The court held that Section 83 of the CGST Act does not require a pre-decisional hearing before provisional attachment and strict legal standards must be met for such actions.

JUDGMENT :

K. V. ARAVIND, J.

Heard Sri Aravind V. Chavan, learned Senior Standing Counsel for the appellants, Sri Raghavendra B. Hanjer, learned counsel for caveator/respondent No.1, and Sri Francis Xavier, learned counsel for respondent No.2.

2. The present appeal is filed by the Revenue under Section 4 of the Karnataka High Court Act, 1961, assailing the order dated 25.04.2025 passed in Writ Petition No.11065/2025, whereby the provisional attachment of the bank account under Section 83 of the Central Goods and Services Tax Act, 2017 (for short, ‘CGST Act’), has been quashed.

2.1 The writ petition was filed with a prayer to quash the blocking of Input Tax Credit (ITC) and the provisional attachment of the bank account, as well as the blocking of the electronic credit ledger, along with consequential relief directing the unblocking of ITC and the release of the bank account.

2.2 Learned counsel for the appellant submits that the present appeal concerns only the provisional attachment of the bank account. Accordingly, this judgment is confined to the issue of provisional attachment of the bank account.

3. The respondent-assessee is registered under the provisions of the GST Act, 2017, and is engaged in the supply of taxable services under the category of construction activities and other taxable services. Summons under Section 70 of the CGST Act were issued to gather evidence relating to inward and outward supplies along with invoices. The respondent failed to comply with the said summons. The appellants thereafter conducted further investigation and found misuse of input tax credit and unsubstantiated transactions. Invoking Section 83 of the CGST Act, the appellants imposed a provisional attachment on the bank account maintained with ICICI Bank Ltd., by order dated 29.01.2025. This attachment was the subject matter of the writ petition. The learned Single Judge, under the impugned order, quashed the provisional attachment under Section 83 of the CGST Act, holding that no pre-decisional hearing had been provided before passing the impugned order of attachment.

4. Sri Aravind V. Chavan, learned Senior Standing Counsel appearing for the appellants, submits that Section 83 of the CGST Act does not mandate an opportunity of hearing before passing an order of provisional attachment of any property, including the bank account of a taxable person. Learned counsel further submits that the impugned order has virtually introduced a new procedure by requiring pre-decisional hearing prior to such provisional attachment. It is contended that if pre-decisional hearing is to be granted, the very purpose and object sought to be achieved by the provisional attachment of a bank account would be rendered nugatory. It is further submitted that when the statute itself does not mandate a pre- decisional hearing, the observations made in the impugned order would amount to re-writing Section 83 of the CGST Act, which is impermissible.

4.1 Learned counsel for the appellant submits that proceedings under Section 83 of the Act are not punitive in nature, but are preventive and precautionary measures. It is further submitted that a person aggrieved by the provisional attachment has an adequate remedy under Rule 159 of the CGST Rules.

5. Sri Raghavendra B. Hanjer, learned counsel appearing for the caveator/respondent No.1, submits that the finding in the impugned order directing pre-decisional hearing is based on the judgment of a Division Bench of