Provisional Attachment of Property Under GST Insights

PROVISIONAL ATTACHMENT OF PROPERTY UNDER GOODS AND SERVICES TAX LAW

A. MEANING AND STATUTORY PROVISIONS:

1. In fiscal jurisprudence, meaning of attachment of property is an action of the departmental authority of seizing of the property of the specified person / persons, who evades / evade tax by any specified means. It is an initial step to demand and recover the tax due to the Government from the evader of tax. It is well known fact that the demand and recovery proceedings consume a lot of time in final disposal of the case. In the interregnum, in order to protect the interest of Revenue, qua Government revenue, attachment of property including freezing of bank account becomes sine qua non, especially when law permits so to do. During this period, attachment of property or freezing of bank account remains provisional in GST law. It means that the person against whom the action of attachment of property is purported to be taken cannot sale the attached property or cannot transfer any amount from the freezed bank account. This Article critically explores the scope of legal embodiments enshrined under the Central Goods and Services Tax Act, 2017 in the light of judicial pronouncements made by the Apex Court and the High Courts time and again.

2. The provisional attachment of property including freezing of bank accounts belonging to certain specified persons are governed by the provisions contemplated under Section 83 of the Central Goods and Services Act, 2017 (in short CGST Act / GST Act), as well as Section 83 of the State / Union Territory Goods and Services Tax Act, 2017 (in short SGST Act / UT GST Act / GST Act), being analogous to each other. Although the power of provisional attachment of property including freezing of the bank account is draconian in nature, yet the Legislature in its wisdom has incorporated it in statute book in the interest of Revenue. The concept of provisional attachment of property including bank accounts is not a new concept in fiscal jurisprudent, but is already in existence in Income Tax Act, Customs Act, Central Excise Act, etc. Excerpts of the provisions of this section, as it remained in force from 01.07.2017 to 31.12.2021, are framed hereunder for the purpose of convenience.

Section 83 of the Central Goods and Services Act, 2017 as originally enacted:

"(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).

3. However, Clause 106 of the Memorandum Explaining the provisions in Finance Bill 2021 proposed to amend Section 83 of the Central Goods and Services Tax Act, 2017 stating that “Section 83 of the CGST Act is being amended so as to provide that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made thereunder.” Accordingly, Section 115 of the Finance Act, 2021 substituted Section 83(1) of the CGST Act, 2017, which came into being w.e.f. w.e.f. 01.01.2022, stating thus: In section 83 of the Central Goods and Services Tax Act, for sub-section (1), the following sub-section shall be substituted, namely:––

“(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 sub-section (1A) of section 122, in such manner as may be prescribed.”

However, Sub-section (2) of Section 83 has remained the same as it was originally enacted in the GST Act.

B. ANALYSIS OF SECTION 83 OF THE CGST ACT BEFORE AMENDMENT:

4. In the interregnum, the Supreme Court in Civil Appeal No. 1155 of 2021 delivered a judgment on 20.04.2021 in the matter of Radha Krishan Industries Vs. State of Himachal Pradesh [2021 (48) G.S.T.L. 113 (S.C.)], which was related to Himachal Pradesh Goods and Services Tax Act, 2017, and laid down certain criteria by explaining the provisions contained in unamended Section 83(1) of the HPGST Act, 2017 corresponding to CGST Act, 2017.

5. Taking into consideration the Marginal Note attached to Section 83, the Supreme Court has explained the meaning and purport of Section 83 stating that the marginal note to Section 83 provides some indication of Parliamentary intent. Section 83 provides for “provisional attachment to protect revenue in certain cases”. Marginal notes, it is well-settled, do not control a statutory provision but provide some guidance in regard to content. Put differently, a marginal note indicates the drift of the provision. With these prefatory comments, the judgment must turn to the essential task of statutory construction. The language of the statute has to be interpreted bearing in mind that it is a taxing statute which comes up for interpretation. The provision must be construed on its plain terms. Equally, in interpreting the statute, regard must be given to the purpose underlying the provision. An interpretation which effectuates the purpose must be preferred particularly when it is supported by the plain meaning of the words used.

