In a significant ruling, the Calcutta High Court has reaffirmed that provisional attachment of bank accounts under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act) automatically lapses after one year. The Court held that such attachment cannot be renewed or continued merely because the underlying proceedings are still pending.
Background of the Case
In J L Enterprises v. Assistant Commissioner, State Tax, the petitioner challenged the continued freezing of its bank account beyond the statutory period of one year from the date of the provisional attachment order.
The tax authorities had invoked Section 83(1) of the CGST Act to provisionally attach the petitioner’s bank account in order to safeguard government revenue during pending proceedings. However, even after one year had elapsed from the date of the attachment order, the freeze continued.
Aggrieved by this action, the petitioner approached the High Court.
Legal Provision: Section 83(2) CGST Act
Section 83(2) clearly provides:
“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).”
The language of the provision is mandatory and leaves no discretion with the department once the one-year period expires.
Court’s Observations
The Calcutta High Court held:
- The provisional attachment automatically ceases to operate after one year.
- The lapse occurs by efflux of time, and no separate order is required to declare it invalid.
- Authorities cannot continue or renew the attachment on the same grounds once the statutory period expires.
- The pendency of adjudication or appeal proceedings does not extend the life of the provisional attachment.
The Court emphasized that permitting continuation beyond one year would defeat the express statutory limitation prescribed under Section 83(2).
Key Legal Principle
The ruling reinforces an important safeguard for taxpayers:
✔ Provisional attachment is a temporary protective measure.
✔ Its validity is strictly limited to one year.
✔ No implied power of renewal exists under Section 83.
✔ Continued freezing of bank accounts beyond one year is unlawful.
Impact on Taxpayers
This decision provides much-needed clarity and protection against prolonged freezing of bank accounts, which can severely disrupt business operations. Tax authorities must strictly adhere to statutory timelines while exercising powers under Section 83.
For businesses facing prolonged bank attachments under GST, this judgment serves as a strong precedent to seek relief before High Courts.