Top Stories Legality of Bank Attachment under GST without a Show Cause Notice: How to Challenge it [Find Draft Reply Format Here] The provisional attachment of bank accounts is a powerful tool, but its misuse can cause undue hardship to businesses By Adwaid M S – On February 24, 2025 12:53 pm – 3 mins read The Goods and Services Tax (GST) framework provides tax authorities with several enforcement mechanisms, including the power of provisional attachment of bank accounts under Section 83 of the CGST Act, 2017.

However, this power is often misused, particularly when authorities freeze bank accounts after a search without issuing a Show Cause Notice (SCN) under Sections 73 or 74. This article delves into the legal framework surrounding such attachments, judicial rulings against their misuse, and the key steps to draft a reply notice challenging them.

Legal Framework for Bank Attachments Under GST Section 83 of the CGST Act, 2017 provides: “Where during the pendency of any proceedings under Section 62, 63, 64, 67, 73, or 74, the Commissioner thinks it necessary to protect government revenue, he may, by order in writing, attach provisionally any property, including a bank account, belonging to the taxable person.” For a bank attachment order to be legally valid, two crucial conditions must be satisfied: 1. There must be pending proceedings under Sections 62, 63, 64, 67, 73, or 74. 2. The Commissioner must justify that such an attachment is necessary for safeguarding government revenue.

Furthermore, Rule 159 of the CGST Rules, 2017 provides procedural safeguards: ● The Commissioner must issue an attachment order in Form GST DRC-22. ● The affected taxpayer has the right to file an objection within seven days under Rule 159(5). ● The Commissioner, upon review, may release the attachment via Form GST DRC-23. Why the Attachment in This Case Is Unlawful In the draft reply, the taxpayer challenges the attachment of their bank account on the following grounds: 1. No Pending Proceedings Under Sections 73 or 74

● The bank attachment was ordered immediately after a search under Section 67, but no Show Cause Notice (SCN) was issued under Sections 73 or 74. ● As per judicial precedents, mere initiation of a search under Section 67 does not justify invoking Section 83. 2. Judicial Precedents Against Such Attachments Multiple High Court rulings have struck down provisional attachments without pending proceedings: ● Punjab & Haryana High Court in UFV India Global Education (CWP No. 11961 of 2020): ○ The court ruled that bank accounts cannot be attached solely based on a search under Section 67.

○ The attachment was quashed as no subsequent proceedings under Section 73 or 74 were initiated. ● Madras High Court in M/s Prime Gold International Ltd. (W.P. No. 33864 of 2019): ○ Held that provisional attachment orders must be backed by pending tax recovery proceedings. ○ Stated that failure to issue an SCN within a reasonable time makes the attachment unlawful. ● Gujarat High Court in Vinodkumar Murlidhar Chechani (R/Special Civil Application No. 12498 of 2020): ○ Quashed the attachment order as no SCN was issued after the search. ○ Reaffirmed that Section 83 cannot be invoked unless proceedings under Sections 73 or 74 are initiated. Steps to Draft a Reply Notice Against Such Attachments If your bank account has been wrongfully attached under Section 83, it is crucial to submit a legally sound objection letter. Below are key steps to draft an effective reply notice: 1. Acknowledge the Attachment Order

● Mention the reference number and date of the attachment order. ● Confirm receipt and formally submit an objection under Rule 159(5). 2. Challenge the Validity of the Attachment ● Clearly state that no SCN has been issued under Sections 73 or 74. ● Argue that the attachment is illegal under Section 83, as it requires pending proceedings. 3. Cite Relevant Legal Provisions ● Refer to Section 83 of the CGST Act and Rule 159(5) & (6) of the CGST Rules. ● Highlight that mere search and seizure do not authorize bank attachment.

4. Support With Judicial Precedents ● Include relevant High Court judgments proving that such attachments are unlawful when no SCN is issued. ● Stress that courts have repeatedly ruled against such arbitrary actions. 5. Request Immediate Release of the Attachment ● Formally request the revocation of the bank account attachment. ● Refer to Form GST DRC-23, which mandates release when no proceedings are pending. 6. Attach Supporting Documents ● Copies of court rulings cited in the reply.

● Official correspondence showing no SCN has been issued. Conclusion The provisional attachment of bank accounts is a powerful tool, but its misuse can cause undue hardship to businesses. The law is clear—bank accounts cannot be attached under Section 83 unless proceedings under Sections 73 or 74 are pending. Courts have consistently held that mere searches under Section 67 do not justify attachment. If you are facing an illegal bank attachment, filing a well-reasoned objection citing judicial precedents and Rule 159(5) is the best course of action to seek its revocation.