Gujarat High Court Holds Provisional Attachment and Seizure Under GST Act Cannot Exceed Statutory Limitation Without Timely Notice

In a significant judgment, the Gujarat High Court clarified the mandatory nature of statutory limitation periods governing provisional attachment of bank accounts and seizure of goods under the Goods and Services Tax Act, 2017 (GST Act). The Court was adjudicating a writ petition challenging the continued attachment of bank accounts and seizure of gold, silver, and cash belonging to the petitioner, a partnership firm engaged in the trading of precious metals and jewellery.

The petitioner’s premises were searched on 9 March 2022 under Section 67(2) of the GST Act, following which a provisional attachment order was issued on 10 March 2022, freezing the petitioner’s bank accounts. During the search, gold, silver, and cash were seized, and a formal seizure order was issued. Despite the passage of more than 20 months, the seized goods and attached accounts were not released, prompting the petitioner to seek judicial intervention.

The petitioner argued that Section 83(2) of the GST Act mandates that provisional attachment of bank accounts cannot continue beyond one year unless a fresh order is passed. Similarly, Section 67(7) requires that if no notice is issued within six months of seizure (extendable by a further six months for sufficient cause), the seized goods must be returned. The petitioner contended that these statutory timelines had lapsed without compliance by the authorities.

The State opposed the petition, citing ongoing investigations into alleged tax evasion amounting to Rs. 26.75 crores and the complexity arising from multiple firms operated by the petitioner. The State admitted, however, that the notice under Section 130 of the GST Act was issued only on 21 June 2024—well after the expiry of the statutory periods.

The Court, after examining the record, found serious lapses and dereliction of duty by the respondent officers. It noted that the provisional attachment order had expired after one year as per Section 83(2), and no fresh order was passed. Further, the Court observed that no notice was issued within the six-month period prescribed by Section 67(7), nor was any extension sought as permitted by the proviso. The subsequent issuance of a confiscation notice under Section 130 during the pendency of the petition was held to be an additional illegality.

The Court rejected the State’s explanation that delays were due to ongoing investigations and lack of clarity, holding that statutory provisions and limitation periods cannot be disregarded. The Court directed the Chief Commissioner of State Tax to conduct an inquiry into the lapses by the officers involved, noting that their omissions had ultimately benefited the petitioner.

In its operative directions, the Court ordered the immediate release of the seized goods and cash, and directed the lifting of the provisional attachment on the petitioner’s bank accounts within ten days of receipt of the order. The Court also made the rule absolute and directed the Registry to communicate the order to the Chief Commissioner for compliance and inquiry. The matter was posted for further listing to monitor the status of the inquiry.

This judgment underscores the binding nature of statutory timelines under the GST Act and affirms that administrative convenience or ongoing investigations cannot justify non-compliance with express legal requirements.