The Gauhati High Court has held that provisional attachment of bank accounts under Section 83 of the Central Goods and Services Tax Act, 2017 automatically ceases to operate after one year from the date of the attachment order.
The bench of Justice Manish Choudhury directed the immediate de-freezing of four bank accounts belonging to three members of a family, observing that the provisional attachment orders issued by the Directorate General of GST Intelligence had ceased to have effect in May 2023.
The Court noted that no subsequent provisional attachment order had been issued and that the petitioners were not named as noticees in the demand-cum-show cause notice subsequently issued against the company under investigation.
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The dispute arose after the DGGI, Guwahati Zonal Unit, provisionally attached the petitioners’ personal bank accounts on May 19 and May 23, 2022.
Ritu Mandelia’s savings bank account with HDFC Bank’s Howrah Liluah Branch had remained blocked since May 19, 2022. She contended that she had not been served with the provisional attachment order in Form GST DRC-22.
Kavita Mandelia challenged the blocking of two savings bank accounts maintained with HDFC Bank and IndusInd Bank. Ashok Kumar Mandelia similarly challenged the continued freezing of his HDFC Bank account.
The petitioners submitted representations to the GST authorities in March and May 2026 requesting revocation of the attachment. However, according to them, the representations did not receive any response.
They consequently approached the High Court seeking directions to the authorities and banks to restore the operation of their accounts.
The provisional attachments arose from an investigation into M/s Salasar Exim Limited.
According to the material before the Court, the authorities had received intelligence that certain registered taxpayers were issuing invoices without making an actual supply of goods. The registrations of some of these entities were subsequently cancelled on grounds including fraud and non-existence.
An examination of the e-way bill and GST portal records allegedly indicated that these entities had shown supplies of aluminium scrap, copper scrap and other goods to recipients in Kolkata between February and March 2022.
Inspections and searches were thereafter conducted at the registered premises of the suppliers. The entities were allegedly not found at their declared principal places of business and were treated as non-existent or fictitious.
The authorities also allegedly found that the entities had no corresponding inward supply of goods reflected in their GSTR-2A returns, despite reporting outward supplies in GSTR-1.
Further investigation reportedly revealed that M/s Salasar Exim Limited was the principal recipient of supplies routed through three other recipients. Searches were consequently carried out at the company’s principal and additional places of business, as well as the residential premises of its directors.
Statements of the company’s staff, stakeholders and former director were recorded under Section 70 of the CGST Act.
According to the department, GST records indicated that Salasar Exim Limited had received input tax credit of approximately Rs. 55.37 crore from suppliers whose registrations had been cancelled due to fraud, non-existence or other reasons during the financial years 2018-19 to 2022-23.
The investigation allegedly indicated that the company had availed and utilised input tax credit of approximately Rs. 106.08 crore on the strength of fake or bogus invoices without the actual receipt of goods.
The company was also alleged to have availed and utilised excess ITC of approximately Rs. 3.37 crore arising from a mismatch between GSTR-2A and GSTR-3B.
On June 25, 2025, the authorities issued a demand-cum-show cause notice to Salasar Exim Limited and its chief executive officer and erstwhile director, Ashish Kumar Mandelia.
The notice proposed a penalty equivalent to the allegedly ineligible ITC of approximately Rs. 109.45 crore under Section 122(1)(vii) of the CGST Act. It also proposed a penalty corresponding to allegedly ineligible ITC of approximately Rs. 115.78 crore passed on by issuing invoices without an actual supply of goods under Section 122(1)(ii).
The Court, however, recorded that none of the three writ petitioners was a recipient or noticee under the June 25, 2025 show cause notice.
The GST authorities defended the attachments by submitting that money had been transferred from the company’s accounts to accounts belonging to its directors and their relatives.
The provisional attachment orders identified Ashok Kumar Mandelia and Kavita Mandelia as the father and mother of the company’s directors, respectively. Ritu Mandelia was identified as the wife of Amar Kumar Mandelia, a director of the company.
The department contended that the accounts were provisionally attached to protect the interests of government revenue. It also produced the attachment orders dated May 19 and May 23, 2022, issued in Form GST DRC-22.
The petitioners, on the other hand, argued that even if valid provisional attachment orders had initially been passed, Section 83(2) expressly provides that every such attachment ceases to have effect after one year.
They submitted that the accounts could not legally remain frozen after May 2023, particularly when they were not noticees in the subsequent proceedings against the company.
The High Court examined Section 83 of the CGST Act and Rule 159 of the CGST Rules.
Section 83 empowers the Commissioner to provisionally attach property, including a bank account, where such action is considered necessary to protect government revenue during the pendency of specified proceedings.
Section 83(2), however, declares that every provisional attachment shall cease to have effect after the expiry of one year from the date of the order.
Rule 159 requires the Commissioner to issue an attachment order in Form GST DRC-22, specifying the property being attached. It also provides a procedure for filing objections and releasing property through Form GST DRC-23.
The Court referred to the Supreme Court’s ruling in Radha Krishan Industries v. State of Himachal Pradesh, which characterised the power of provisional attachment as draconian in nature.
In that decision, the Supreme Court explained that the attachment contemplated under Section 83 is provisional and operates before the finalisation of assessment or crystallisation of liability. The power must therefore be exercised strictly in accordance with the statutory conditions.
The High Court also relied on the Supreme Court’s ruling in Keshari Nandan Mobile v. Office of Assistant Commissioner of State Tax.
In that case, the Supreme Court held that the revenue authorities cannot issue a second provisional attachment order merely to renew an earlier order that has lapsed after one year.
Allowing repeated or renewed provisional attachments would make the one-year limitation under Section 83(2) meaningless, the Supreme Court had observed.
The decision further clarified that provisional attachment is a pre-emptive measure intended to safeguard revenue. It cannot be converted into a mechanism for recovery. Once the proceedings culminate in a final demand, the department must resort to the specific recovery provisions available under the GST law.
The Gauhati High Court applied these principles to the present dispute.
During the hearing, the Court specifically asked the counsel representing the CGST authorities whether any subsequent attachment orders had been issued either during the one-year currency of the original orders or after their expiry.
The department answered the query in the negative.
The High Court consequently held that the attachment orders dated May 19 and May 23, 2022 had ceased to have effect after May 19 and May 23, 2023, respectively.
It further observed that the demand-cum-show cause notice dated June 25, 2025 had not been issued to any of the three petitioners.
In these circumstances, the Court found no reason to continue preventing the petitioners from operating their four bank accounts.
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