Facts of the Case

  1. A batch of four petitions came before the Gujarat High Court, namely Special Civil Application Nos. 6853 of 2022, 6718 of 2022, 8355 of 2022 and 8388 of 2022.
  2. Since all the petitions involved a common thread of facts and an identical issue, the High Court heard and considered them together through a common oral order.
  3. The petitioners challenged the provisional attachment of their bank accounts by the GST authorities in exercise of powers under Section 83 of the CGST Act, 2017.
  4. In the representative petition, Special Civil Application No. 6853 of 2022, the petitioner sought setting aside of the attachment orders dated 11 March 2021 and 12 October 2021, passed by the Commissioner of CGST and Central Excise, Ahmedabad in FORM GST DRC-22.
  5. The attached accounts in the representative matter were maintained with the concerned banks, and the petitioner sought cancellation of the impugned attachment orders and release of the bank accounts.
  6. The petitioner had also made a representation before the authorities seeking defreezing of the bank accounts. The rejection of such request was also questioned.
  7. Across the connected petitions, a total of nine bank accounts had been provisionally attached.
  8. During the hearing, counsel for the respondents fairly admitted that the statutory period of one year had expired.
  9. Consequently, as contemplated under Section 83 of the CGST Act, the provisional attachment of seven out of the nine bank accounts had ceased to have effect.
  10. The petitioners placed on record an email communication dated 19 October 2022 from the competent authority of the Preventive Section, CGST Gandhinagar, confirming cessation of the attachments in respect of seven accounts because the one-year period had expired.
  11. The communication specifically stated that the relevant DRC-22 had been issued on 8 October 2021 and, by virtue of Section 83(2), the provisional attachments had ceased to have effect after expiry of one year, i.e. after 7 October 2022.
  12. The communication further referred to completion of investigation in the cases of certain taxpayers, appearance pursuant to summons, issuance and reply to FORM GST DRC-01A, issuance of show cause notices, and pendency of adjudication.
  13. It also referred to paragraph 3.5 of the CBIC Guidelines dated 23 February 2021, while acknowledging that provisional attachments under Section 83 had ceased to have effect upon expiry of one year from the date of DRC-22.
  14. The communication recorded that the authorities were in the process of intimating the concerned banks after obtaining approval of the competent authority.
  15. The petitioners nevertheless complained that, despite expiry of the one-year period, the banks had not been informed about cessation of the provisional attachments.
  16. The respondents informed the High Court that the authorities would intimate the concerned banks within one week to enable operation of the bank accounts by the petitioners.
  17. As regards the remaining two bank accounts, fresh orders of provisional attachment had been passed.
  18. The High Court observed that those fresh attachment orders would give rise to a fresh cause of action in accordance with law.

Issues Involved

The principal issues arising before the High Court were:

  1. Whether a provisional attachment of a bank account under Section 83 of the CGST Act can continue to operate after expiry of the statutory period of one year.
  2. Whether provisional attachment automatically ceases to have effect upon expiry of one year under Section 83(2) of the CGST Act.
  3. Whether the authorities are required to communicate cessation of the provisional attachment to the concerned banks so that the taxpayers can actually resume operation of their accounts.
  4. Whether the petitioners’ grievance survives where the statutory period of attachment has already expired.
  5. What is the legal consequence where fresh provisional attachment orders are subsequently passed in respect of certain bank accounts.

Petitioner’s Arguments

The petitioners’ case, as emerging from the order, was substantially as follows:

  1. Their bank accounts had been provisionally attached by the GST authorities under Section 83 of the CGST Act through orders in FORM GST DRC-22.
  2. The petitioners sought cancellation of the impugned attachment orders and release or defreezing of the bank accounts.
  3. Their representations seeking defreezing of the bank accounts had not yielded the requested relief and the adverse decision was also challenged.
  4. The petitioners relied upon the expiry of the statutory period of one year applicable to provisional attachment.
  5. The petitioners produced the email communication dated 19 October 2022 issued by the competent authority of the Preventive Section, CGST Gandhinagar, which confirmed that the attachments concerning seven bank accounts had ceased to have effect because the one-year period had expired.
  6. A specific grievance was raised that, notwithstanding expiry of the statutory period, the concerned banks had not been informed about cessation of the provisional attachment.
  7. Therefore, the practical restriction on operation of the accounts continued despite the statutory attachment having ceased to have effect.

