When a taxpayer finds their bank accounts frozen or faces any attachment under the Goods and Services Tax ( GST ) Act, the instinctive response is often to rush to court. This often to get immediate relief through the writ petition. However, the responses always depend on the facts and circumstances of the cases.

Coming to the relief side, the court will always follow the statute where it is clearly stated that taxpayer must approach the commission first for the relief with regards to the attachment. This has been clarified in the judgment by the Punjab and Haryana High Court in the case of Magna Wires Pvt. Ltd. & Others vs Union of India & Others.

LEGAL PROVISIONS ON ATTACHMENT UNDER GST ACT

The Section 83 and the Rule 159 deals with the attachment under the Act.

SECTION 83 : PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES

The Section 83 of the CGST Act is a tool given to the authorities to protect the interest of government revenue during ongoing investigations or assessments. The section allows the Commissioner to provisionally attach the property or bank accounts of a taxable person to prevent the potential loss of revenue to the exchequer.

However, this power is not unrestricted and can be exercised only when proceedings are pending under specific provisions, namely Sections 62 (best judgment assessment), 63 (assessment of unregistered persons), 64 (summary assessments), 67 (search and seizure), 73 (tax not paid/short paid without fraud), or 74 (tax not paid/short paid with fraud).

The Commissioner, or an authorized officer, must form an objective opinion and issue a written order for attachment in accordance with Rule 159 of the CGST Rules, 2017. The order must identify the property or bank accounts to be attached and must follow procedural safeguards to prevent abuse of power. The attachment covers both movable and immovable properties and effectively restricts the taxpayer from dealing with those assets.

The provisional attachments do not have indefinite effect and automatically cease unless renewed under fresh proceedings. The act clearly states that every such attachment shall cease to have effect after one year from the date of the order.

This makes sure that the attachment does not continue indefinitely and that the taxpayer is not burdened unnecessarily beyond a reasonable period unless further proceedings justify a new action.

RULE 159 : PROVISIONAL ATTACHMENT OF PROPERTY

Rule 159 of the CGST Rules, 2017 lays down the detailed procedure and safeguards for provisional attachment of property (including bank accounts) by the Commissioner under Section 83 to protect government revenue.

The procedure starts with the issue of an order detailing the attached property in Form GST DRC-22. In order to impose legal encumbrances, this order must also be sent to the appropriate authorities (such as banks and revenue officials). These attachments automatically expire after a year, although they can be removed sooner with the Commissioner’s written consent.

For perishable or hazardous goods, the taxpayer may secure immediate release by paying either the market value or the estimated tax liability, whichever is lower, following which the Commissioner must issue a release order in Form GST DRC-23. If the taxpayer fails to pay, the Commissioner may dispose of the goods and adjust the proceeds against dues.

WHOM TO APPROACH : COURT OR COMMISSIONER?

From the statute, it is clear that the taxpayer should approach the commissioner, if he / she has any issue with attachment. The Rule 159 – as explained above clearly states about the involvement of the commissioner from the attachment stage, grievance addressing stage to release stage.

The Rule 159(5) reads as follows:

“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.

From the bare reading of the above-mentioned provision, the taxpayer who is inflicted with the attachment should approach the commissioner. He should file an objection in the GST Form DRC – 22A. And the commissioner, after providing the hearing on the objection, shall release the property. Thus, the solution for the attachment is given in the statute itself. When the statute is clear about that, then why should the taxpayer approach the court before availing that remedy.

When should the taxpayer approach the court?

When a taxpayer’s property or bank account is provisionally attached under Section 83 of the CGST Act, Rule 159 of the CGST Rules provides them with the right to file an objection in Form GST DRC-22A, stating that the attachment was either unjustified or that the property in question is not liable to attachment.

Once such an objection is submitted, the Commissioner is duty-bound to provide an opportunity of being heard and to pass a reasoned order either accepting or rejecting the objection. However, if the taxpayer finds that their objection has been ignored, delayed excessively, or not dealt with in accordance with law, they are not left without remedy.

In such cases, the aggrieved person may approach the jurisdictional High Court by way of a writ petition under Article 226 of the Constitution of India, seeking appropriate relief. The court may issue directions to the Commissioner or concerned GST authority to consider the objection expeditiously, in accordance with the principles of natural justice.

Further, if the taxpayer is facing irreparable harm for example, if the attachment has crippled business operations, frozen salaries, or stalled essential payments they may also seek interim or immediate relief, such as a stay on the attachment or partial de-freezing of accounts.

Judicial Ruling – Magna Wires Pvt. Ltd and others vs Union of India and others, 2021

The ruling by the Punjab and Haryana High Court clearly states that the assessee ought to have approached the commissioner instead of approaching the court for the attachment related issues.

The petitioners, including Magna Wires Pvt. Ltd. and other associated entities, approached the High Court seeking relief against the provisional attachment of multiple bank accounts and the blocking of Input Tax Credit (ITC) under Section 83 of the CGST Act, 2017. The GST department had acted without issuing prior notice, leaving the businesses paralyzed unable to pay statutory dues, procure raw materials, or meet day-to-day expenses.

The Court dismissed the petition, ruling that the petitioners had not used the alternate statutory remedy available to them. The bench stated that specifically, Rule 159(5) of the CGST Rules allows an assessee to file objections within 7 days of the attachment, seeking release of property or bank accounts by submitting a representation to the Commissioner of CGST.

Justices Jitendra Chauhan and Vivek Puri stated that “A plain reading of the above-said rules clearly shows that after provisional attachment of the property, the applicant ought to have approached the Commissioner. However, in the present case, the petitioners without availing the efficacious alternative remedy, have approached this Court.”

Thus, if your bank account is attached or property provisionally frozen, your first course of action should be to file an objection before the GST Commissioner, showing that the attachment was unjustified or unlawful. The Commissioner, upon satisfaction and after granting a hearing, can release the attached property.

Why Courts May Not Intervene Immediately

The Courts always discourage bypassing statutory remedies unless there are exceptional circumstances like violation of natural justice, lack of jurisdiction, or irreparable harm. In this case, the Court found no such urgency or procedural lapses, and hence refused to entertain the writ petition.

Key takeaways from this article

• If you receive an order of attachment under Section 83, act swiftly and file an objection within 7 days under Rule 159(5).
• Do not directly approach the High Court unless the Commissioner fails to act or there is clear evidence of procedural irregularity or violation of your fundamental rights.