Provisional attachment of property including Bank account of a taxable person to protect Government revenue in certain cases has been prescribed under Section 83 of the CGST Act, 2017 read with Rule 159 of the CGST Rules, 2017. The adjudicating authority initiate the recovery of tax during pendency of any proceedings under Section 59 to 64 of the CGST Act, 2017, Section 67 to 72 of the CGST Act, 2017 & Section 73 / Section 74 of the CGST Act, 2017 by way of provisional attachment of property including bank account.
Statutory provisions for attachment of Bank Account:
Section 83 of the CGST Act empowers the Commissioner to provisionally attach the any property including bank account belonging to a taxable person or any person specified in sub-section (1A) of section 122 of the CGST Act. The attachment can be made where, after initiation of any proceedings, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue.
No attachment of property can be initiated by the proper officer unless an order in FORM GST DRC-22 pass by the Commissioner under Rule 159 of the CGST Rules, 2017 read with Section 83 of the CGST Act, 2017. Rule 159(6) of the CGST Act, 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.
Provisional attachment lapses after one year:
Section 83 (2) of the CGST Act, provides that every provisional attachment shall cease to have effect after the expiry of a period of one year from the date of order made under sub-section (1) of section 83 of the CGST Act,2017.
Judicial decisions:
The Hon’ble Supreme Court in the case of Radha Krishan Industries vs. State of Himachal Pradesh, reported in 2021 (48) G.S.T.L113 (S.C), held that the Provisional attachment is draconian power exercised before finalization of assessment or raising of demand It has to be exercised with due caution. It is provisional as in aid of something else and its purpose is to protect revenue. Its validity depends on strict observance of statutory pre-conditions. Formation of Commissioner’s opinion must have proximate and live nexus to protection of revenue interest and it is not left to unguided subjective discretion. The Commissioner’s opinion must be based on tangible material regarding statutory requirements.
Therefore, the Hon’ble Supreme Court has issued the following mandatory guidelines to be followed while ordering for provisional attachment of property including bank account of the taxable person.
- The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled;
- The exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the government revenue. Before ordering a provisional attachment the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting the interest of the government revenue.
- The expression “necessary so to do for protecting the government revenue” implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment;
- The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue;
- In the facts of the present case, there was a clear non-application of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal;
- Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards :
(a) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and
(b) An opportunity of being heard;
- The Commissioner is duty bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attached;
- A final order having been passed under Section 74(9), the proceedings under Section 74 are no longer pending as a result of which the provisional attachment must come to an end.
The Hon’ble High Court of Madras in the case of Senior Intelligence officer, DGGI, vs. KPN Travels India Ltd, reported in 2021(49) G.S.T.L.338( Mad.), held that “In the considered view of this Court, an order of attachment of the first respondent’s bank account, which are stated to be 14 in number, should be for the purpose of protecting the interest of the Government Revenue and the Commissioner should be of the opinion, it is for such purposes and he is required to pass an order in writing attaching provisionally any property including bank account. The procedure is in terms of Rule 159 of the CGST Rules. Thus, if the first respondent is able to explain to the satisfaction of the officer that the provisional attachment is not warranted, it goes without saying that the Commissioner can exercise powers and lift the order of provisional attachment or otherwise confirm the provisional attachment. Admittedly, the investigation is yet to be completed and therefore, time is yet to come for issuance of show cause notice for recovery of alleged tax due or for that matter to crystallize the alleged liability, the first appellant shall consider and pass appropriate interim orders, if found tenable, considering the lifting of the provisional attachment in respect of a few bank accounts to enable the first respondent to carry on its business activities.”
The Hon’ble High Court of Bombay in the case of Chotu Lal vs. Union of India, reported in 2023 (72) G.S.T.L. 167(Bom), held that the petitioner to approach the concerned authority under Rule 159(5) of the GST Rules for revocation of the attachment, the authority will make endeavour to take a decision thereupon as per law, within three weeks of filing of such application for revocation of bank attachment.
The High Court of Madras in the case of Federal Bank Ltd, vs. Sub Registrar , reported in 2023(72) G.S.T.L.40 (Mad.), held that “Section 83(2) of GST Rule make it clear that every such provisional attachment shall cease to have effect after expiry of a period of one year from the date of the order made under sub-section(1),. Therefore, provisional attachment made by the second respondent vide order dated 18.12.2021 has ceased to have effect, after expiry of a period of one year. There is no material to show any final order of attachment, or any subsequent order passed by the second respondent pursuant to the aforesaid order. Therefore, this court is of view that the impugned order dated 17-10-2022 is liable to be quashed.
