GST Recovery: Law & Procedure for Unpaid Dues, Interest, Penalties, Late Fees

RECOVERY OF TAX

1. INTRODUCTION

1.1b The recovery proceedings are final step towards realisation of any tax or amount. This Chapter deals with the law and procedure relating to recovery of the unpaid GST dues, including interest, penalties and late fees. The provisions of CGST Act, 2017 and CGST Rules, 2017, relevant to this Chapter are as under –

Sr. No.	Section/Rules	Provisions pertaining to
1	Section 75	General provisions relating to determination of tax
2	Section 78	Initiation of recovery proceedings
3	Section 79	Recovery of tax
4	Section 80	Payment of tax and other amount in instalments
5	Section 81	Transfer of property to be void in certain cases
6	Section 82	Tax to be first charge on property
7	Section 83	Provisional attachment to protect revenue in certain cases
8	Section 84	Continuation and validation of certain recovery proceedings
9	Section 85	Liability in case of transfer of business
10	Section 86	Liability of agent and principal
11	Section 87	Liability in case of amalgamation or merger of companies
12	Section 88	Liability in case of company in liquidation
13	Section 89	Liability of directors of private company
14	Section 90	Liability of partners of firm to pay tax
15	Section 91	Liability of guardians, trustees, etc.
16	Section 92	Liability of Court of Wards, etc.
17	Section 93	Special provisions regarding liability to pay tax, interest or penalty in certain cases
18	Section 94	Liability in other cases
19	Section 119	Sums due to be paid notwithstanding appeal, etc.
20	Rule 142	Notice and order for demand of amounts payable
21	Rule 142 A	Procedure for recovery of dues under existing laws
22	Section 161	Rectification of errors apparent on the face of record
23	Rule 88C	Manner of dealing with difference in liability reported in statement of out-ward supplies and that reported in return.
24	Rule 88D	Intimation by electronic means regarding excess availment of ITC by tax-payer
25	Rule 143	Recovery by deduction from any money owed
26	Rule 144	Recovery by sale of goods under the control of proper officer
27	Rule 144 A	Recovery of penalty by sale of goods or conveyance detained or seized in transit
28	Rule 145	Recovery from a third person
29	Rule 146	Recovery through execution of a decree
30	Rule 147	Recovery by sale of movable or immovable property
31	Rule 148	Prohibition against bidding or purchase by officer
32	Rule 150	Assistance by police
33	Rule 151	Attachment of debts and shares, etc.
34	Rule 152	Attachment of property in custody of courts or Public Officer
35	Rule 153	Attachment of interest in partnership
36	Rule 154	Disposal of proceeds of sale of goods and movable or immovable property
37	Rule 155	Recovery through land revenue authority
38	Rule 156	Recovery through court
39	Rule 157	Recovery from surety
40	Rule 158	Payment of tax and other amounts in instalments
41	Rule 159	Provisional attachment of property
42	Rule 160	Recovery from company in liquidation

1.2 The provisions, Forms, Circulars, Notification, etc., can be seen by clicking ctrl+click on the respective hyperlink, which will open the https://taxinformation.cbic.gov.in page. On clicking GST option on the Menu bar, ‘Information-GST’ page will appear, below which the option of Act, Rules, Notification, etc. is provided. The required page of the relevant provision/Form/Circular/Notification can be seen by clicking the appropriate option.

1.3 GST law mandates payment of tax on supply of goods and/or services by the taxpayers. The tax self-assessed by the taxpayer has to be paid by due date prescribed under the CGST Act. There may be a situation where the tax dues are not paid correctly by the taxpayers, either inadvertently or deliberately.

1.4 The provisions of CGST Act and the rules made thereunder contain elaborate provisions to safeguard the revenue due to the Government. In case of any failure to pay the tax dues to the Government appropriate provisions have been incorporated in the GST law for recovery of such unpaid tax by following the procedure and guidelines stipulated in the CGST Act and the rules made thereunder.

1.5 The statutory provisions providing for recovery of the Central Tax dues under the GST law are contained in Section 78 to 83 of the CGST Act, 2017 and Rules 142 to 161 of the CGST Rules, 2017. These legal provisions of recovery contained in the CGST Act, 2017 can broadly be divided in the following three parts:

(I) When the recovery proceeding can be started by tax officer (Section 78)

(II) The various modes of the recovery of the dues (Section 79)

(III) Protective measures to safeguard the interest of Revenue (Section 80 to 83).

