Provisional Attachment under GST

Case Title: Sidhivinayak Chemtech (P.) Ltd. v. Principal Commissioner, CGST
Court: High Court of Delhi
Petition No.: W.P.(C) No. 17547 of 2022
Relevant Sections: Section 83(1), Section 122(1A), Rule 159(5) of CGST Act & Rules
Category: Provisional Attachment
Date of Judgement: 16 May 2023
Takeaway: Jurisdiction first – When action under Section 83 CGST must originate from the proper Commissioner

Facts of the Case [¶2–14]:

1. The petitioner, M/s Sidhivinayak Chemtech Pvt. Ltd., is engaged in trading industrial chemicals with GST registrations in Haryana and Uttar Pradesh [¶2].
2. It was summoned in May 2022 under Section 70 of CGST Act in connection with alleged fraudulent ITC of ₹36.6 crores availed by M/s Best Crop Science LLP and Pvt. Ltd. [¶3].
3. Repeated summons were issued and records sought; petitioner objected via Form GST DRC-22A against a provisional attachment order dated 01.09.2022 [¶4–6].
4. The provisional attachment of the petitioner’s bank account (Punjab National Bank, Delhi) was confirmed by the Commissioner, CGST Meerut, via order dated 08.12.2022 [¶10].
5. The attachment was challenged in a writ petition before the Delhi High Court alleging lack of jurisdiction and absence of credible justification [¶11].

Questions in Consideration [¶16–22, ¶30–31]:

1. Whether the Principal Commissioner, CGST, Meerut had territorial jurisdiction to pass a provisional attachment order against the petitioner.
2. Whether there was sufficient formation of opinion based on tangible material justifying the provisional attachment under Section 83 of CGST Act.

Observations of the Court:

• On Jurisdiction [¶16–24]:
  The petitioner was registered in jurisdictions outside Meerut Commissionerate, namely Haryana and UP. Respondent No. 1 (CGST Meerut) had no jurisdiction over the petitioner and thus lacked authority to pass the attachment order [¶24].
• On Procedural Validity and Application of Section 83 [¶25–29]:
  The power to attach bank accounts must be exercised by the jurisdictional Commissioner of the “taxable person” or persons under Section 122(1A). Respondent No. 1 failed to establish petitioner’s direct benefit or control over the alleged fraud [¶28–29].
• On Formation of Opinion [¶31–47]:
  The Court held that attachment must be preceded by formation of an objective opinion based on tangible material. In this case, the reasoning was speculative: the only basis was that one director was previously an employee of Best Agro Group and that sale proceeds of Best Agro’s shares were allegedly parked in petitioner’s account—a claim unsupported by evidence [¶38–42].
• Reference to Precedents [¶32–33]:
  The Court reaffirmed the principles laid down in:
  • Radha Krishan Industries v. State of Himachal Pradesh, 2021 (Supreme Court) – which emphasized that provisional attachment must be based on tangible and credible material [¶32].
  • CIT v. Kelvinator of India Ltd. (Income-tax case), for the standard of “reason to believe” [¶33].

Judgement of the Court [¶48–49]:

The Court set aside the provisional attachment order dated 01.09.2022 and the confirming order dated 08.12.2022 on grounds of lack of jurisdiction and failure to justify necessity under Section 83 of the CGST Act. However, it allowed the authorities liberty to proceed in accordance with law.

Between Fine Lines:

• Only the jurisdictional Commissioner can invoke Section 83 for provisional attachment.
• Mere suspicion or indirect association is insufficient; tangible and credible material is mandatory.
• Attachment of bank accounts is a drastic step, not a preliminary investigative tool.
• Procedural safeguards like hearing and speaking orders must be strictly followed.
• This judgment affirms judicial insistence on disciplined and restrained use of revenue protection powers.

Summary of Referred Cases: