the essay of 16 July 2025 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=utf-8"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><strong><font color="#663399"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">JULY 16, 2025</font></font></font></strong></p> <p align="center"><font color="#FF6633" face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong> Draconian attachment: Freeze Frame with GST</strong></font></p> <p align="center"><strong><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><u>By Vijay Kumar</u></font></font></strong></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> starts like any regular day for a taxpayer. Birds chirping, chai boiling, GSTN dashboard blinking ominously. And then-bam! -bank accounts frozen, business paralysed, and confusion colder than a high-altitude GST seminar. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">It's what can happen under Section 83 of the CGST Act: the provisional attachment power that allows Commissioners to lock up property (including bank accounts) if they believe it's necessary to protect revenue. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The problem? <em>"Belief" </em>often arrives unaccompanied by <em>"reason."</em> And taxpayers find their funds in fiscal solitary confinement. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Frozen bank account? Check. Panic attack? Check. Life on hold? Double check. All thanks to a GST officer whose morning mood and Section 83 collided. </font></font></p> <p align="justify"><em><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">"When in doubt, attach a bank account"- unofficial motto of over enthusiastic enforcement. </font></font></em></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">As per Section 83 of the CGST Act, </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, 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 or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(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). </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">This power is often used indiscriminately, and with spicy disregard for judicial restraint. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">As per Section 107(6) and (7): </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(6) No appeal shall be filed under sub-section (1), unless the appellant has paid- </font></font></p><blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty crore rupees], in relation to which the appeal has been filed. </font></font></p></blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(7) Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Let us visualise the situation: </font></font></p> <p align="justify"><img src="https://admin.taxindiaonline.com/UploadedFiles/Customs/CaseLaws/2025/JestGST160725.PNG" style="height:450px; width:331px"/></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">A taxpayer gets a good demand notice from the GST department, which is eventually and certainly followed by an adjudication order confirming the demand. Now, as per the Department there is an amount of tax that is to be paid by the taxpayer. And the Department has machinery to collect that tax by various means including the attachment of the bank accounts of the taxpayer under Section 83. This is the easiest mode of collection as pliant and pusillanimous bank managers are more than willing to get the accounts of the taxpayer attached at just a nod from the powerful GST Department. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">This adjudicating authority is not the Supreme Court and his orders are appealable. So, if you appeal, you are required to pay ten per cent of the disputed tax amount. And once you appeal and pay that ten per cent, the recovery proceedings for the balance amount shall be deemed to be stayed, as per Section 107. Well, this is the LAW – not well-known, at least among officers. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Delhi High Court last week delivered an important attachment judgement. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The petition challenged the provisional attachment of the bank account vide communication dated 29th May 2025. The case of the Petitioner is that the Order in Original dated 31st January 2025, which is the basis of the said attachment, is itself challenged vide an appeal by the Petitioner and 10% pre-deposit has also been made. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Counsel for Revenue confirmed that an appeal has been filed by the Petitioner and the pre-deposit has already been made. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The High Court observed, <em>MJ Bizcrafts LLP vs Central Goods and Services Tax Delhi South Commissionerate <strong>- <a href="https://taxindiaonline.com/searchcaselaw/details?id=188393&type=caselaw&keyword=null" target="_blank">2025-TIOL-1103-HC-DEL-GST</a></strong></em> </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">A perusal of Section 107(7) of the Central Goods and Services Tax <strong><a href="https://admin.taxindiaonline.com/UploadedFiles/PressRelease/Central_GST.pdf" target="_blank">Act, 2017</a> </strong>and the judgments relied on, would show that once an appeal is filed and pre-deposit is made, there is<font color="#ff0000"> automatic stay of the impugned order</font>. In view thereof, the attachment of the bank account is not sustainable. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The same is, accordingly, set aside. The bank shall permit the Petitioner to operate its bank accounts as also the FDR account. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In an earlier case decided just two months ago in <em>Unity Traders Vs Principal Additional Director-DGGI <strong>-<a href="https://taxindiaonline.com/searchcaselaw/details?id=188392&type=caselaw&keyword=null" target="_blank"> 2025-TIOL-1102-HC-DEL-GST</a></strong></em>, the same Delhi High Court ordered: </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In view of the fact that the appeal in respect of the impugned Order-in- Original has already been filed in terms of Section 107 of Central Goods and Services Tax<strong> <a href="https://admin.taxindiaonline.com/UploadedFiles/PressRelease/Central_GST.pdf" target="_blank">Act, 2017</a></strong>, the final order dated 28th January, 2025 is automatically stayed. Therefore, Kotak Mahindra Bank is directed to de-freeze all three accounts with immediate effect. The Department shall also issue a communication to the Kotak Mahindra Bank calling upon them to lift the debit freeze. