Attachment Lifted: Provisional Attachment of Bank Accounts Must Be Removed Upon Filing of GST Appeal
The Delhi High Court ruled that the provisional attachment of a taxpayer’s bank accounts under the GST Act becomes unsustainable and must be lifted immediately once the taxpayer files a statutory appeal and makes the mandatory pre-deposit required under the law.
Key Points of the Judicial Ruling
- Attachment Becomes Superfluous: The court held that the purpose of provisional attachment (typically done under Section 83 of the CGST Act to secure revenue when proceedings are pending) is to protect the interest of the revenue. Once the tax demand is challenged in an appeal and the mandatory 10% pre-deposit has been made under Section 107(6), the interest of the revenue is considered sufficiently protected.
- Taxpayer’s Rights Restored: Allowing the provisional attachment to continue after the statutory pre-deposit is made would defeat the purpose of the appellate mechanism and unduly hamper the taxpayer’s business operations, even though they have complied with the statutory requirement for filing the appeal.
- Coercive Action Barred: The ruling effectively prevents the tax department from maintaining coercive measures, such as freezing bank accounts, against a taxpayer who has actively pursued their statutory right to appeal and fulfilled the necessary pre-conditions for that appeal.