Chhattisgarh High Court quashes provisional attachment order issued without reasons by GST Department

The Hon'ble High Court of Chhattisgarh in M/s R.B. Drillers And Construction vs. State Of Chhattisgarh, Directorate Of Jal Jeevan Mission [WPT No. 141 of 2025] dated September 24, 2025 held that the GST Department cannot issue provisional attachment orders without mentioning the relevant provisions and grounds for such action. The Court held that prior to issuance of any notice for provisional attachment, the authorities must assign reasons as to why such attachment is necessary for protecting the interest of government revenue. The Court quashed the impugned notice which directed blocking of payments due to the Petitioner without stating any reasons, observing that such action amounts to exercise of unguided discretion and arbitrary power against citizens and their legitimate business activities.

FACTS OF THE CASE

The Petitioner, M/s R.B. Drillers and Construction, was engaged in various works including drilling of borewell and installation of pipes pursuant to work orders issued by Respondent No. 2, the Directorate of Jal Jeevan Mission. An amount for the work completed was yet to be paid by Respondent No. 2 to the Petitioner.

On December 24, 2024, Respondent No. 1, the GST Department, conducted a raid at the office of the Petitioner and prepared certain documents. Subsequently, proceedings under Section 74 of Chapter 15 of the Central Goods and Services Tax Act, 2017 were initiated against the Petitioner. Respondent No. 1 had already attached the bank account of the Petitioner.

Despite the attachment of the bank account, Respondent No. 1 issued an impugned order dated March 21, 2025 (Annexure-P/1), directing Respondent No. 2 not to pay any amount to the Petitioner for the tender work done by it in the Jal Jeevan Mission. The impugned notice did not mention under which provision it was issued and what was the reason to attach the amount payable by Respondent No. 2 to the Petitioner. No reason was assigned by Respondent No. 1 as to why provisional attachment of amount payable to the Petitioner by Respondent No. 2 was necessary.

The learned counsel for the State/Respondents submitted in their reply that proceedings under Section 74 of Chapter 15 of the Act, 2017 had been initiated. It was stated that primarily it had been found that the Petitioner had evaded about Rs. 2 crores, and subsequently it was also revealed that the Petitioner had evaded about Rs. 13 crores GST.

The Petitioner was aggrieved by the impugned order dated March 21, 2025, which blocked payments due for work already completed without mentioning any provision or reason for such attachment, and therefore filed the present writ petition seeking to quash the impugned order and direct disbursement of payments for work done.

ISSUE

Whether the GST authorities can issue a provisional attachment order blocking payments due to an assessee without mentioning the relevant legal provisions, without stating reasons for such attachment, and without forming an opinion that such attachment is necessary for protecting the interest of government revenue?

HELD BY THE COURT

The Hon'ble High Court of Chhattisgarh in WPT No. 141 of 2025 held that:

1. The Court observed that it is a sorry state of affairs that the GST Department issued notices, but neither mentioned relevant provisions nor showed any ground to do so. The Court noted that perusal of the impugned notice (Annexure-P/1) does not show that it has been issued under which provision and what is the reason to attach amount payable by Respondent No. 2 to the Petitioner.

2. The Court relied upon the judgment of the Hon'ble Supreme Court in the case of Radha Krishan Industries, which dealt with the provisions of Section 83 of the Act, 2017. The Court observed that the Hon'ble Supreme Court has held that the exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assessee can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorise Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue.

3. The Court held that before the Commissioner can levy a provisional attachment, there must be a formation of "the opinion" and that it is necessary "so to do" for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. The attachment is provisional and contemplated during the pendency of proceedings at a stage which is anterior to the finalisation of an assessment or the raising of a demand. Conscious of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, the legislature conditioned the exercise of the power by employing specific statutory language.

4. The Court opined that the statute indicates first, the necessity of the formation of opinion by the Commissioner; second, the formation of opinion before ordering a provisional attachment; third, the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourth, the issuance of an order in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power.

5. When the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory preconditions by the Commissioner.

6. The Court held that by utilising the expression "it is necessary so to do", the legislature has evinced an intent that an attachment is authorised not merely because it is expedient to do so (or profitable or practicable for the Revenue to do so) but because it is necessary to do so in order to protect interest of the government revenue. Necessity postulates that the interest of the Revenue can be protected only by a provisional attachment without which the interest of the Revenue would stand defeated. Necessity postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallised. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules.

7. Having considered the law laid down by the Hon'ble Apex Court, the Court examined the facts of the instant case and found that prior to issuance of the impugned notice, no reason has been assigned by Respondent No. 1 as to why provisional attachment of amount payable to the Petitioner by Respondent No. 2 is necessary. The aforesaid impugned notice was found to be against the observation made by the Hon'ble Apex Court. Consequently, the Court allowed the writ petition and quashed the impugned notice dated March 21, 2025 (Annexure-P/1). However, liberty was left with Respondent No. 1 to take steps in accordance with law for stoppage of payment of amount in question payable to the Petitioner by Respondent No. 2, if so advised.

RELEVANT SECTIONS

Section 74 of Chapter 15 of the Central Goods and Services Tax Act, 2017 - "Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts"

Section 83 of the Central Goods and Services Tax Act, 2017 - "Provisional attachment to protect revenue in certain cases" - This section provides that where during the pendency of any proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.

PARI MATERIA / CASES REFERRED

1. Radha Krishan Industries vs. State of Himachal Pradesh & Others [2021 (4) TMI 837 - SUPREME COURT] / (2021) 6 SCC 771

The Hon'ble Supreme Court held that the power to levy a provisional attachment under Section 83 of the GST Act is draconian in nature. Before the Commissioner can levy a provisional attachment, there must be a formation of opinion and that it is necessary so to do for the purpose of protecting the interest of the government revenue. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of the statutory ingredients must be strictly applied before a provisional attachment on the property of an assessee can be levied.

The Commissioner must be alive to the fact that such provisions are not intended to authorise Commissioners to make pre-emptive strikes on the property of the assessee merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. Necessity postulates a more stringent requirement than a mere expediency, meaning that the interest of the Revenue can be protected only by a provisional attachment without which the interest of the Revenue would stand defeated.

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