Provisional attachment of bank account ‘patently illegal’ if search proceedings concluded

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The Hon’ble Punjab and Haryana HC in UFV India Global Education v. Union of India & Ors. [CWP No. 11961 of 2020 (O&M) dated September 9, 2020] held that provision attachment of bank account is patently illegal when the proceedings initiated under Section 67 of the Central Goods and Services Act, 2017 (“CGST Act”) has already been over and directed the release of provisionally attached bank account of the UFV India Global Education.

Facts:

UFV India Global Education (“the Petitioner”) is carrying out the academic programs in India of the University of Fraser Valley, Canada (“the UFV, Canada”).

On July, 27, 2020 the officials of the Directorate General of Goods and Services Tax Intelligence, Chandigarh Zonal Unit (“DGGI”) visited the premises of the petitioner and recorded the statements of its Associate Director(s). A panchnama was prepared on the said date which shows that the authorized persons of the petitioner cooperated with DGGI and provided access to all the required documents. On July 30, 2020, the Officer of the DGGI sent an e-mail to the petitioner that its bank account has been provisionally attached under Section 83 of the CGST Act.

Thereafter, objection was filed against provisional attachment of bank account and it was submitted that the Petitioner had to make the urgent payments, therefore, account may be released from the attachment.

On August 6, 2020, GST Authority (“Department”) passed the order of partly releasing the Bank Account for payments under the Amnesty Scheme but rejected the prayer to release the provisional attachment holding that the petitioner does not have any property other than the Bank Account from where the Government revenue can be protected. Further, order for provisional attachment of bank account was passed on July 29, 2020.

The Petitioner submitted that the order of provisional attachment has been passed under Section 83 of the CGST Act (i.e., provisional attachment to protect revenue in certain cases) on account of launching of the proceedings under Section 67 of the CGST Act (i.e., power of inspection, search and seizure). It is further submitted that the proceedings under Section 67 of the CGST Act have already been over and no proceedings either under Section 63 (i.e., assessment of unregistered persons) or 74 (i.e., determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised in fraud cases) of the CGST Act have been initiated so far, therefore, the attachment order passed under Section 83 of the CGST Act has become redundant.

Issue:

Whether bank account can be provisionally attached when proceedings initiated under Section 67 (i.e., power of inspection, search, and seizure) of the CGST Act have been concluded.

Held:

The Hon’ble HC, Punjab and Haryana in CWP No. 11961 of 2020 (O&M) dated September 9, 2020 held as under:

  • The Court observed that legislature has cautiously used the word “or” for each and every Section of the Act for the purpose of giving powers to the Commissioner to initiate proceedings to provisionally attach the property or the bank account of the taxable person but it is not provided anywhere that the property or the bank account can remain attached under the order passed under Section 83 of the CGST Act if the proceedings initiated under Section 67 is culminated into the proceedings under Section 63 or Section 74 i.e. Assessment of unregistered persons and Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful misstatement or suppression of facts.
  • The effect of Section 83 of the CGST Act shall come to an end as soon as the proceedings pending in any of the below-mentioned Sections i.e.
    • Section 63 of the CGST Act- Assessment of unregistered persons
    • Section 64 of the CGST Act- Summary assessment in certain special cases
    • Section 67 of the CGST Act- Power of inspection, search and seizure
    • Section 73 of the CGST Act- Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason in non- fraud cases
    • Section 74 of the CGST Act- Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason in fraud cases

are over because pendency of the proceedings is the sine qua non and in case the Commissioner still feel or is of the opinion that it is necessary so to do in the interest of protecting the Government revenue, it still can pass an order in writing to attach any property or even the bank account of the taxable person if the proceedings are initiated in any of the aforesaid provisions and are pending but for the provisions in which the proceedings have earlier been initiated and are over.

  • The provisional attachment of bank account is patently illegal specially when the proceedings initiated under Section 67 of the CGST Act has already been over and set aside the order for provisional attachment of bank account and directed the Department to release the aforesaid bank account of the Petitioners.

Relevant Provisions:

Section 83 of the CGST Act:

“83. Provisional attachment to protect revenue in certain cases.

(1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or 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.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).”

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