Respondent’s Arguments / Stand

The respondents’ position before the High Court was materially as follows:

  1. Counsel for the respondents fairly admitted that the period of one year had expired.
  2. Consequently, the respondents accepted that, in terms of Section 83 of the CGST Act, the provisional attachment concerning seven out of nine bank accounts had ceased to have effect.
  3. The departmental communication dated 19 October 2022 further confirmed the statutory cessation of those attachments.
  4. The respondents stated before the Court that the authorities would intimate the concerned banks regarding cessation of the attachment.
  5. A specific assurance was given that such communication would be made within one week from the date of the Court’s order, thereby enabling the petitioners to operate the concerned bank accounts.
  6. Regarding the remaining two bank accounts, it was stated that fresh provisional attachment orders had been passed.

Court Order / Findings

The Gujarat High Court recorded and held, in substance, as follows:

1. Common Issue Justified Common Disposal

The Court noted that all the captioned petitions involved a common thread of facts and an identical issue. Therefore, they were considered simultaneously and disposed of through a common order.

2. Seven Attachments Ceased After Expiry of One Year

The respondents fairly admitted that the one-year period had expired. The Court accordingly recorded that, as contemplated under Section 83 of the CGST Act, the provisional attachment of seven bank accounts out of the total nine had ceased to have effect.

3. Grievance Regarding Those Seven Accounts Did Not Survive as to Continuance of Attachment

Since the statutory period had expired and the attachments had ceased to have effect, the substantive grievance regarding continued validity of those seven provisional attachments did not survive.

4. Departmental Communication Taken on Record

The High Court took on record the email communication dated 19 October 2022 issued by the competent authority of the Preventive Section, CGST Gandhinagar.

The communication confirmed, inter alia, that:

  • DRC-22 had been issued on 8 October 2021;
  • under Section 83(2), the provisional attachments had ceased to have effect after expiry of one year;
  • the relevant date of cessation was stated as 7 October 2022;
  • paragraph 3.5 of the CBIC Guidelines dated 23 February 2021 was considered; and
  • the department was in the process of intimating the banks with approval of the competent authority.

5. Banks to Be Intimated Within One Week

When the petitioners complained that the banks had not yet been informed despite expiry of the statutory period, the respondents stated that the authorities would intimate the concerned banks within one week.

The purpose of such communication was to enable the petitioners to operate their bank accounts.

6. Fresh Attachment Orders Create Fresh Cause of Action

Regarding the remaining two bank accounts for which fresh provisional attachment orders had been passed, the Court observed that such fresh orders would give rise to a fresh cause of action in accordance with law.

7. Petitions Disposed Of

All the petitions were disposed of in terms of the Court’s observations and directions. The notices in each petition were discharged subject to those observations.

Important Clarification

A. Provisional Attachment Is Not Indefinite

The most important legal clarification emerging from the order is that provisional attachment under Section 83 is not intended to continue indefinitely. Where the statutory one-year period expires, the attachment ceases to have effect in accordance with Section 83(2).

B. Cessation by Operation of the Statutory Provision

The order is significant because the departmental side itself acknowledged that the provisional attachments had ceased after expiry of one year. Therefore, continued practical freezing of accounts cannot be justified merely because administrative communication to the bank remains pending.

C. Practical Defreezing Requires Prompt Communication to Banks

Although statutory cessation occurs upon expiry of the prescribed period, a taxpayer may remain unable to operate the account if the bank has not received appropriate communication from the department. The order therefore has substantial practical importance: the authorities stated that the banks would be informed within one week.

D. Fresh Attachment Is Legally Distinct from Expired Attachment

The Court did not hold that no fresh provisional attachment could ever be made. Instead, it specifically noted that where fresh attachment orders had been passed concerning two bank accounts, those orders would provide a fresh cause of action in accordance with law.

Accordingly, an expired attachment and a subsequent fresh attachment must be legally examined on their own footing.

E. Pendency of Adjudication Does Not Alter the Recorded Statutory Cessation

The departmental communication noted that investigation had been completed in certain cases, DRC-01A proceedings had taken place, show cause notices had been issued and adjudication remained pending. Nevertheless, the communication expressly recognised cessation of the earlier provisional attachments upon expiry of one year.

F. No Wider Proposition Should Be Attributed Beyond the Order

The judgment is a short common oral order disposing of the petitions on the basis of the statutory position, departmental communication and statements made before the Court. It should not be read as laying down that every subsequent or fresh attachment is automatically invalid. The legality of a fresh order may constitute a separate cause of action and must be tested independently.

Section Involved

Section 83 of the Central Goods and Services Tax Act, 2017 – Provisional Attachment to Protect Revenue in Certain Cases

The controversy concerned exercise of power to provisionally attach bank accounts under Section 83 of the CGST Act.

Section 83(2) – Core Provision Relevant to the Case

The essential statutory principle relevant to the dispute is that every provisional attachment ceases to have effect after expiry of one year from the date of the order made under Section 83(1).

This provision formed the central basis for the acknowledgment that the attachments of seven bank accounts had ceased to have effect.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783489657_1380compressed.pdf

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