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In view of this decision on May 28, 2025, the Department could have <em>suo moto </em>lifted the attachment of the taxpayer in the present case. But on 04.07.2025, the Counsel for the Department wanted to seek instructions and on 10.07.2025, when the case came up for hearing, the department did not concede and let the High Court pass the order quashing the attachment. An irresistible urge for litigation? </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In <em>Sidhivinayak Chemtech Private Limited Vs Principal Commissioner, CGST, Meerut in</em><strong><em> - <a href="https://taxindiaonline.com/searchcaselaw/details?id=176304&type=caselaw&keyword=null" target="_blank">2023-TIOL-601-HC-DEL-GST</a></em></strong>, the Delhi High Court had observed two years ago: </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">It is necessary to bear in mind that attachment of a bank account would in effect result in the closure of the business of a taxpayer and has the propensity to cause irretrievable harm. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">It is difficult to imagine that a company would survive if its bank accounts are frozen for a protracted period of time. Thus, the nature of the power makes it necessary that the same is exercised with due caution and only when it is necessary. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In <em>Patran Steel Rolling Mill</em><strong><em> - <a href="https://taxindiaonline.com/searchcaselaw/details?id=144228&type=caselaw&keyword=null" target="_blank">2018-TIOL-2937-HC-AHM-GST</a></em></strong>, the HIGH COURT OF GUJARAT observed, </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">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 or 67(2) of the GGST 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. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Such 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. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Bombay High Court in <strong><a href="https://taxindiaonline.com/searchcaselaw/details?id=155950&type=caselaw&keyword=null" target="_blank">2020-TIOL-151-HC-MUM-GST</a> </strong>observed, </font></font></p> <blockquote><p align="justify"><em><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Power to provisionally attach bank accounts is a drastic power. Considering the consequences that ensue from provisional attachment of bank accounts, the Courts have repeatedly emphasized that this power is not to be routinely exercised. Under Section 83, the legislature 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. </font></font></em></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Gujarat High Court in <em>Valerius Industries Vs Union of India </em><strong><em> - <a href="https://taxindiaonline.com/searchcaselaw/details?id=152072&type=caselaw&keyword=null" target="_blank">2019-TIOL-2094-HC-AHM-GST</a></em></strong> observed, </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">1. The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">2. The attachment of bank account and trading assets should be resorted to only as a last resort or measure. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Often, the adjudication order is still warm from the printer when the bank freeze hits-without considering whether an appeal is pending or a pre-deposit has been made. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">There are several cases where bank accounts are indiscriminately attached, virtually paralyzing the business and these unfortunate victims have to approach the High Courts for justice and relief. And it is not as if the High Courts are sitting free without work to decide this kind of writ petitions. Government should realise that killing the goose was never a wise proposition, and more so now, especially when the geese farm is just prospering. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court delivered a significant judgement in relation to provisional attachments under GST -<strong> <a href="https://taxindiaonline.com/searchcaselaw/details?id=165662&type=caselaw&keyword=null" target="_blank">2021-TIOL-179-SC-GST</a></strong>. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Some quotes: </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">- The power to levy a provisional attachment is <font color="#ff0000">draconian</font> in nature. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">- The statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">- By utilizing the expression <em>"it is necessary so to do" </em>the legislature has evinced an intent that an attachment is authorized not merely because it is expedient to do so (or profitable or practicable for the revenue to do so) but because it is necessary to do so in order to protect interest of the government revenue. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">- <em>'Necessity'</em> postulates a more stringent requirement than a mere expediency. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">- The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. </font></font></p></blockquote> <p align="justify"><font color="#ff0000"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Unfreeze the Thought Process </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The purpose of GST law is not to paralyse - it's to protect. Commissioners are guardians, not warriors. And taxpayers are contributors, not combatants. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The law, when read sensibly, seeks balance. But balance requires temperance, transparency, and a touch of humility. Let Section 83 be used with care, not theatrics. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Until then, taxpayers shall continue their frozen pilgrimage - from blocked accounts to thawed judgments, from anxiety to appeal, from bureaucracy to legality. </font></font></p> <p align="justify"><font color="#ff0000"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Until next week</font></font></font></p> <p align="justify"><font size="3"><font face="Verdana, Arial, Helvetica, sans-serif">Comments/feedback welcome at <u><a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in</a></u> or 9848111243 (WhatsApp) </font></font></p> </body> </html>