B-1. Six Point Tests pronounced by the Supreme Court:

6. Now, explaining the provisions of Section 83(1), the Supreme Court has held that Sub-section (1) of Section 83 can be bifurcated into several parts. The first part provides an insight on when in point of time or at which stage the power can be exercised. The second part specifies the authority to whom the power to order a provisional attachment is entrusted. The third part defines the conditions which must be fulfilled to validate the power or ordering a provisional attachment. The fourth part indicates the manner in which an attachment is to be levelled. The final and the fifth part defines the nature of the property which can be attached. Each of these special divisions is for convenience of exposition. While they are not watertight compartments, ultimately and together they aid in validating an understanding of the statute. Each of the above five parts is now interpreted and explained below:

(i) The power to order a provisional attachment is entrusted during the pendency of proceedings under any one of six specified provisions : Section 62, 63, 64, 67, 73 or 74. In other words, it is when a proceeding under any of these provisions is pending that a provisional attachment can be ordered;

(ii) The power to order a provisional attachment has been vested by the Legislature in the Commissioner;

(iii) Before exercising the power, the Commissioner must be “of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do”;

(iv) The order for attachment must be in writing;

(v) The provisional attachment which is contemplated is of any property including a bank account belonging to the taxable person; and

(vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute.

7.  The Supreme Court has further held that under sub-section (2) of Section 83, a provisional attachment ceases to have effect upon the expiry of a period of one year of the order being passed under sub-section (1). The power to levy a provisional attachment has been entrusted to the Commissioner during the pendency of proceedings under Section 62, 63, 64, 67, 73 or as the case may be, Section 74. Section 62 contains provisions for assessment for non-filing of returns. Section 63 provides for assessment of unregistered persons. Section 64 contains provisions for summary assessment. Section 67 elucidates provisions for inspection, search and seizure. Section 73, where notice is issued for normal period of limitation, is similarly worded except “fraud, or any wilful mis-statement or suppression of facts to evade tax” as compared to Section 74, where notice is issued for extended period of limitation. Therefore, the Supreme Court adverted to Section 74, which relates to determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful mis-statement or suppression of facts.

8. Now in this backdrop, the Apex Court has adumbrated that it becomes necessary to emphasize that before the Commissioner can levy a provisional attachment, there must be a formation of “the opinion” and that it is necessary “so to do” for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency of the proceedings under the stipulated statutory provisions noticed earlier. An attachment which is contemplated in Section 83 is, in other words, at a stage which is anterior to the finalization of an assessment or the raising of a demand. Conscious as the Legislature was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, it conditioned the exercise of the power by employing specific statutory language which conditions the exercise of the power. The language of the statute indicates first, the necessity of the formation of opinion by the Commissioner; second, the formation of opinion before ordering a provisional attachment; third the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourth, the issuance of an order in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory pre-conditions by the Commissioner. While conditioning the exercise of the power on the formation of an opinion by the Commissioner that “for the purpose of protecting the interest of the government revenue, it is necessary so to do”, it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue.

9. By utilizing the expression, the Apex Court further elaborated that, “it is necessary so to do” the Legislature has evinced an intent that an attachment is authorized not merely because it is expedient to do so (or profitable or practicable for the revenue to do so) but because it is necessary to do so in order to protect interest of the government revenue. Necessity postulates that the interest of the revenue can be protected only by a provisional attachment without which the interest of the revenue would stand defeated. Necessity in other words postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assessee can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue.