The Hon’ble High Court of Madras in the case of Sree Minakshi Industries vs. Commissioner of commercial tax, reported in 2022 (65) G.S.T.L. 457 (Mad.), held that” It is made clear that, this order, setting aside the provisional attachment order and the consequential bank communication in respect of these two cases, shall not stand in the way for the respondent/Revenue to invoke Section 83 once again, if they have reasons with tangible materials and records to form an opinion that in the interest of Revenue, such an invocation of Section 83 become inevitable and after recording such reasons that kind of invocation could be possible at the hands of the Revenue. Insofar as the assessment is concerned, it is open to the Revenue to complete the assessment at the earliest with utmost co-operation of the petitioners”
The Hon’ble High Court of Delhi in the case of Karmatji Jaiswal vs. Commissioner of Central Tax, reported in 2022(66) G.S.T.L. 333 ( Del.), held that Admittedly, every provisional order ceases to have effect after the expiry of a period of one year from the date of the order made under Section 83(1) of the CGST Act. After the issuance of the impugned orders, no fresh attachment order has been issued. Consequently, this Court directs the Respondent to defreeze the bank account and release the immovable properties of the Petitioner not later than three days from the date of uploading the order.
The Hon’ble High Court of Telangana in the case of Rahul Aggarwal vs. Commissioner of Central Tax, reported in 2022(64) G.S.T.L. 290 (Telangana), held that in the instant case, provisional attachment was ordered on 9-2-2021. Thus, the period of one year has expired. Though a statement has been made in the counter affidavit that the provisional attachment was reviewed by the Commissioner on 11-3-2022 where after such attachment for further period was approved, no such order has been placed on record. In any case, sub-section (2) of Section 83 of the CGST Act is very clear. Every provisional attachment made under sub-section (1) of Section 83 of the CGST Act shall cease to have effect after expiry of a period of one year from the date of the order made under sub-section (1) of Section 83 of the CGST Act. That being the position, we are of the considered opinion that continuance of the impugned order of provisional attachment dated 9-2-2021 cannot be sustained. The same is accordingly set aside and quashed. Respondents are directed to forthwith de-attach the aforesaid bank account of the petitioners. The Hon’ble High Court of Gujarat in the case of Mahavir Enterprise vs. State of Gujarat, reported in 2022(62) G.S.T.L.166 (Guj.) held that “The plain reading of the above referred provision would indicate that if any amount of tax, interest or penalty like the one in our case is payable by a person to the Government under any of the provision of this Act or the Rule then such amount can be recovered by a proper Officer of State Tax or the Union Territory as the case may be, as if it were an arrear of State Tax or the Union Territory Tax. In other words, this provision can be interpreted or can be understood as recovery of any debts, interest or penalty by way of revenue measures. Its like recovery under the Bombay Land Revenue Code. This is possible or rather permissible only after proper attachment of any property of the assessee. This attachment which we are talking about has nothing to do with the provisional attachment under Section 83 of the Act. For the purpose of sub-clause (3), the attachment is permissible even under the provisions of the Bombay Land Revenue Code. In such circumstances referred to above, the impugned order of provisional attachment purported to have been passed under Section 83 of the Act could be said to be without jurisdiction. The same is hereby quashed and set aside. We leave it open to the respondents to initiate appropriate proceedings in accordance with law, if they intend to do so.”
The Hon’ble High Court of Orissa in the case of Shri Radha Raman Alloys Pvt.Ltd, vs. Union of India, reported in 2021(52) G.S.T.L.5 (Ori.), held that Rule 159 of the OGST Rules, 2017 sets out the procedure to be adopted for issuing a provisional attachment order. Under Rule 159(5) a person whose property is attached may, within seven days of such attachment, file an objection to the effect that the property attached was or is not liable to attachment. After such objection is filed, the Commissioner is required to offer the person objecting an opportunity of being heard and thereafter pass an appropriate order in FORM GST DRC-23, if he is of the view that the property is required to be released from attachment.
Conclusion: The provision of attachment property including bank account is the weapon in the hands of the adjudicating authority for recovery of revenue under Section 83 of the CGST Act, 2017, but it should be supported by judicious opinion of the Commissioner by issuance of Order in FORM GST DRC-22. Section 83 of the CGST Act, 2017 empowers the Commissioner to initiate proceeding of attachment property including bank account under Section 83 of the Act, if he satisfied that it is genuine reason and fit case of attachment of bank account of any registered person to protect the revenue of the Government. The Commissioner may authorize his subordinate officer to initiate proceedings of bank attachment giving an opportunity of heraing to the taxable person as per the direction of the Hon’ble Supreme Court decision in the case of Radha Krishan Industries (supra). The taxable person also an opportunity is available under Rule 159(5) of the CGST Rules, 2017 to approach the GST authority filing an objection application for the de-attachment of bank account in case he is not liable to pay any tax or his property is not liable for attachment.
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