1.6 There are no independent provisions for recovery of tax dues of IGST, interest thereon and penalties. However, Section 20 of the IGST Act, 2017 provides for applicability of the provisions of CGST Act, 2017 relating to demands and recovery, offences and penalties and other miscellaneous provisions. Thus, the recovery of dues under IGST Act can be made under the relevant provisions of CGST Act, 2017 read with Section 20 of the IGST Act, 2017 and the CGST Rules, 2017. Similarly, for recovery of dues under GST (Compensation to States) Act, 2017, Section 11 of GST (Compensation to States) Act provides for applicability of the provision of CGST Act, 2017 to intra­state supplies and for applicability of the provision of IGST Act, 2017 to inter-state supplies. (Section 11 of GST (Compensation to States)Act and Section 20 of IGST Act, 2017)

1.7 In order to comply with the principles of natural justice, the GST law lays down certain procedures to be followed before taking action for recovery of the tax and other amounts like, interest, penalty, late fees, etc. One such procedure is raising demand and determination of the short-paid or not-paid tax, wrongly availed input tax credit and erroneously refunded amount in the prescribed manner, which is being disputed by the taxpayer. The details of the manner prescribed to demand and determine the short-paid or not-paid tax, wrongly availed input tax credit and erroneously refunded amount has been elaborately dealt in the Chapter on “Demand and Determination thereof”.

1.8 The GST law also contains provisions to encourage voluntary compliance, wherein if the tax dues and the mandatory interest thereof are paid within the time period prescribed in the law, then no penalty or lesser penalty, as applicable, is charged. The law provides an opportunity for payment of tax, interest and a nil or nominal penalty (depending on nature of offence) before issuance of Notice and stipulates that in all such cases no Notice shall be issued and consequently there shall be no other consequences for recovery of the default.

1.9 Even after issuance of a show cause notice, there is another chance to discharge tax and interest liability with applicable penalty (depending on nature of offence) voluntarily within 30 days of issuance of the Notice. If all dues are paid within 30 days then the GST law provides that all proceedings in respect of such Notice shall be deemed to be concluded. Thus, there are sufficient opportunities to correct the errors made and discharge the tax liability with nil or nominal penalties.

1.10 The taxpayer is required to self-assess his tax liability on the supplies made in the course of business or in furtherance of business. Such self-assessed tax is an undisputed tax liability as the same is determined by the taxpayer himself as payable to the Government. As per Section 75 of CGST Act, 2017, where there’s any unpaid self-assessed tax, it can be recovered without issuing any show-cause notice and the proceedings for recovery as provided under Section 79 of the CGST Act, 2017 can be directly invoked. (Section 75 and 79 of CGST Act, 2017)

1.11 GST is paid at the time of filing GSTR-3B return and this return cannot be filed unless and until the tax payable declared in the return is not paid fully. There is a possibility that the taxpayer shows higher sales in the GSTR-1 return, wherein the invoice wise details of the sales/supplies is declared, so as to pass on excess ITC to the recipient and under-reports the supplies while declaring in GSTR-3B for evading the tax. For dealing with such situations the Explanation to Section 75(12) of the CGST Act clarifies that the self-assessed tax would include the GST payable for outward supplies reported in the GSTR-1 but not included in the GSTR-3B return. In such cases, the recovery proceedings can be directly invoked under Section 79 of the CGST Act, 2017 for recovering the self-assessed tax and interest thereof. (Section 75(12) of CGST Act, 2017)

1.12 If the tax dues and other amounts confirmed as payable after following the due process of adjudication by the proper officer remain unpaid, despite all these beneficial provisions mentioned above, and the taxpayer fails to pay the dues after the orders are passed and statutory limit for appeal is over and no appeal is filed, then such dues are considered as ‘arrears’ and the proper officer may initiate recovery proceedings in terms of Section 79 of the CGST Act for recovery of arrears. (Section 79 of CGST Act, 2017)

2. MEANING OF ‘ARREARS’ AND TYPES OF ARREARS

2.1 The demand of tax may be confirmed fully or partially or dropped in the process of adjudication. On issuance of the Order after adjudication proceedings the amount of tax, interest, penalty, late fees, etc., determined as payable by the taxpayer, become arrears and recoverable from the taxpayer. If the arrears are paid by taxpayer, then the dispute concludes. However, in case, it is not paid then the mechanism prescribed in GST law has to be used to recover the same from the taxpayer or other person concerned.

2.2 Thus, arrears are the overdue payment of the amount of tax, cess, interest, fine, late fee or penalty that is payable by the taxpayer to the exchequer. The arrears may arise as a result of Order-in-Original, Order of Appellate Authority, Appellate Tribunal and the Courts (High Court/Supreme Court).

