1. Introduction

Attachment and freezing of bank accounts, along with seizure of cash, are among the most stringent enforcement actions used by tax authorities under the Income Tax Act, 1961 and the CGST Act, 2017. Typically invoked during search, survey, or recovery proceedings, these measures aim to protect government revenue but can significantly disrupt business operations and liquidity.

Authorities may freeze accounts to prevent fund diversion, attach balances for recovery, or seize unaccounted cash. In cases of overlapping jurisdiction, such as between GST and Income Tax authorities, seized cash may be transferred, leading to complex issues like duplication of proceedings and jurisdictional conflicts.

Courts, including the Supreme Court and various High Courts, have consistently held that these powers must be exercised strictly in accordance with law, ensuring procedural safeguards and natural justice. Arbitrary or excessive actions have often been set aside.

In this context, an effective legal defence is essential—not only to challenge the validity of such actions but also to secure timely relief and restore financial stability.

2. Attachment of Bank Accounts: A Drastic Power, Not Routine Tool

Under GST law, provisional attachment of bank accounts is governed by Section 83, which allows authorities to attach property—including bank accounts—only during the pendency of specified proceedings and only if necessary to protect revenue. 

As per Section 83 of the CGST Act, 2017 the followings grounds must exist for resorting to provisional attachment of property:

(i) There must be pendency of a proceeding against a taxable person under section 62, 63, 64, 67, 73 or 74 of the CGST Act;

(ii) The Commissioner must have formed the opinion that provisional attachment of the property belonging to the taxable person is necessary for the purpose of protecting the interest of the Government revenue.

2.1 Attachment is permissible only when proceedings are actually pending, not merely during inquiry or investigation

The Supreme Court in the case of M/s Radha Krishan Industries Versus State of Himachal Pradesh & Ors. (Civil Appeal No 1155 of 2021 Arising out of SLP(C) No 1688 of 2021) held that Section 83 of the CGST Act, 2017 provides for provisional attachment of property for the purpose of protecting the interest of revenue during the pendency of any proceeding under section 62 or section 63 or section 64 or section 67 or section 73 or section 74 of the GST Act. 

• Section 62: Assessment of non-filers of returns
• Section 63: Assessment of unregistered persons
• Section 64: Summary assessment in certain special cases
• Section 67: Proceedings related to inspection, search and seizure
• Section 73: Demand raised in cases other than those involving fraud or willful misrepresentation of facts
• Section 74: Demand raised in cases involving fraud or willful misrepresentation of facts

In any other case, there is no provision to attach the property of such taxpayer. Accordingly, for proceedings closed, Section 79 of the CGST Act (recovery of taxes) gets attracted for attachment of property by the GST officer. It applies for all those cases where the proceedings are complete and the taxpayer is declared as a defaulter. Hence, Section 83 (provisional attachment of the property) applies only in limited cases when certain proceedings are pending before the tax authorities as listed above. 

2.2 Commissioner Undertaking Provisional Attachment Must Exercise Due Diligence, Record Reasons, and Avoid Mechanical Action

The Supreme Court in Radha Krishan Industries case (supra) has observed that for forming an opinion under section 83, it is important that Commissioner must exercise due diligence and duly consider as well as carefully examine all the facts of the case, including the nature of offence, amount of revenue involved, established nature of business and extent of investment in capital assets and reasons to believe that the taxable person, against whom the proceedings referred in section 83 are pending, may dispose of or remove the property, if not attached provisionally.

2.2.1 Conditions For Attachment Under GST & Rights Of Person  Whose Property Is Attached

The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled.

1. As per  Rule 159(1) of the CGST Rules, 2017, in case, the Commissioner forms an opinion to attach any property, including bank account, of the taxable person in terms of section 83, he should duly record on file the basis, on which he has formed such an opinion. He should, thereafter, pass an order in FORM GST DRC-22 with proper Document Identification Number (DIN) mentioning therein the details of property being attached.
2. As per  Rule 159(2) of the CGST Rules, 2017, a copy of the order of attachment should be sent to the concerned Revenue Authority or Transport Authority or Bank or the relevant Authority to place encumbrance on the said movable or immovable property. The property, thus attached, shall be removed only on the written instructions from the Commissioner.
3. Rule 159(5) of the CGST Rules contemplates two safeguards to the person whose property is attached:

• Firstly, it permits such a person to submit objections to the order of attachment on the ground that the property was or is not liable for attachment. 
• Secondly, Rule 159(5) posits an opportunity of being heard. Both requirements are cumulative. [Para 64 of Supreme court Judgement in the case of M/s Radha Krishan Industries Versus State of Himachal Pradesh & Ors. (Civil Appeal No 1155 of 2021 Arising out of SLP(C) No 1688 of 2021)]

