A bank account attachment under Section 83 of the CGST Act can paralyse a business. Payroll, vendor payments, and loan servicing all come to a halt. Understanding the legal remedies for release is essential for any business facing this situation.
This article explains the grounds for bank account attachment, the one-year limitation, and the practical steps to secure release.
Grounds for Bank Account Attachment
A bank account can be provisionally attached under Section 83 when the Commissioner is of the opinion that attachment is necessary to protect the interests of revenue. The power is typically invoked during investigations into:
- Fake invoicing and fraudulent ITC.
- Circular trading.
- Tax evasion.
- Non-filing of returns.
The attachment order is issued in Form GST DRC-22 and served on the bank.
The One-Year Automatic Lapse
The most important legal safeguard is the one-year limitation. Section 83(2) provides that provisional attachment ceases to have effect after one year from the date of the order. The Delhi High Court has directed banks to de-freeze accounts after one year unless a fresh attachment order is served. The Madras High Court has similarly held that the attachment automatically ceases after one year.
Steps to Get the Attachment Released
Step 1: Verify the Attachment Order
Obtain a copy of the attachment order from the bank or the GST portal. Verify that it is in Form DRC-22 and contains the reasons for attachment.
Step 2: File an Application for Release
The taxpayer can file an application before the Commissioner for release of the attachment. If the Commissioner is satisfied that the attachment is no longer necessary, the release order is issued in Form GST DRC-23.
Step 3: Follow Up with the Bank
The bank will remove the encumbrance only upon receiving written instructions from the Commissioner in Form DRC-23. Follow up with both the department and the bank to ensure prompt release.
Step 4: File an Appeal if Necessary
If the attachment is arbitrary or without jurisdiction, file a writ petition before the High Court. The court can direct the release of the attachment with appropriate safeguards.
Step 5: Pre-Deposit for Release
In some cases, the taxpayer may need to make a pre-deposit of the disputed tax to secure the release of the attachment. The pre-deposit for an appeal before the Appellate Authority is 10% of the disputed tax.
Practical Tips for Businesses
- Maintain sufficient liquidity in multiple bank accounts to avoid complete paralysis.
- Act promptly once the attachment is lifted to restore normal banking operations.
- Keep the department informed of your compliance efforts.
- Consult a GST professional before filing any application for release.
Conclusion
Bank account attachment under Section 83 is a serious disruption. The one-year limitation provides a statutory safeguard, and the DRC-23 release mechanism offers a direct remedy. Businesses must act promptly to secure release and restore operations.
At Anuj Desai & Associates, we provide expert representation services for GST bank account attachment matters. Our team can help you secure release and protect your business operations.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.