Over the past few months, the Supreme Court of India has been very active in laying down certain foundational principles of goods and services tax (GST) law. Through a series of landmark decisions, the apex court has clarified the scope of statutory powers, reinforced procedural safeguards, and ensured an even balance between the protection of the Department of Revenue’s interests and taxpayers’ rights.
The Supreme Court’s decision in Armour Security (India) v Commissioner, CGST, Delhi East Commissionerate & Anr. (Armour Security), regarding the interpretation of the term “initiation of proceedings” under Section 6(2)(b) of the Central Goods and Services Tax Act (the CGST Act), has emerged as a critical area of judicial intervention.
Indian Supreme Court rules on ‘initiation of proceedings’ in Armour Security case
In Armour Security, the Supreme Court addressed whether the issuance of a summons under Section 70 of the CGST Act constitutes initiation of proceedings under Section 6(2)(b), which bars parallel proceedings by different tax authorities on the same subject matter. The petitioner argued that since the state GST authority had already issued a show cause notice (SCN), the central GST authority’s summons on the same issue was barred under Section 6(2)(b).
In the judgment handed down on August 14 2025, the Supreme Court held that a summons is merely part of an “inquiry” and not a “proceeding”. The court stated that the expression “initiated any proceedings” in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of an SCN – either under Section 73, 74, or 76 of the CGST Act – and does not encompass the issuance of summons, or the conduct of any search, seizure, etc.
Referring to settled precedents, the court emphasised that an SCN is the foundational document that frames charges, quantifies demand, and triggers adjudication. It sets the law in motion concerning the liability under the statute, containing charges that a taxpayer is called upon to answer. Thus, the bar under Section 6(2)(b) applies only after an SCN is issued.
In essence, it was ruled that only when there is a ‘formation of mind’ by the tax authorities – i.e., only when the tax authorities frame the specific allegations, determine the quantum of demand, and thereafter issue an SCN – do formal proceedings against the taxpayer get initiated.
Concept of provisional attachment
For the purpose of protecting the interests of government revenue, the power of provisional attachment of the property of taxpayers has been statutorily prescribed in indirect tax laws.
Before discussing provisional attachment under the current GST regime, it is imperative to understand how attachment provisions were envisaged in the erstwhile indirect tax regime. The power of provisional attachment was previously provided for during the pendency of proceedings. For instance, Section 11DDA of the Central Excise Act, 1944 and Section 73C of the Finance Act, 1994 used the expression “during the pendency of any proceeding[s] under [S]ection […]”.
In the context of service tax, the Service Tax (Provisional Attachment of Property) Rules, 2008 – read with Circular No. 103/6/2008-S.T., dated July 1 2008, issued with respect to Section 73C of the Finance Act, 1994 and in the context of the Excise Law, Circular No. 874/12/2008-CX, dated June 30 2008, issued with respect to Section 11DDA of the Central Excise Act, 1944 – laid down the procedural safeguards to be taken while resorting to provisional attachment.
The above rules and circulars provided, inter alia, that the power of attachment was to be exercised with maximum care and restraint, only after the issuance of an SCN, and during the pendency of such proceedings.
Provisional attachment under Section 83 of the CGST Act
Prior to the amendment through Section 115 of the Finance Act, 2021 dated March 28 2021, which came into effect from January 1 2022, the language envisaged for Section 83(1) of the CGST Act was similar to that employed under the previous regime. It could therefore be contended that the power of attachment under Section 83 prior to the amendment through the Finance Act, 2021 could be exercised only “during the pendency of any proceedings”.
This view was fortified by the Supreme Court in Radha Krishan Industries v State of Himachal Pradesh (2021), wherein the scope and limitations of the power of attachment under Section 83 (as it stood prior to its amendment through the Finance Act, 2021) was examined. The case arose when the assessee’s receivables were provisionally attached before any formal proceedings under Section 74 had commenced. The High Court of Himachal Pradesh had dismissed the writ petition on the ground of alternative remedy.
The Supreme Court reversed this, emphasising that the power under Section 83 was “drastic and extraordinary” and must be exercised with extreme caution. It held that to invoke the power of provisional attachment, there must be a formation of an “opinion” by the tax authorities, and that it must be based on tangible material and a reasoned opinion that it was necessary “so to do” for the purpose of protecting the interests of government revenue.
The court held that this power cannot be used arbitrarily or as a substitute for recovery proceedings and must not cripple legitimate business operations. It also stressed the need for procedural fairness, including adherence to Rule 159 of the Central Goods and Services Tax Rules, 2017 and the principles of natural justice.
Having examined the foundational aspects in this article, part two will delve deeper into the amendment to Section 83 and the interpretation of the phrase “initiation of any proceedings” in light of the decision in Armour Security.
The views expressed in this article are entirely personal.