B-2. Doctrine of Proportionality / Necessity of Tangible Material:

10. While speaking for the purpose and necessity of provisional attachment, the Supreme Court has moved on to explain that these expressions in regard to both the purpose and necessity of provisional attachment implicate the doctrine of proportionality. Proportionality mandates the existence of a proximate or live link between the need for the attachment and the purpose which it is intended to secure. It also postulates the maintenance of a proportion between the nature and extent of the attachment and the purpose which is sought to be served by ordering it. Moreover, the words embodied in sub-section (1) of Section 83 would leave no manner of doubt that while ordering a provisional attachment the Commissioner must in the formation of the opinion act on the basis of tangible material on the basis of which the formation of opinion is based in regard to the existence of the statutory requirement.

B-3. The machinery provisions of Rule 159 of the CGST / SGST Rules:

11. On the issue of machinery provisions contained in Rule 159, especially Rule 159(5), the Supreme Court has lucidly explained that a significant aspect of Rule 159(5) is that upon the levy of a provisional attachment, the person whose property is attached is empowered to file an objection within seven days on the ground that the property was or is not liable to attachment. In using the expression “was or is no longer liable for attachment”, the delegate of the legislature has comprehended two alternative situations. The first, evidenced by the use of the word “was” indicates that the property was on the date of the attachment in the past not liable to be attached. That is the reason for the use of the past tense “was”. The expression “is not liable to attachment indicates a situation in praesenti. Even if the property, arguably, was validly attached in the past, the person whose property has been attached may demonstrate to the Commissioner that it is not liable to be attached in the present.

12. Further, the Supreme Court has held that the second significant aspect of sub-rule (5) is the mandatory requirement of furnishing an opportunity of being heard to the person whose property is attached. This is in consonance with the principles of natural justice and ensures that a fair procedure is observed. Sub-rule (5) provides for a post-provisional attachment right of :

(i) Submitting an objection to the attachment;

(ii) An opportunity of being heard.

Sub-rule (5) contains clear language to the effect that a person whose property is attached is entitled to two procedural entitlements: first, the right to submit an objection on the ground that the property was not or is not liable to be attached; and second, an opportunity of being heard to the person filing an objection. This is a clear indicator that in addition the filing of an objection, the person whose property is attached is entitled to an opportunity of being heard. It is not open to the Commissioner to hold the view that the only safeguard under sub-rule (5) is to submit an objection without an opportunity of a personal hearing. Such a construction would be plainly contrary to sub-rule (5) which contemplates both the submission of an objection to the attachment and an opportunity of being heard. The opportunity of being heard can be availed of as a matter of right by the person whose property is attached. Both the right to submit an objection and to be afforded an opportunity of being heard are valuable safeguards. The consequence of a provisional attachment is serious. It displaces the person whose property is attached from dealing with the property. Where a bank account is attached, it prevents the person from operating the account. A business entity whose bank account is attached is seriously prejudiced by the inability to utilize the proceeds of the account for the purpose of business. The dual procedural safeguards inserted in sub-rule (5) of Rule 159 demand strict compliance.

B-4. Alternative mode of protection of Government Revenue:

13. Further, it has been held by the Supreme Court that the Commissioner who hears the objections must pass a reasoned order either accepting or rejecting the objections. To allow the Commissioner to get by without passing a reasoned order will make his decision subjective and defeat the purpose of subjecting it to judicial scrutiny. The Commissioner must deal with the objections and pass a reasoned order indicating whether, and if not, why the objections are not being accepted. Sub-rule (6) of Rule 159 allows for the release of a property which either was or is no longer liable for attachment. The form in which such an order has to be passed, namely form GST DRC-23, states that “now there is no such proceeding pending against the defaulting person which warrants attachment” of the account or as the case may be, the property. Sub-rules (5) and (6) do not expressly contemplate a situation in which the person whose property is attached can object on the ground that the attachment is in excess of the amount likely to be due for which proceedings have been launched under the Act. Nor does it provide for a specific opportunity to the taxable person to offer any alternative form of security in lieu of the attachment. Such an opportunity must be read in to the provision to allow for a fair working in practice. Whether any alternative security that is furnished by the taxable person should be accepted and if so, its sufficiency, is a matter for the Commissioner to determine. Undoubtedly, the taxable person may not have a right to demand that only a particular form of security must be accepted. The Commissioner has to decide whether the form of security offered would secure the interest of the revenue. Where the taxable person sets up the plea that the extent of the attachment is excessive or where the taxable person offers an alternative form of security, these are also matters which ought to be determined by the Commissioner in the exercise of powers under Rule 159(5). The scope of objection can also extend to the nature of the property which is being provisionally attached.

