“Understand the concept of provisional attachment of property by the GST department as per Section 83 of the CGST Act, 2017. Explore the amendments made by the Finance Act 2021, widening its scope and implications. Learn about the procedural aspects and guidelines, ensuring a balance between protecting government revenue and safeguarding the interests of the taxable person. Stay informed on the stringent conditions for a valid exercise of this power, as highlighted by legal precedents.”
Provisional attachment of the property means that the attached property cannot be sold/disposed off by its owner and any sale of such property shall be considered as void.
Section 83 of the Central Goods and Services Tax Act,2017 read with Rule 159 of the CGST Rules, 2017 deals with the provisional attachment of the property by the department to protect revenue in certain cases.
This section was inserted with a view to protect the interest of the revenue if Commissioner has the reason to believe that the person may dispose or remove the property, if not attached provisionally.
Section 83 of the CGST Act, 2017 as amended by Finance Act 2021 with effect from 01.01.2022 reads as under:
“83(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.]
(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).”
The Finance Act 2021, has widened the scope of Section 83, which is illustrated in the below table:
|
Before amendment |
After amendment |
| This section was applicable only during the pendency of the proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74. | The section is now applicable on initiation of proceedings under chapter XII, Chapter XIV or Chapter XV. It means that this section is now applicable on scrutiny of returns, provisional assessments, summons, etc. |
| This section was applicable on only the taxable person. | Now, this section is also applicable on the person who retains the benefit of the below transactions and at whose instance such transactions are conducted:
a) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply. b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder. c) takes or utilizes input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder. d) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; |
Rule 159 of the CGST Rules, 2017 provides for the procedure to be followed for provisional attachment of the property by the Commissioner and by following the principle of natural justice by providing an opportunity of being heard to such person before attaching the property.
However, following the doubts raised by the officers in the field formations of this Section and the observations made by Hon’ble Courts in number of case, Government has issued Circular CBEC-20/16/05/2021-GST/359, dated 23.02.2021 providing for the detailed guidelines or SOP (Standard Operating Procedures) with respect to the exercise of powers under Section 83 of the Act.
The gist of the Rule 159 of the CGST Rules 2017 and the Circular CBEC-20/16/05/2021-GST/359, dated 23.02.2021 is provided below:
- For resorting to the provisional attachment of the property under the provisions of section 83 of the Act, the followings grounds must exist:
1. There must be a pendency of a proceeding against a taxable person under the Chapters mentioned in section 83 of the Act.
2. The Commissioner must have formed the opinion that provisional attachment of the property belonging to the taxable person is necessary for the purpose of protecting the interest of the Government revenue.
The Court in the case of Valerius Industries Vs. Union of India, reported in [2019] 70 GSTR 147 (Guj) has held that power of provisional attachment under section 83 of the act should be exercised by the authority only if there is reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should therefore be exercised with extreme care and caution. The Court held that power under section 83 of the act should not be used as a tool to harass the assessee nor should it be used in as manner which may have irreversible detrimental effect on the business of the assessee.
- The basis on which the Commissioner has formed such an opinion should be duly recorded on file.
- In case, the Commissioner forms an opinion to attach all property, including bank account of the taxable person in terms of section 83, he should duly record on file the basis, on which he has formed such an opinion.
However, The Supreme Court in the case of Radhe Krishan Industries vs. state of H.P. reported in (2021) 6 SCC 771 held that, the power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled.
- Each such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order of attachment.
- The Commissioner may, upon being satisfied that the property was, or is no longer liable for attachment, release such property by issuing an order in FORM GST DRC-23.
In the case of Merlin Facilities (P.) Ltd.v. Union of India, the HC of Delhi has held that that operation of an order provisionally attaching bank account would cease to be operative after expiry of statutory period of one year. Therefore, no orders are required for setting aside the same.
Disclaimer: The contents of this topic are solely for the purpose of knowledge and cannot be tantamount to any kind of professional advice.
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