2.3 The amount involved in the case under investigation, unconfirmed demands (i.e. the amount demanded in the Show Cause Notice but not adjudicated, and Order-in-Original set aside or remanded for de-novo adjudication by Appellate authority are not the arrears.

2.4 The following are the categories of arrears:

(i) Arrear in Litigation/Appeal: where the confirmed demand is under appeal or litigation before any appellate authorities, namely, Supreme Court/High Court/Appellate Tribunal /Commissioner (Appeals);

(ii) Restrained Arrears: Taxpayer against whom financial/operational creditors have initiated insolvency or bankruptcy proceeding before NCLT/DRT under Insolvency and Bankruptcy Code, 2016;

(iii) Arrear where appeal period is not yet over;

(iv) Recoverable arrear other than the above.

2.5 The time period allowed under Section 107 of the CGST Act, 2017 for filing appeal before the Appellate Authority or Appellate Tribunal is three months from the date of receipt of the Order-In-Original or the Order-In-Appeal, as the case may be. The taxpayer may, consequent to any order passed, pay the dues within 3 months from the date of receipt of order. (Section 107 of CGST Act, 2017)

2.6 For filing an appeal before the Appellate Authority or Appellate Tribunal, the taxpayer has to make a mandatory pre- deposit of the prescribed amount, as prescribed under Section 107(6) and 112(8) of the CGST Act respectively. If a taxpayer files the appeal before the Appellate Authority or Appellate Tribunal and deposits the mandatory pre-deposit, then the balance amount of dues shall be deemed as stayed. If any demand proceedings have attained finality either on account of no appeal filed against the Order-In-Original or on account of litigation process being finally over or attained finality on account of taxpayer having exhausted all appellate remedies available under the law, then such confirmed demand becomes recoverable arrears. (Section 107(6) of CGST Act, 2017)

2.7 As per Section 119 of the CGST Act, 2017, if an appeal has been preferred to the High Court or the Supreme Court, sums due to the Government as per the order passed by the Appellate Tribunal or an order passed by the High Court, as the case may be, shall be payable in accordance with the order so passed. (Section 119 of CGST Act, 2017)

2.8 In respect of cases where proceedings have been initiated by financial or operational creditors before National Company Law Tribunal or before Debt recovery Tribunal (DRT), as applicable, under Insolvency and Bankruptcy Code, 2016, (IBC Code, 2016), against the taxpayer or defaulter person from whom GST arrears are also due for recovery, the provision of Insolvency and Bankruptcy Code has overriding effect over the provision of GST Laws. Therefore, any action for recovery of arrears, where the proceedings have already been initiated by financial / operational creditors against the defaulter before NCLT, has to be considered in the light of provision of IBC, 2016. Such arrears are ‘restrained arrears’. Circular No. 134/04/2020-GST dated 23rd March, 2020 and Circular No. 187/19/2022-GST, dated 27.12.2022 issued by CBIC contain the instructions and clarifications on dealing with the restrained arrears in such cases before NCLT/DRT.

3. MODES OF RECOVERY OF TAX

3.1 Section 79(1) of the CGST Act, 2017 lays down various modes of recovery of tax or any amount due. The following are the modes of recovery- (Section 79(1) of CGST Act, 2017)

(i) Recovery by Deduction from any money owed which may be under control of proper officer or specified officer.

(ii) Recovery by detain and sale of goods belonging to such persons which are under the control of proper officer or such other specified officer.

(iii) Recovery from third person.

(iv) Recovery through execution of a decree (verdict).

(v) Recovery through sale of movable or immovable property, like, attachment of debt and shares, etc., attachment of property in custody of courts or public officer, attachment of interest in partnership.

(vi) Recovery through land revenue authority.

(vii) Recovery through court.

(viii) Recovery through surety.

4. PROPER OFFICER FOR RECOVERY OF GST ARREARS

4.1 Circular No. 3/3/2017-GST, dated 05.07.2017, amended vide Circular No. 31/05/2018-GST, dated 09.02.2018, further amended vide Circular No. 169/01/2022-GST, dated 12.03.2022, have assigned function of ‘Proper Officer’ under Sections 77 to 84 of the CGST Act, 2017 and Rules 142 to 161 of the CGST Rules, 2017, in respect of recovery of tax or other dues, to the officers of different ranks as per details given in Table below:

