Karnataka High Court Upholds Provisional Attachment Under Section 83 of CGST Act: No Hearing Needed Before Bank Account Freeze

Case Background: Mohammed Kamran Vs Additional Director General, Directorate General of GST Intelligence (Karnataka High Court)

The Karnataka High Court recently pronounced its ruling on a writ petition filed by the proprietor of a scrap trading enterprise, challenging a provisional attachment order that had frozen his bank accounts. The order, dated 27.10.2025, was issued by the Directorate General of GST Intelligence (DGGI) under Section 83 of the Central Goods and Services Tax Act, 2017. The petitioner sought both quashing of the order and a direction to defreeze the attached accounts.

The case raises critical questions around the legality of provisional bank account attachments in GST enforcement proceedings — specifically, whether prior hearing is mandatory, and whether Central authorities can initiate independent investigation when State GST authorities have already acted on the same subject matter.

Background: The Assessee and the Allegations

The petitioner, proprietor of M/s MK Traders, was engaged in the trading of old steel and iron scrap. According to the petitioner's account, State GST authorities had conducted an inspection on 17.06.2025 and called upon him to submit documents pertaining to business transactions for assessment years 2021–22 through 2025–26. The petitioner claimed full compliance with those directions.

However, the DGGI — acting on independent intelligence inputs — commenced its own investigation, alleging that the petitioner was a key participant in a network of fictitious entities engaged in fraudulent input tax credit (ITC) availment. The DGGI's findings, reportedly based on BIFA analytics, pointed to a coordinated scheme involving:

  • Common IP addresses used to manage multiple fictitious firms
  • Circular trading to generate the appearance of legitimate transactions
  • Fake invoices to fraudulently claim ITC
  • Non-existent entities used as conduits for the fraud

On 16.09.2025, the petitioner was arrested under Section 132(1)(b) and Section 132(1)(c) of the Central Goods and Services Tax Act, 2017, and remained in judicial custody until 31.12.2025, when this Court granted him bail. During this period of custody, the impugned provisional attachment order dated 27.10.2025 was issued, freezing the assessee's bank accounts.

The Karnataka High Court framed the following points for adjudication:

  1. Whether the impugned proceedings were barred under Section 6(2) of the Central Goods and Services Tax Act, 2017 due to prior action by State GST authorities?
  2. Whether the provisional attachment order was vitiated for absence of a pre-decisional hearing?
  3. Whether interference was warranted under Article 226 of the Constitution of India?

Contention I: Was There a Statutory Bar Under Section 6(2)?

The Petitioner's Argument

The petitioner's senior counsel strenuously contended that the DGGI had no jurisdiction to initiate parallel proceedings, given that the State GST authorities had already commenced action on the same subject matter. Under Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, where one authority has already initiated proceedings in respect of a matter, another authority is barred from initiating proceedings on the same subject.