initiating fresh proceedings under law, if warranted.
With these directions,
the writ petition was allowed.
8.
Conclusion and Implications
The judgment in Noordeen
Enterprises vs. Commissioner of GST & CE reiterates important
principles relating to provisional attachment under GST law:
1. Time-Bound
Nature of Attachment: Provisional attachment under Section 83
is an extraordinary power, available only for a maximum of one year.
Authorities cannot extend it indefinitely, nor can banks continue to freeze
accounts beyond this period.
2. Relief
for Taxpayers: The decision brings relief to businesses
suffering from prolonged account freezes, often without fresh review by
authorities. It ensures that once the statutory life of an order lapses,
taxpayers regain access to their accounts.
3. Duty
of Banks: Banks must carefully verify whether attachment
orders are still valid. Blindly freezing accounts even after expiry of orders
may expose them to legal consequences.
4. Safeguard
Against Arbitrary Action: By remanding the matter for fresh
consideration, the Court balanced the interests of revenue with protection of
taxpayer rights, ensuring that extraordinary powers are not misused.
5. Practical
Impact: Businesses facing provisional attachments should be
vigilant about the statutory expiry period and assert their rights promptly
once the attachment lapses.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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