A provisional attachment of property under the GST law automatically expires after one year.
Issue
Can a provisional attachment of a bank account, made under Section 83 of the CGST Act, 2017, continue to be in effect for a period longer than one year from the date the attachment order was initially made?
Facts
- The GST department, after issuing a show-cause notice, ordered the provisional attachment of the petitioner’s bank account, citing the need to protect the interest of the revenue.
- The petitioner’s request to the department to de-freeze the account was rejected.
- More than one year had passed since the date on which the attachment order was made.
- The assessee filed a writ petition before the High Court, arguing that as per the specific provisions of Section 83(2) of the CGST Act, the attachment had automatically lapsed by law and was no longer valid.
Decision
The High Court ruled decisively in favour of the assessee.
- It held that the language of Section 83(2) of the Act is clear and unambiguous. A provisional attachment ceases to have any legal effect after the expiry of one year from the date of the order.
- Since the one-year statutory period had lapsed in this case, the attachment of the bank account was no longer valid and was set aside.
- To ensure immediate relief, the court explicitly directed the concerned bank manager to give effect to its order and allow the assessee to operate the account, without waiting for any further communication from the GST department (DGGI).
Key Takeways
- Attachment has a Strict One-Year Lifespan: A provisional attachment under Section 83 is a temporary and drastic power given to tax authorities. It comes with a strict, built-in expiry date of one year.
- The Expiry is Automatic: The attachment does not need to be formally lifted by the department after the one-year period is over; it ceases to have effect automatically by the operation of the law itself.
- A Safeguard for Taxpayers: This one-year limit is a crucial legislative safeguard for taxpayers. It prevents the department from indefinitely freezing a business’s working capital and causing undue hardship while proceedings are still pending.
- Enforcing Judicial Orders: The court’s specific direction to the bank manager to act on its order without waiting for the department’s instructions is a significant measure to ensure that its orders are implemented immediately and the taxpayer gets prompt and effective relief.
CM APPL. 42732 of 2024
| • | Bank: HDFC Banks |
| • | Branch: Rohini |
| • | Account No.: 50200001632681 |
“83. Provisional attachment to protect revenue in certain cases.—
(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in subsection (1A) of section 122, in such manner as may be prescribed.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1). ”
“4. Section 83 of the Act, under which the impugned communication dated 14.08.2019 has been issued, reads as under:—
“83. Provisional attachment to protect revenue in certain cases. (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, 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.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).”