In India, the Goods and Service Tax (GST) was introduced for diverse assessment provisions. The tax collection and legislation process. The provisional attachment of bank accounts u/s 83 of the CGST Act 2017 is one of the most controversial parts of GST enforcement.
The same blog tries to look into the statutory framework that regulates bank attachments, the procedural requirements, and judicial pronouncements that have shaped the interpretation of this provision.
Legal Framework Governing Provisional Bank Attachments Under the GST Act
Provisional attachment is a process that permits the tax authorities to have the government revenue in cases where the proceedings are ongoing under the mentioned sections of the GST Act. Section 83(1) of the CGST Act furnishes that:
“Where during the pendency of any proceedings under section 62 or section 63, section 64, section 67 or section 73 or section 74, the Commissioner thinks that to protect the interest of the Government revenue, it is necessary to do so, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.”
The two major conditions are to be fulfilled for a provisional attachment order to be valid legally-
- There should be ongoing proceedings under sections 62,63,64,67,73 or 74 of the GST Act.
- It is to be believed by the commissioner that the same attachment is required to safeguard the revenue of the government.
The procedural requirements for such an attachment are justified under Rule 159 of the CGST Rules, 2017. This rule reads accordingly:-
- The Commissioner, upon deciding to attach any property, including a bank account, under the provisions of Section 83, shall issue an order in FORM GST DRC-22. This order must specify the details of the attached property.
It was mandated under the rule that the commissioner furnishes an attachment order in Form GST DRC-22 and any affected taxpayer could submit an objection within 7 days of the attachment per rule 159(5) which reads as
“(5) Any person whose property is attached may, within seven days of the attachment under sub-rule (1), file an objection that the attached property was or is not liable to attachment. After being heard by the person filing the objection, the Commissioner may release the said property by an order in FORM GST DRC- 23.
(6) The Commissioner may, upon being satisfied that the property was, or is no longer liable for attachment, release such property by issuing an order in FORM GST DRC- 23.”
The Commissioner can release the attachment through Form GST DRC-23 if the objection is justified.
Courts in India have repeatedly ruled that provisional attachment must not be misused as a means of harassment despite the legislative provision.
In the case of Kushal Ltd. vs. Union of India(2019), the Gujarat High Court held that no bank attachment can be made unless proceedings under Sections 62, 63, 64, 67, 73, or 74 are pending. In this case, the taxpayer’s bank account was provisionally attached without any pending proceedings, prompting the court to quash the order.
In the case of Praful Nanji Satra (2021 TAXSCAN (HC) 687), The Bombay High Court set aside a provisional attachment order where the Revenue Department had attached the bank account of the taxpayer following a search conducted by officers at the particular premises of a related entity.
However, the court ruled that provisional attachment under Section 83 cannot extend to an entity unless there are pending proceedings against it.
How to Write a Response Notice Under GST for a Provisional Bank Attachment
- Consider the notice and cite the reference number and date of the notice. Validate the receipt and mention the objective of the reply.
- Challenge the legality of the attachment to validate if proceedings under Sections 62, 63, 64, 67, 73, or 74 are due. If no such proceedings are there then it is directed that the attachment is not legal.
- Reference pertinent statutory provisions quote section 83 of the CGST Act and rule 159 of the CGST Rules. Cites the need for the satisfaction of the commissioner for the necessity for attachment.
- Refer to Judicial precedents. Quote the pertinent High Court or Supreme Court rulings that establish that bank attachments without pending proceedings are not regulatory.
- Request for removal of attachment. Formally request the bank account release.
Cite Rule 159(5) & (6) which permits the filing of an objection and ordering a release through Form GST DRC-23.
- Provide supporting documents, including relevant case law excerpts, previous communications, or financial records that substantiate the claim.
The extraordinary authority of provisional attachment u/s 83 should be utilised merely in the cases authorized via law. Apart from being unfair, the arbitrary bank attachments are not legal particularly when no current legal process is there.