14. It follows from this judgment that 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. Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards, i.e. (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. Under sub-section (2) of Section 83, a provisional attachment ceases to have effect upon the expiry of a period of one year of the order being passed under sub-section (1) or if 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.

C. ANALYSIS OF SECTION 83 OF THE CGST ACT AFTER AMENDMENT:

15. Sub-section (2) of Section 83, as substituted by Section 115 of the Finance Act, 2021, which came into being w.e.f. 01.01.2022, postulates that 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 sub-section (1A) of section 122, in such manner as may be prescribed.

16. It follows from this substitution that mainly three changes have been made effective by this substitution from the erstwhile sub-section (1) of Section 83, i.e., (i) change of initiation of provisional attachment; (ii) broadening of scope of provisional attachment; and (iii) expanding the property to be attached., etc. Thus, the effect of this substitution from the erstwhile sub-section (1) of Section 83 is as follows:

(i) Change of initiation of provisional attachment from “during the pendency of any proceedings” to anytime “after the initiation of any proceeding”;

(ii) Broadening of scope of provisional attachment from “under section 62 or section 63 or section 64 or section 67 or section 73 or section 74” to “under Chapter XII, Chapter XIV or Chapter XV”; and

(iii) Expanding the property to be attached from only “belonging to the taxable person” to “belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed”.

C-1. Change of initiation of provisional attachment:

17. Before substitution of sub-section (1) of Section 83, the expression “during the pendency of any proceedings” was related to the proceedings initiated under Section 62 (Assessment of non-filers of returns) or Section 63 (Assessment of unregistered persons) or Section 64 (Summary assessment in certain special cases) or Section 67 (Power of inspection, search and seizure) or Section 73 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts) or Section 74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts).

18. It follows from the above that proceedings under Section 62 or Section 63 or Section 64 would end with an assessment order is passed. As a result, the proceedings of provisional attachment would be lifted automatically. As far as Section 67 is concerned, once the inspection, search and seizure were complete, the attached property required to be released irrespective of any final assessment order is passed under Section 73 or 74 or not. Thus, proceedings under Section 73 or Section 74 had no concern with Section 67 being independent of Section 73 or Section 74 especially provisional attachment under Section 83(1) is concerned. Similarly, under Section 73 and / or Section 74, which related to determination of tax liability, the attachment of property would get lifted after passing of the order, qua, adjudication order.

19. However, after substitution of the expression “during the pendency of any proceedings” with “after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV”, the anomaly of ceasing effect of provisional attachment of property has been removed in the interest of Government revenue. Now, even after passing of the order under specified Chapters, the provisional attachment of the property would not cease automatically until or unless an appeal is filed under Section 107 of the Act of 2017 with payment of prescribed amount of pre-deposit under sub-section (6) of Section 107 for the purpose of stay under Section 107(7) from the operation of the impugned order.

C-2. Broadening of scope of provisional attachment:

20. The expression “section 62 or section 63 or section 64 or section 67 or section 73 or section 74” under erstwhile sub-section (1) of Section 83 has been substituted with the expression “Chapter XII, Chapter XIV or Chapter XV”. Thus, the scope of provisional attachment has been enlarged from specific Sections to Chapters which include in their precincts a number of Sections. Chapter XII includes Section 59 (Self-assessment), Section 60 (Provisional assessment), Section 61 (Scrutiny of returns), Section 62 (Assessment of non-filers of returns), Section 63 (Assessment of unregistered persons), and Section 64 (Summary assessment in certain special cases). Likewise, Chapter XIV includes in its premises Section 67 (Power of inspection, search and seizure), Section 68 (Inspection of goods in movement), Section 69 (Power to arrest), Section 70 (Power to summon persons to give evidence and produce documents), Section 71 (Access to business premises), and Section 72 (Officers to assist proper officers).

