Delhi High Court Orders Banks To De-freeze Provisional GST Attachments After 1 Year Unless Fresh Order Served

The Delhi High Court has directed all banks and financial institutions to de-freeze bank accounts provisionally attached under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act), upon the expiry of one year from the date of attachment, unless a fresh attachment order is issued in accordance with law.

The Division Bench of Justices Anil Kshetrapal and Shail Jain also directed the Reserve Bank of India (RBI) to issue a circular to all scheduled banks and financial institutions to ensure uniform compliance with Section 83(2) of the CGST Act and prevent unnecessary harassment of assessees.

The directions were issued while disposing of a writ petition filed by Zubair Enterprises, whose bank accounts had remained frozen despite the expiry of the statutory one-year period prescribed under Section 83(2) of the CGST Act.

The Court noted that under Section 83(2), a provisional attachment can remain in force only for one year from the date of its issuance.

In the present case, the petitioner's bank accounts had been provisionally attached on March 9, 2021, and the statutory period had long expired. The respondent did not dispute the legal position. Accordingly, the Court directed the petitioner's bank accounts maintained with Jammu & Kashmir Bank to be de-frozen.

Before parting, it observed, "a significantly large number of Writ Petitions are being filed in the Court for seeking declaration that the provisional attachment has lapsed after a period of one year, and correspondingly seeking the de-freezing of the bank accounts, so attached. In order to ensure compliance with the statutory mandate and to obviate unnecessary hardship to assessees, the following directions are issued to all authorities exercising powers under Section 83:

(A) While passing an order of provisional attachment, the competent authority shall expressly record that the order shall remain operative for a maximum period of one year from the date of its issuance, whereafter it shall automatically cease to have effect unless a fresh order of provisional attachment is passed in accordance with law.

(B) All banks and other financial institutions shall, upon the expiry of the aforesaid period of one year, forthwith de-freeze the attached bank accounts, unless a fresh order of provisional attachment, validly issued under law, is served upon them.

(C) The Reserve Bank of India is directed to issue an appropriate circular to all scheduled banks and financial institutions apprising them of the mandate contained in Section 83(2) of the Act and the present directions, so as to ensure uniform compliance and prevent unnecessary harassment to assessees."

The Court further directed that a copy of the order be forwarded to the Union Finance Ministry and the RBI Governor India for necessary compliance.

It also requested the respective GST Commissioners to circulate the order to all concerned authorities.

For Petitioner: Advocates Bharat Bhushan, Nidhi Gupta, Anunay Mishra

For Respondent: Advocates Akash Verma, SSC CBIC, with Anchal Uppal