Section/ Rule	Subject Heading	Rank/ designation of Proper Officer
Section 78	Initiation of Recovery Proceedings (for Proviso to section 78)	Commissioner
Section 79	Recovery of Tax	Deputy or Assistant Commissioner
Section 80	Payment of tax and amount in instalment	Commissioner
Section 81	Transfer of property to be void in certain cases (for Proviso to section 81)	Additional or Joint Commissioner
Section 83	Provisional attachment to protect revenue in certain cases	Commissioner
Section 84	Continuation and Validation of Certain     Recovery Proceedings	Commissioner
Rule 142	Notice and Order for demand of amounts payable under the Act [for Sub-rule (1), (2), (3) and (7)]	Superintendent of Central Tax
Rule 143	Recovery by deduction from any money owed	Deputy or Assistant Commissioner
Rule 144	Recovery by sale of goods under the control of proper officer [for Sub-rules (1), (3), (4), (5), (6) and (7)]	Deputy or Assistant Commissioner
Rule 145	Recovery from a third person (for Sub-rules (1) and (2) of Rule 145)	Deputy or Assistant Commissioner
Rule 146	Recovery through execution of a decree	Deputy/ Assistant Commissioner
Rule 147	Recovery by sale of moveable or immovable property [for Sub-rules (1), (2), (3), (5), (6), (7), (8), (10),(11), (12), (14) and (15)]	Deputy or Assistant Commissioner
Rule 150	Assistance by Police	Superintendent of Central Tax
Rule 151	Attachment of debt and shares, etc. [for Sub rules (1),(2) and (3)]	Deputy or Assistant Commissioner
Rule 152	Attachment of property in custody of courts or Public Officer	Deputy or Assistant Commissioner
Rule 153	Attachment of interest in partnership	Deputy or Assistant Commissioner
Rule 155	Recovery through land revenue authority	Deputy or Assistant Commissioner
Rule 156	Recovery through court	Deputy or Assistant Commissioner
Rule 158	Payment of tax and other amounts in instalment	Commissioner
Rule 159	Provisional attachment of Property	Commissioner
Rule 160	Recovery from company in liquidation	Commissioner

5. RECOVERY MECHANISM

5.1 The recovery provisions under the CGST Act, 2017 and the rules made thereunder lay down proper procedure for initiation of the recovery proceedings.

5.2 As per Section 78 of the CGST Act, any amount payable by a taxable person in pursuance of an order passed under the CGST Act, shall be paid by the taxpayer within a period of three months from the date of service of such order, failing which recovery proceedings shall be initiated. However, as per proviso to Section 78 of CGST Act, if the proper officer considers it appropriate in the interest of revenue, he may, after recording the reasons in writing, ask the said taxpayer to make the payment within a specified period, before the completion of three months. The Commissioner of Central Tax has been assigned the functions of Proper Officer in this regard. (Section 78 of CGST Act, 2017)

5.3 As per rule 142(5) of the CGST Rules, 2017, a summary of the order issued under section 52 ,62,63,64,73,74,7 5,76,122,123,124,125,127,129 or section 130 of CGST Act, 2017 shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax. DRC-7 to be treated as Notice for Recovery (Refer Rule 142(6) of the CGST Rules, 2017). As per Rule 142(7) of the CGST Rules, 2017 if a rectification of the order has been passed in accordance with the provisions of Section 161 (Rectification of error) or if an order uploaded on the system has been withdrawn, then a summary of the rectification order or of the withdrawal order shall be uploaded electronically by the proper officer in FORM GST DRC-08. (Rule 142(5), (6) and (7) of CGST Rules, 2017) (Section 161 of CGST Act, 2017)

5.4 Section 79 of Goods and Services Tax Act, 2017, deals with the provisions relating to the recovery of the self- assessed tax when the person fails to pay tax to the Government. Before proceeding with the recovery action, it is important to ascertain whether the difference in reporting of outward supplies in the GSTR-1  return and in the GSTR-3B return is due to a genuine mistake or otherwise.

5.5 There is a possibility of typographical error or unintentional wrong reporting of any detail in GSTR-1 or GSTR- 3B. Such errors or omissions can be rectified by the taxpayer in a subsequent GSTR-1/ GSTR-3B as per the provisions of Section 37(3) of CGST Act or the provisions of Section 39(9) of the Act, as the case may be. Also there can be cases where Outward Supply was not declared in the past, but the tax was paid under GSTR-3B and to correct this error, such outward supplies are reported in later tax period. In such cases, there could be a mis-match between GSTR-l and GSTR-3B. Therefore, in such cases, an opportunity needs to be provided to the concerned taxpayer by sending a communication to him, asking him to explain the differences between GSTR-1 and GSTR-3B, if any, and for making good short payment or non-payment of the amount of self-assessed tax liability, and interest thereon by paying the same within a reasonable time, before any action under Section 79 of the Act is taken for recovery of the said amount. If, the concerned person is able to justify the differences between GSTR-1 and GSTR-3B, or is able to explain the reasons of such short-payment or non-payment of tax, to the satisfaction of the proper officer, or pays such short paid or not paid amount, then there is no requirement to initiate proceedings for recovery under section 79 except in cases where the taxpayer fails to rectify errors of omission by 30th day of November following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier. (Section 37(3) of CGST Act, 2017) (Section 39(9) of CGST Act, 2017)

