Can your bank account be provisionally attached under GST?
What do you mean by provisional attachment?
Provisional attachment is a protective measure that seizes property (including bank accounts and accounts receivable) to ensure satisfaction of a later judgment by the courts. Provisional attachment immobilizes or freezes the attached assets as the debtor is deprived of his right to dispose of the assets.
If the government attaches the property of a person, the person cannot transfer the said property to anyone else. When bank accounts are attached, he will not be allowed to transfer his funds to any other account. Even if he does manage to transfer the attached property or bank account, the transfer shall be deemed void and will not be recognized by law.
How is provisional attachment covered under GST Law?
Provisional attachment to protect revenue in certain cases is covered under Section 83 of CGST Act. The provisions of the law are as below:-
- Where during the pendency of any proceedings under section 62, section 63, section 64, section 67, 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.
- Such provisional attachment shall cease to exist after the expiry of 1 year from the date of the order made under sub-section (1).
What proceedings are required to be pending for provisional attachment to take place?
Proceedings under the following sections are required to be pending in order to initiate provisional attachment proceedings under Section 83?
- section 62 – Assessment of non-filers of returns
- section 63 – Assessment of unregistered persons
- section 64 – Summary assessment in certain special cases
- section 67 – Proceedings related to inspection, search and seizure
- section 73 – Demand raised in cases other than those involving fraud or willful misrepresentation of facts
- section 74 – Demand raised in cases involving fraud or willful misrepresentation of facts
In the case of Kaish Impex Private Limited it was held by the High Court that, Section 83 read with section 159(2) and the form GST DRC-22 shows that a proceeding has to be initiated against a specific taxable person. An opinion has to be formed that, to protect the interest of Revenue an order of provisional attachment is necessary.
The format of the order (form GST DRC-22), also specifies the particulars of a registered taxable person and which proceedings have been launched against the aforesaid taxable person indicating a connection between the proceedings to be initiated against a taxable person and provisional attachment of bank account of such taxable person.
Therefore, even though specified proceedings have been launched against one taxable person, bank account of another taxable person can be provisionally attached merely based on the summons issued under section 70 to him.
What is the process for provisional attachment?
Provisional Attachment under GST is not applicable every time
M/S Patran Steel Rolling Mill vs Assistant Commissioner Of State (20.12.2018)
High Court advised caution to the concerned authorities that while exercising powers under section 83 of The GGST Act. It stated that
- The authorities should try to balance the interest of the Government revenue as well as a dealer to ensure that while the interest of the revenue is safeguarded, the dealer is also in a position to continue with his business, because it is only if the dealer continues with the business that he would generate more revenue.
- The authorities should keep in mind that bringing the business of a dealer to a halt does not in any manner serve the interest of the revenue. Therefore, while taking action under section 83 of the CGST Act, the concerned authorities should take care to ensure that equities are maintained and while securing the interest of the revenue, they should attempt to see that the dealer is in a position to continue with the business.
- The court does not intend to lay down any absolute proposition that in no case drastic action should be taken, but that the respondents should consider the background and history of the dealer as well as his financial position to ascertain as to whether or not he would otherwise be in a position to pay the dues that may be assessed upon the culmination of any assessment proceedings that may be initiated.
- Drastic powers under section 83 of the Act should not be exercised as a matter of course, but only after due application of mind to the relevant factors
Gehna trading LLP and DNB multitrade India private limited vs Union of India
The court stated and assumed that the section 62, 63, 64, 67, 73 and 74 mentioned in section 83 of the Act are not applicable to the petitioner but issued summon as per the pursuant to the inquiry adding the M/s. Maps Global under section 67 of the Act, as per the summon. Therefore the judges said that the attachment powers might come to rescue the government revenue but are still not acceptable to apply them to any situation without properly understanding them.
Attachment is only effective when Proceedings are Pending – Kushal Ltd Vs UoI (Gujarat High Court)
- Section 83 of the CGST Act makes it clear that an essential condition for exercising powers under this provisions is that proceedings should be pending u/s 62, 63, 64, 67 or 74 of the CGST Act.
- If the proceedings u/s 67 are no longer pending and pursuant to search, proceedings under any of the other sections mentioned in Section 83 were not initiated, then, on the date when the orders of provisional attachment came to be passed, the basic requirement for exercising powers u/s 83 is not satisfied.
- Hence the provisional attachment is not in accordance with the provisions of Section 83 and cannot be sustained.
Power to provisionally attach bank accounts is a drastic power. Considering the consequences that occur from provisional attachment of bank accounts, the Courts have repeatedly emphasized that this power is not to be routinely exercised. Under Section 83, the law has no doubt conferred power on the authorities to provisionally attach bank accounts to safeguard government revenue, but the same is within well-defined ambit. Only upon contingencies provided therein that the power under section 83 can be exercised.