2026 (1) TMI 770 - HC - GST

GST provisional attachment and confiscation after s.83(2) one-year lapse; attachment set aside and goods released

Dominant issue: validity of provisional attachment and subsequent confiscation under the GST regime where statutory one-year limitation under s.83(2) ... Seizure and confiscation - provisional attachment of bank account in Form GST DRC-22 attaching the bank accounts - Limitation period - Tax evasion - statutory provisions to give leverage to the present petitioner to get out of confiscation, to release the gold and metal articles and lifting the attachment of the bank accounts - HELD THAT:- After the search was conducted, a provisional attachment was passed on 10.03.2022 wherein the bank accounts of the petitioner were attached. The deponent of the affidavit-in-reply dated 26.06.2024 in fact in paragraph 10 has admitted that under the provisions of Section 83(2) of the GST Act, such provisional attachment expires after a period of one year. It is also admitted that inadvertently no fresh order of provisional attachment has been passed in the case of the petitioner. This is the first omission which is committed by the concerned officer. No notice has been issued by resorting to this proviso, this is the third lacuna, and thereafter, the notice of confiscation under section 130 of the GST Act has been issued on 21.06.2024 during the pendency of this petition. This is the fourth illegality committed by the respondent-officer/s. It appears that the respondent officer, though being aware of the statutory provisions and the limitation period sat idle and did not issue any notices, and paved the way for the petitioner to take shelter of such omissions. This approach adopted by the respondents in handling the entire matter prima facie appears to be thoughtful. Hence, we direct the respondent no. 2 – Chief Commissioner of State Tax to hold appropriate inquiry against the officer/s involved in leaving the loopholes, which has ultimately aided the petitioner. Thus, the present petition succeeds. The respondent no. 3 is directed to release the goods and cash seized during the course of search and further direct respondent no. 5 to lift the provisional attachment of bank account. Issues: (i) Whether the provisional attachment of the petitioners bank accounts under Section 83(2) of the GST Act, 2017 must be lifted after the statutory period of one year; (ii) Whether goods seized under Section 67(2) of the GST Act, 2017 must be returned under Section 67(7) where no notice of confiscation is issued within six months (or within an extended six months) of seizure.Issue (i): Whether the provisional attachment under Section 83(2) expires after one year and requires lifting when no fresh order of provisional attachment was passed.Analysis: Section 83(2) prescribes the temporal limitation for provisional attachment of bank accounts. The official record admits that the provisional attachment expired after one year and no fresh provisional attachment order was passed. The omission to pass a fresh order despite awareness of the limitation and ongoing investigation constituted a failure to comply with the statutory timeline.Conclusion: Provisional attachment expired after one year and must be lifted; conclusion in favour of the assessee.Issue (ii): Whether seized goods must be returned under Section 67(7) where no notice of confiscation was issued within six months or by way of a justified extension.Analysis: Section 67(7) requires issuance of notice within six months of seizure, with a proviso permitting a single extension of up to six months on sufficient cause. The record shows no notice within six months, no valid invocation of the proviso to extend time, and eventual issuance of notice under Section 130 only after the statutory periods had lapsed. The failure to issue timely notice or validly extend the period deprived the authority of the statutory mechanism to retain the seized goods.Conclusion: Seized goods and cash must be returned to the petitioner; conclusion in favour of the assessee.Final Conclusion: The petition is allowed to the extent that the provisional attachment of bank accounts must be lifted and the seized goods and cash returned to the petitioner; an administrative inquiry is directed against the officers responsible for the statutory omissions.Ratio Decidendi: Where statutory periods for provisional attachment and for issuing notice of confiscation under the GST Act are not observed and no valid extension or fresh order is made, the statutory scheme mandates lifting of attachment and return of seized goods to the person from whose possession they were seized.