21. Similarly, in the matter of Section 73 and Section 74, scope of provisional attachment has been broadened by substituting with Chapter XV, which consists of Section 73 to Section 84. These Sections relate to the postulations as mentioned below: –

(i) Section 73 (Determination of tax [1][, pertaining to the period upto Financial year 2023-24,] not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts);

(ii) Section 74 (Determination of tax [2][, pertaining to the period upto financial year 2023-24,] not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts);

(iii) Section 74A ([3][Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason pertaining to Financial Year 2024-25 onward]);

(iv) Section 75 (General provisions relating to determination of tax);

(v) Section 76 (Tax collected but not paid to Government);

(vi) Section 77 (Tax wrongfully collected and paid to Central Government or State Government);

(vii) Section 78 (Initiation of recovery proceedings);

(viii) Section 79 (Recovery of tax);

(ix) Section 80 (Payment of tax and other amount in instalments);

(x) Section 81 (Transfer of property to be void in certain cases);

(xi) Section 82 (Tax to be first charge on property);

(xii) Section 83 (Provisional attachment to protect revenue in certain cases); and

(xiii) Section 84 (Continuation and validation of certain recovery proceedings).

C-3. Expanding the property to be attached:

22. The expression “belonging to the taxable person” has been substituted by the expression “belonging to the taxable person or any person specified in sub-section (1A) of section 122”. Thus, scope of the person against whom order of the provisional attachment of property is passed by the Commissioner has been extended to “any person specified in sub-section (1A) of section 122” apart from the “taxable person”, which has been retained as such. The expression “taxable person” has been defined under Section 2(107) of the CGST Act to mean “a person who is registered or liable to be registered under section 22 (Persons liable for registration) or section 24 (Compulsory registration in certain cases)”. So far as the expression “any person specified in sub-section (1A) of Section 122” is concerned, this sub-section of Section 122 specifies the persons embodied therein thus:

“Section 122(1A). Any person who retains the benefit of a transaction covered under clause (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.”

23. The person who retains the benefit of a transaction covered under clause (i), (ii), (vii) or clause (ix) of sub-section (1) of Section 122 of the CGST Act embodies the persons thus:

(a) Where a taxable person who supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply [Clause (i) Section 122(1)] – [Supplier];

(b) Where a taxable person who issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder [Clause (ii) Section 122(1)] – [Supplier];

(c) Where a taxable person who takes or utilizes input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder [Clause (vii) Section 122(1)] – [Recipient]; and

(d) Where a taxable person who takes or distributes input tax credit in contravention of section 20 (Manner of distribution of credit by Input Service Distributor), or the rules made thereunder [Clause (ix) Section 122(1)] – [Input Service Distributor].

D. JUDICIAL PRONOUNCEMENTS ON PROVISIONAL ATTACHMENT OF PROPERTY:

D-1. Double proceedings for the same cause of action:

24. The Supreme Court in the case of Radha Krishan Industries supra also settled the issue of proceedings of provisional attachment of property twice for the same facts and same circumstances holding that without change in circumstances, another order on same ground cannot be passed after withdrawal of earlier order on consideration of representations under Section 83(1) of Goods and Services Tax Act, 2017.

