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How to Reply to GST Provisional Bank Attachment Notices

Legal Guide to Challenging GST Bank Attachments

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-

The procedural requirements for such an attachment are justified under Rule 159 of the CGST Rules, 2017. This rule reads accordingly:-

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

Cite Rule 159(5) & (6) which permits the filing of an objection and ordering a release through Form GST DRC-23.

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.

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