Provisional attachment of bank account is to be lifted up after one year

The Hon'ble Bombay High Court in Bharat Parihar v. State of Maharashtra Thr. PP Office and Ors. [Writ Petition No. 3742 of 2023 dated June 30, 2023] set aside the provisional attachment order and held that the provisional attachment order is not valid after one year.

Facts

Bharat Parihar ("the Petitioner") had abank account with the Yes bank which was provisionally attached on April 21,2022 by the Revenue department ("the Respondent") and was communicated to the Petitioner on April 19, 2023 also retained under Section 83 of Central Goods and Services Tax Act, 2017 ("the CGST Act").  The Petitioner filed the writ petition as his objections to provisional attachment of the bank account were disposed off under Rule 159(5) of the Central Goods and Services Tax Rules, 2017 ("the CGST Rules").

The Respondent contended that the order under Rule 159(5) of the CGST Rules disposing off  the objections attaching the bank account provisionally is an appealable order and therefore, the writ petition should not being entertained and also relied on Section 107 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") in support of the contention that the same is an appealable order.

The Petitioner contended that the provisional attachment could not have effect after the expiry of a period of "one year" from the date of the order as per Section 83(2) of the CGST Act.

The Petitioner relied upon the judgment of the Hon'ble Supreme Court in Radha Krishan Industries vs. State of Himachal Pradesh[Civil Appeal No 1155 of 2021 dated April 20, 2021]wherein it was held that the order disposing the objections to provisional attachment of bank account is not an appealable order, the only remedy available is the invocation of the writ jurisdiction under Article 226 of the Constitution of India.

Issue

Whether the provisional attachment of bank account is to be lifted up after one year?

Held

The Hon'ble Bombay High Court in Writ Petition No.3742 of 2023 held as under:

• Observed that, the Respondent has failed to show that the order was passed and served on the Petitioner, much less prior to the provisional attachment order ceased to operate by virtue of Section 83(2) of the CGST Act and the communication dated April 19, 2023, furthermore no fresh order had been passed by the Respondent to attach the Petitioner's bank account on April 19, 2023.
• Opined that, the noting in the file of the Respondent could not constitute an order without a formal order, as the law may mandate, being passed and being communicated to the affected person, whose bank account was attached.
• Held that, the communication dated April 21, 2022, for provisionally attaching the bank account of the Petitioner was illegal and invalid  as per Section 83(2) of the CGST Act.

Relevant Provisions

Section 83 of the CGST Act

"Provisional attachment to protect revenue in certain cases

83. (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.

(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)."

Rule 159(5) of the CGST Rules

"Provisional attachment of property

Any person whose property is attached may file an objection in FORM GST DRC-22A to the effect that the property attached was or is not liable to attachment, and the Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC- 23."

Our comments

Provisional Attachment of Property/ Bank Account

Section 83(1) of the CGST Act that deals with provisional attachment of any property to protect revenue, has been amended in a manner, to widen the scope of the power to provisionally attach any property by replacing specified Sections covered therein with complete Chapters of the CGST Act. Also, it is provided that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII (assessment), Chapter XIV (inspection, search, seizure and arrest) or Chapter XV (Demands and Recovery) till the expiry of a period of one year from the date of order made thereunder.

In addition, the Commissioner is now empowered to provisionally attach, property belonging to any persons who retain the benefits arising out of an offence or at whose instance the offence is committed.

However, in all cases, the provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the said order.