4. Even in cases where objection is not filed within the time prescribed under rule 159(5) of CGST Rules, the Commissioner may take the grounds mentioned in the said objection/representation on record and pass a reasoned order. Where the Commissioner is satisfied that the property was or is no longer liable for attachment, he may release such property by issuing an order in FORM GST DRC- 23.[CBEC-20/16/05/2021 -GST]
5. As per Rule 159(6) of the CGST Rules, 2017, in case, the Commissioner is satisfied that the property was or is no longer liable for attachment, he may release such property by issuing an order in FORM GST DRC- 23.
6. Each such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order of attachment. (Calcutta High Court in case of J L Enterprises vs. Assistant Commissioner, State Tax, Ballygunge Charge (WPA 30968 of 2024 dated 03.03.2025))
7. As per the  Rule 159(3) & (4) of the CGST Rules, 2017, if provisionally attached property is perishable or hazardous, it may be released to the taxpayer upon payment of the lower of its market value or the amount payable, against FORM GST DRC-23. If the taxpayer fails to pay, the property may be disposed of, and the proceeds adjusted against dues.
8. Further, the sale proceeds thus obtained must be deposited in the nearest Government Treasury or branch of any nationalised bank in fixed deposit and the receipt thereof must be retained for record, so that the same can be adjusted against the amount determined to be recoverable from the said taxable person.

3. Cases Fit For Provisional Attachment Of Property

The remedy of attachment being, by its very nature, extraordinary, needs to be resorted to with utmost circumspection and with maximum care and caution. 

It normally should not be invoked in cases of technical nature and should be resorted to mainly in cases where there is an evasion of tax or where wrongful input tax credit is availed or utilized or wrongfully passed on. 

While the specific facts of the case need to be examined in detail before forming an opinion in the matter, the following are some of type of cases, where provisional attachment can be considered to be resorted to, subject to specific facts of the case:

Where taxable person has:

• supplied any goods or services or both without issue of any invoice, in violation of the provisions of the Act or the rules made there under, with an intention to evade tax; or
• issued any invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made there under; or
• availed input tax credit using the invoice or bill referred to in clause (b) or fraudulently availed input tax credit without any invoice or bill; or
• collected any amount as tax but has failed to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; or
• fraudulently obtained refund; or 
• passed on input tax credit fraudulently to the recipients but has not paid the commensurate tax.

The list is illustrative only and not exhaustive. The Commissioner may examine the specific facts of the case and take a reasoned view in the matter.

4. Safeguards to Prevent Excessive Property Seizure and Protect Business Continuity

It should be ensured that the value of property attached provisionally is not excessive. The provisional attachment of property shall be to the extent it is required to protect the interest of revenue, that is to say, the value of attached property should be as near as possible to the estimated amount of pending revenue against the person.

More than one property may be attached in case the value of one property is not sufficient to cover the estimated amount of pending revenue against such person. Further, different properties of the taxpayer can be attached at different points of time subject to the conditions specified in section 83 of the CGST Act.

It may be noted that the provisional attachment can be made only of the property belonging to the taxable person, against whom the proceedings mentioned under section 83 of the CGST Act are pending.

Movable property should normally be attached only if the immovable property, available for attachment, is not sufficient to protect the interests of revenue.

As far as possible, it should also be ensured that such attachment does not hamper normal business activities of the taxable person. This would mean that raw materials and inputs required for production or finished goods should not normally be attached by the Department.

In cases where the movable property, including bank account, belonging to taxable person has been attached, such movable property may be released if taxable person offers, in lieu of movable property, any other immovable property which is sufficient to protect the interest of revenue. Such immovable property should be of value not less than the tax amount in dispute. It should also be free from any subsisting charge, liens, mortgages or encumbrances, property tax fully paid up to date and not involved in any legal dispute. The taxable person must produce the original title deeds and other necessary information relating to the property, for the satisfaction of the concerned officer.

5. Attachment Period

Every provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the provisional attachment order.

5.1 Provisional Attachment under GST Can’t Be Renewed after one year

The Supreme Court in Kesari Nandan Mobile v. Assistant Commissioner of State Tax (R/Special Civil Application No. 16339 Of 2024) has held that the GST department could not issue a fresh or renewed provisional attachment order after the earlier order had lapsed upon expiry of one year in terms of Section 83(2). 