D-2. Jurisdictional issue to take action under Section 83 against an Assessee:

25. In the matter of Sidhivinayak Chemtech Pvt. Ltd. Vs. Principal Commissioner of CGST, Meerut [(2023) 6 Centax 187 (Del.)], the Delhi High Court has held that the Principal Commissioner / Commissioner not having jurisdiction, in respect of the territory, where the Assessee’s principal place of business is located, cannot pass attachment order in respect of such Assessee as “taxable person”. Assets of a person falling under sub-section (1A) of Section 122 can be attached only by the Commissioner who exercises jurisdiction in respect of the said “taxable person”. The term 'Commissioner' as used in Section 83 of CGST Act, 2017 would necessarily refer to Commissioner who exercises jurisdiction under CGST Act in respect of “taxable person”. Formation of opinion by Commissioner under Section 83 of CGST Act, 2017 should be based on credible material having live link with formation of opinion.

D-3. Only Competent Authority is empowered to pass an Order:

26. In the matter of Vikas Enterprises Vs. Commissioner of Central Tax (GST) [(2023) 9 Centax 191 (Del.)], the Superintendent (Anti-Evasion) called upon the bank to furnish certain documents pertaining to the petitioner. The said communication further directed the bank not to permit any debit from the petitioner's bank account maintained with the said bank without prior permission of the Department. The said communication was an order under Section 83 of the CGST Act. However, no such order was passed by the Commissioner. The order in Form DRC-22 had not been issued. The impugned communication was emanated from the Superintendent (Anti-evasion) and not by the Commissioner exercising jurisdiction in respect of the tax payer. The said communication also did not indicate that it was issued with the authority of the Commissioner. The Delhi High Court has held that Revenue Officers should act in accordance with statutory provisions as same has been disregarded with impunity. A cost of Rs. 5,000 has been imposed upon the respondents, which is to be recovered from concerned officer (Respondent No. 2).

D-4. Proceedings under specified Sections / Chapters is necessary for taking action under Section 83 of the CGST Act:

27. In the case of Om Prakash Gupta Vs. Principal Additional Director General DGGI [(2025) 31 Centax 53 (Del.)], the Assessee challenged attachment of his bank account under Section 83 of CGST Act and SCN on ground of lack of prior DRC-01A intimation, and that no proceedings were initiated before attachment and there was also absence of Commissioner’s opinion justifying attachment. Co-ordinate Bench of the Delhi High Court had held that there was no requirement that material on basis of which Commissioner had formed an opinion must be included in an order passed under Section 83(1) ibid and, thus, contention that impugned order was vitiated as it did not include all such material, was unmerited. Said order was assailed by Assessee before Supreme Court. The Supreme Court passed order during pendency of writ petition that proceedings in impugned SCN had continued and an order under Section 74 ibid was passed and, thus, Assessee had already availed of its appellate remedy under Section 107 in respect of said order. In view of this, only issue that currently remained was in respect of freezing of bank account. The Delhi High Court has further held that after order passed by Supreme Court and culmination of proceedings in respect of SCN, which was impugned, order freezing bank account would also automatically get lifted. Since, Assessee had already availed appellate remedy, freezing bank account of Assessee would stand lifted automatically.

D-5. Non-cooperation by Assessee does not justify provisional attachment:

28. In the case of Mansi Overseas Vs. Principal Commissioner of Goods and Service Tax, East Delhi [(2025) 28 Centax 266 (Del.)], the Assessee challenged order freezing its bank account under Section 83 of CGST Act, 2017. Revenue tax authorities justified attachment based on Assessee’s failure to respond to notices and non-cooperation in tax proceedings. In this case the High Court has held that Power under Section 83 to provisionally attach property is draconian and can only be exercised upon formation of opinion based on tangible material that attachment is necessary to protect government revenue. Mere non-cooperation or failure to respond to notices does not justify provisional attachment. Tax authorities failed to produce cogent material showing reasonable apprehension of default. Thus, the Order of provisional attachment has been quashed by the High Court.

