Facts of the Case:
In this case, the petitioner challenged the provisional attachment of its bank account ordered under Section 83. The attachment had severely hampered the petitioner’s day-to-day business operations, including payment of salaries and routine expenses. During the pendency of the writ petition, the petitioner, without prejudice, offered two fixed deposit receipts (FDRs) aggregating to approximately ₹14.99 crore to be provisionally attached in lieu of the bank account, whereas the department had provisionally quantified the alleged tax liability at ₹13.69 crore for the period April 2019 to July 2025.
The petitioner further submitted that if the adjudication proceedings pursuant to an existing show cause notice and proposed future notices were completed within a time-bound schedule, it would not press its challenge to the provisional attachment order.
The respondents defended the attachment as lawful but expressed willingness to justify it through affidavits.
Issue:
Whether the provisional attachment of a functional bank account under Section 83 of the MGST Act can be substituted by attachment of fixed deposit receipts offered by the taxpayer, and whether such substitution, coupled with a direction for time-bound adjudication, satisfies the requirements of proportionality and fairness under the GST law.
Held that:
The Court observed that the object of Section 83 is only to protect the interest of revenue during the pendency of proceedings and not to paralyse the business operations of a registered person. In the present case, the attachment of the petitioner’s operational bank account had resulted in serious disruption of its day-to-day business activities, including payment of salaries and routine expenses, which was neither the intent nor the permissible scope of a provisional attachment.
The Court found merit in the petitioner’s without-prejudice offer to furnish two fixed deposit receipts aggregating to approximately ₹14.99 crore, which was more than sufficient to secure the department’s provisionally quantified liability of ₹13.69 crore. Acceptance of such an offer was held to be fair, reasonable and proportionate, as it fully safeguarded the revenue’s interest while simultaneously allowing the petitioner to continue its business.
The Court further held that once adequate security is available in the form of fixed deposits, continuation of attachment of the bank account would be excessive and arbitrary, and would fail the test of proportionality implicit in Section 83. The respondents were therefore directed to attach the fixed deposit receipts in lieu of the bank account and to forthwith lift the attachment on the bank account upon such substitution.
The Court also emphasized that a provisional attachment order is temporary in nature, and by virtue of Section 83(2), its maximum life is statutorily limited to one year. In this context, the Court held that the respondents could have no legitimate objection to completing the adjudication proceedings within a fixed timeframe. Accordingly, the Court directed that the adjudication pursuant to the existing show cause notice dated 29 September 2025, as well as the proposed additional show cause notices, be concluded expeditiously and in any event on or before 30 May 2026.
It was clarified that the provisional attachment of the fixed deposit receipts would abide by the outcome of the adjudication proceedings and would automatically cease either upon conclusion of adjudication or upon expiry of the statutory period, whichever occurred earlier. The Court also made it explicit that the order would not preclude the respondents from taking any other action in accordance with law, if circumstances so warranted.
Case Name: Creative Carve Pvt. Ltd. Versus The State of Maharashtra And Ors. dated 12.12.2025
To read the complete judgement 2025 Taxo.online 3314