Interpreting Section 83 as a whole, the Court held that sub-section (2), which provides that every provisional attachment ceases after one year, must be given full effect. Applying the principle of ut res magis valeat quam pereat, the Court observed that permitting renewal or reissuance of attachment on the same grounds would render Section 83(2) redundant. Therefore, once an attachment lapses by operation of law, it cannot be revived.

The Court further invoked the settled principle that what cannot be done directly cannot be done indirectly, holding that repeated or successive attachment orders on identical grounds would amount to an abuse of power. Such actions were likened to “filling old wine in a new bottle” and were found to be contrary to the legislative intent.

It was also clarified that provisional attachment is merely a pre-emptive measure to safeguard revenue during investigation and not a tool for recovery. Once proceedings culminate in a demand, the authorities must resort to the appropriate recovery mechanisms provided under the statute rather than continuing attachment indirectly.

The Court held that the one-year limitation is deliberate, and unlike other statutes such as customs or excise laws, the CGST Act does not provide any provision for extension or renewal.  

5.2 Property exempt from attachment

All such property as is by the Code of Civil Procedure, 1908 (5 of 1908), exempted from attachment and sale for execution of a Decree of a Civil Court shall be exempt from provisional attachment.

6. Cash Can’t Be Attached But It Can Be Seized U/s 67

The Cash cannot be attached but it can be seized under section 67 of the CGST Act, 2017.

6.1 Attachment vs Seizure under GST

The issue of whether cash can be seized during a GST search as “things” has been clarified by the Court by interpreting Section 67(2) of the CGST Act. The provision permits seizure of (i) goods liable for confiscation and (ii) documents, books, or “things” that are useful or relevant for proceedings. Since cash falls within the definition of “money,” it is expressly excluded from “goods.” The Court further held that the term “things” cannot be interpreted broadly to include all assets; instead, it must be read ejusdem generis with “documents” and “books,” meaning it covers only items that contain or provide evidentiary value. Consequently, cash cannot be seized merely because it is unaccounted or suspected to be linked to tax evasion, as GST search powers are intended to gather evidence and not to recover or secure revenue. However, an exception exists where specific cash has direct evidentiary relevance—for instance, where identifiable currency is linked to a particular transaction or used to establish a modus operandi of evasion. Thus, in general, cash is not seizable under GST as “things” unless it is required as evidence in proceedings.

6.2 Can Cash Seized Be Transferred To The Income Tax Department?

Yes, cash seized by GST can be transferred to the Income Tax (IT) Department under Section 132A of the Income Tax Act if it is deemed to be undisclosed income. The Income Tax Department can requisition assets seized by other authorities if they believe the funds are undisclosed income. 

It is worthwhile to note that the cash amount seized from the premises of the appellants cannot be retained either by the GST Department of the State or the Income Tax Department prior to a finalisation of respective proceedings initiated by them.

6.2.1 GST Dept Can’t Illegally Seize and Transfer Cash to IT Dept U/S 132

However, the transfer is valid only if the original authority had the authority to seize the cash. Kerala High Court in the case of Centre C Edtech Private Limited Vs. Intelligence Officer held that if the initial seizure by a department (like GST) was illegal (e.g., not part of stock-in-trade), the subsequent transfer to the Income Tax Department does not make it valid.

The salutary principle that prevents the expropriation of property or tax from a citizen without the authority of law finds expression in Articles 265 and Article 300A of the Constitution of India. As a matter of fact, the Kerala High Court in Sabu George & Ors. v. Sales Tax Officer (IB) & Ors., had clearly found that the power of the GST Authorities to seize any “thing” while functioning under the provisions of the statute cannot be seen as permitting a seizure of cash from the premises of a dealer more so when the cash in question was not part of the stock in trade of the business conducted by the dealer. It was confirmed by the Supreme Court in Sales Tax Officer (IB) & Ors. V Sabu George & Ors.

6.2.2 Seized assets cannot be retained indefinitely

In the case of Gautam Thadani v. Director Income Tax (Investigation) and Anr. (W.P.(C) 10960/2016) the Delhi High Court has held that seized assets cannot be retained indefinitely; they must be assessed or returned based on the deadline under Section 153A, as clarified by the Delhi High Court.

7. Conclusion 

Attachment, freezing, and seizure powers must follow due process. Courts like the Supreme Court of India stress legality. Prompt, strategic defence is vital to challenge excesses and restore business stability.

Note : This article was awarded in the Article Writing Competition organized by the G.C. Kanjhlia Memorial and Delhi State GST Bar Association (Sales Tax Bar Association) on the occasion of its 70th Foundation Day held on March 31, 2026.

Read More: JURISHOUR | TAX LAW DAILY BULLETIN : APRIL 4, 2026