D-6. Non-mention of DIN in assessment order invalidates the attachment proceedings:

29. In the case of Kishor Kumar Reddy Vs. Deputy Assistant Commissioner of State Tax [(2025) 30 Centax 327 (A.P.)], the Petitioner was served with an assessment order passed by revenue for period April, 2018 to March 2019. The Petitioner was also served with a notice in Form GST DRC-16 by revenue directing lower authorities of revenue to attach immovable property of Petitioner. Assessment order, in Form GST DRC-07, was challenged by Petitioner on grounds that said proceeding did not contain signature of assessing officer and also did not mention DIN number on impugned assessment order. The High Court after following various judicial precedents and on basis of circular, No.128/47/2019-GST, issued by C.B.I.C., has held that non-mention of a DIN number would mitigate against validity of such proceedings. Thus, in view of said circular and judicial precedents said assessment order has been set aside.

D-7. Attachment Order based on assumptions and presumption invalidates whole exercise of attachment:

30. In the case of Shubh Corporation Vs. State of Maharashtra [(2025) 30 Centax 513 (Bom.)], during search of Assessee's business premises, revenue found two Backhoe Loaders (JCB). An order was passed attaching Assessee's bank account under Section 83 of MGST Act, 2017. The Assessee contended that no tax amount had been determined or demanded from Assessee and Commissioner had no material to form opinion that attachment of bank account was necessary to protect interest of Government Revenue. The Court has held that power to cause attachment of a bank account is drastic in nature, inasmuch as, it could in certain situations, bring business of a taxable person to a grinding halt. Before attachment is levied, Commissioner has to form an opinion that for purpose of protecting interest of Government Revenue, it is necessary to attach any property including bank account of taxable person. This opinion has to be based on material and cannot be on basis of assumptions and presumptions of Commissioner. In instant case, proceedings under Section 67 ibid stood concluded and there was no determination of any tax amount, or even calling upon the Assessee to show-cause as to why any tax amount ought not to be recovered from him. No proceedings for raising a demand on the Assessee has been filed till date. This apart, before attachment is levied, Commissioner has to form an opinion that for purpose of protecting interest of Government Revenue, it is necessary to attach any property, including Bank Account of taxable person. This opinion has to be based on material, and cannot be on basis of assumptions and presumptions of Commissioner. The Impugned order did not set out any material which formed basis of opinion for attaching bank account of the Assessee. No material which led Commissioner to believe that attachment was necessary to secure interest of Revenue was communicated to the Assessee. Thus, the Impugned order has been set aside.

D-8. Powers of seizure by police under Section 106 of BNSS vests in the jurisdictional Magistrate:

31. In the case of Kirti Deora Vs. State of West Bengal [(2026) 40 Centax 288 (Cal.)], a notice dated January 6, 2025 had been issued by the respondent No. 3 i.e. the Officer-in-charge, Police Station Itanagar, Papumpare, Arunachal Pradesh to the Branch Manager, ICICI Bank thereby calling upon the addressee of the notice, inter alia, to debit freeze the Bank Account standing in the name of the petitioner. Thus, while exercise of initial powers of seizure by police under section 106 of BNSS is ultimately dependent upon reporting thereof to the jurisdictional Magistrate, attachment under section 107 of BNSS can only be done upon orders passed by the jurisdictional Magistrate pursuant to application made by the police. In the case at hand, the Calcutta High Court has held that, there is nothing on record to show that the concerned Investigating Officer has approached the jurisdictional Magistrate and any order of seizure or attachment has been passed or that the debit freezing has been reported to the jurisdictional Magistrate. A debit freeze of bank account cannot be continued indefinitely without any appropriate order of the jurisdictional Magistrate. In such view of the matter, the impugned notice dated January 06, 2025 issued by the mandating debit freezing of the petitioner's bank account cannot be said to be in accordance with law and cannot directed to be continued. Accordingly, such part of the notice dated January 06, 2025 issued by the Officer-in-charge, Police Station Itanagar, Papumpare, Arunachal Pradesh to the Branch Manager, ICICI Bank, whereby the bank has been directed to debit freeze the petitioner's bank account is set aside and quashed. The bank shall allow the petitioner to operate the petitioner's said bank account.

