Provisional Attachment under Section 83 valid when prima facie view arises that attachment is necessary to protect revenue interest

The Delhi High Court has ruled that provisional attachment of assets under Section 83 of the CGST Act is valid when there's a prima facie view that it's necessary to safeguard government revenue. The court dismissed a petition against such an attachment, agreeing with the Commissioner that a link existed between the taxpayer and a supplier alleged to be non-existent, who had issued invoices without actual supply.

The Hon'ble Delhi High Court in the case of JV Creatives (P.) Ltd. v. Principal Additional Director General, DGGI, Gurugram Zonal Unit [W.P. (C) No. 10042 of 2024 dated July 23, 2024] dismissed the writ petition filed against the order of provisional attachment passed under Section 83 of the Central Goods and Services Tax Act ("the CGST Act") wherein the Commissioner prima facie opined that passing of order was necessary to protect revenue interest in case where the Hon'ble High Court was of the view that there is nexus between the supplier and recipient in case wherein it has been alleged that the supplier was non-existent and the invoice has been issued without the supply of goods.

Facts:

JV Creatives (P.) Ltd. ("the Petitioner") filed a writ petition against order dated June 26, 2024 ("the Impugned Order") passed by DGGI Gurugram ("the Respondent") wherein the order of provisional attachment has been passed under Section 83 of the CGST Act, alleging that the supplier of the Petitioner was non-existent and invoice have been issued without the supply of goods.

Held:

The Hon'ble Delhi High Court in the case of W.P. (C) No. 10042 of 2024 held that the facts clearly indicate that the Respondent Commissioner found it necessary to provisionally attach the Petitioner bank account to protect the interest of the revenue, it clearly seems that there is nexus between the supplier and the Petitioner. Hence, the writ petition is dismissed and the Impugned Order is upheld.

Our Comments:

As per Section 83(1) of the CGST Act, after initiation of assessment (Chapter-XII), inspection, search, seizure and arrest (Chapter XIV) and Demand and Recovery (Chapter XV) proceedings, the Commissioner is empowered to attach any property provisionally (including bank account) belonging to any taxable person or any person under Section 122(1A) of the CGST Act to protect government revenue interest. However, as per Section 83(2) of the CGST Act, the provisional attachment is effective only for a period of one year from the date of passing of order under Section 83(1) of the CGST Act. Further, as per Rule 159(1) of the CGST Rules, the Commissioner is required to pass order in Form GST DRC-22, for attachment of property, including bank account. Furthermore, as per Rule 159(5) of the CGST Rules, 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.

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