D-9. Attachment Order under GST ceases to have effect after the completion of one year from the date of such order:

32. I the case of Ali K. Vs. Additional Director General, DGGI, Kochi [(2024) 24 Centax 283 (Ker.)], search was conducted at business premises of petitioners. Registration of petitioner’s firm was also cancelled. A show cause notice was issued to petitioners for availing ITC on fake invoices. Said notice was pending adjudication and an order of attachment was issued. After expiry of period prescribed in Section 83 of CGST/KSGST Act, 2017 petitioners addressed communications to respondent authority praying for lifting of attachment. However, respondents did not favour petitioners with any reply and instead, issued orders again provisionally attaching properties belonging to petitioners. Single Member Bench of the High Court while setting aside the impugned order has held that where competent Authority had issued fresh orders of attachment after expiry of one year from date when attachment was first made, since provisions of Section 83 indicate beyond doubt that period of attachment cannot be extended beyond one-year, fresh order of attachment suffered from vice of non-application of mind; and, hence, same is quashed.

33. Revenue challenged the judgment of Single Judge titled as, Additional Director General, DGGI, Kochi Vs. Ali K. [(2025) 27 Centax 209 (Ker.)], who had held that an order of provisional attachment issued under Section 83 of CGST Act cannot continue beyond a period of one year and that on same set of facts, a fresh order of provisional attachment under Section 83(1) of CGST Act, 2017 cannot be issued thereafter. The Double Bench of the High Court has held that although Section 83 underwent an amendment by Finance Act, 2021, provision of sub-section (2) remained unamended, which shows that Parliament intended to confer validity on order of attachment only for a period of one year. Thus, on expiry of period of one year, provisional attachment loses its efficacy and automatically pales into insignificance. Accepting argument of revenue that in order to protect interest of Revenue, it had to be construed as conferring power on authorities to issue fresh orders of attachment, would amount to supplying words to statute. It is well settled in taxation laws, that there cannot be any intendment in a taxing statute. Accordingly instant writ appeal had no merits and has been dismissed.

34. The above judgment of Double Bench of Kerala High Court delivered in the matter of Ali K. supra has also been affirmed by the Supreme Court in the matter of Kesari Nandan Mobile Vs. Office of Assistant Commissioner of State Tax [(2025) 33 Centax 224 (S.C.)]. In this case, after expiry of one year from date of original provisional attachment order, respondent renewed provisional attachment order. The Assessee filed a writ petition contending that respondent had not disposed of objection raised against original provisional attachment order. The Division Bench of the High Court of Gujarat vide impugned order held that provisional attachment orders ceased to have effect after one year, but there was no embargo on authorities to renew attachment upon recording satisfaction. Further, since Assessee was found to be engaged in fraudulent invoicing, leading to loss of revenue by utilizing ITC, provisional attachment of bank accounts was required to be continued. The Assessee vide instant appeal sought declaration that there being no provision for renewal, any such exercise was a nullity in law. In this matter, the Supreme Court has held that there is a complete absence of any executive instruction consistent with legislative policy and intendment of CGST Act authorizing renewal of a lapsed provisional attachment order. Conceding power to revenue to issue a fresh provisional order of attachment after initial order lapsed by operation of law or to renew same would render text of sub-section (2) of Section 83 otiose and accepting reason assigned by High Court would permit revenue to exercise a power which is not statutory intendment. Therefore, respondent could not have issued impugned provisional attachment orders upon previous ones having ceased to have any effect by operation of law after a year of its issuance. Bank accounts attached by respondent shall stand de-freezed and be made operatable forthwith.

E. CONCLUSION:

35. Last but not the least, 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. 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. Under sub-section (2) of Section 83, a provisional attachment ceases to have effect upon the expiry of a period of one year of the order being passed under sub-section (1) or if 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 provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding till the expiry of a period of one year from the date of order made thereunder.

DISCLAIMER: The views expressed in this Article are personal views of the Author.

By G.R Singh , IRS (Retd)

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