5.6 If the taxpayer fails to reply to the Proper Officer or fails to make the payment of the short paid or not paid amount within the time prescribed in the communication or as permitted by the Proper Officer, then the proceedings under Section 79 for recovery of such amount has to be initiated. Further, where the taxpayer fails to explain the reasons for such difference/ short payment of tax to the satisfaction of the Proper Officer then he may proceed for recovery of the said amount as per provisions of Section 79.

5.7 With effect from 26.12.2022 specific provisions by way of Rule 88C of CGST Rules, 2017, have been incorporated in the CGST Rules, 2017, for dealing with difference in liability reported in GSTR-1 and GSTR-3B. (Rule 88C of CGST Rules, 2017)

(i) The provisions of Rule 88C of CGST Rules, 2017 provide that where the tax payable by a taxpayer as per the statement of outward supplies furnished in FORM GSTR-1 in respect of a tax period exceeds the amount of tax payable as per the return in FORM GSTR-3B for that period then such taxpayer shall be intimated about such difference, in Part A of FORM GST DRC-01B, electronically on the common portal, and a copy of such intimation shall also be sent to his e-mail address provided at the time of registration or as amended, highlighting the said difference and directing him to pay the differential tax liability, along with interest through FORM GST DRC-03 or explain the difference in tax payable on the common portal, within the stipulated period.

(ii) The taxpayer shall either pay the amount of the differential tax liability, fully or partially, along with interest and furnish the details thereof or furnish a reply, explaining the reasons for the differential tax liability that has remained unpaid, in Part B of FORM GST DRC-01B electronically on the common portal, within the stipulated period.

(iii) If any amount specified in the intimation remains unpaid and if no explanation or reason is furnished by the taxpayer in default or if the explanation or reason furnished by such person is not found acceptable by the Proper Officer then the said amount shall be recovered in accordance with the provisions of Section 79.

5.8 With effect from 04.08.2023 specific provisions by way of Rule 88D have been incorporated in the CGST Rules, 2017. (Rule 88D of CGST Rules, 2017)

(i) Rule 88D provides that if the amount of input tax credit availed by a taxpayer in the FORM GSTR-3B return for a tax period or periods exceeds the input tax credit available to such person in accordance with the auto-generated statement containing the details of input tax credit in FORM GSTR-2B for the corresponding period then the said taxpayer shall be intimated of such difference in Part A of FORM GST DRC-01C, electronically and a copy of such intimation shall also be sent to his e-mail address, highlighting the said difference and directing him to pay the excess input tax credit amount availed in the said FORM GSTR-3B, along with interest, through FORM GST DRC-03 or explain the reasons for the aforesaid difference.

(ii) The taxpayer shall either pay the excess input tax credit amount, fully or partially, along with interest through FORM GST DRC-03 and furnish the details thereof or furnish a reply, electronically, giving reasons in respect of the excess input tax credit, in Part B of FORM GST DRC-01C, within the specified period.

(iii) If any amount remains to be paid and where no explanation or reason is furnished by the taxpayer in default or where the explanation or reason furnished by such person is not found to be acceptable by the Proper Officer, then the said amount shall be liable to be demanded under the provisions of Section 73 or Section 74, as the case may be. (Section 73 and Section 74 of CGST Act, 2017)

5.9 Rule 142B has been inserted in the CGST Rules, 2017 vide notification No. 38/2023-CT, dated 04.08.2023, w.e.f. 04.08.2023, which lays down the procedure for intimating the taxpayer online about the amount liable to be recovered under Section 79 of the CGST Act, 2017, as under:- (Rule 142B of CGST Rules, 2017)

(i) If any amount of tax or interest has become recoverable under Section 79 of the CGST Act in accordance with Section 75 ibid read with Rule 88C of CGST Rules, 2017 and is unpaid, the Proper Officer shall intimate the details of the said amount in FORM GST DRC-01D, electronically on the common portal, directing the taxpayer to pay the said amount along with applicable interest, within the specified time and the said amount shall be posted in Part-II of Electronic Liability Register in FORM GST PMT-01. (Section 75 of CGST Act, 2017) (Rule 88C of CGST Rules, 2017)

(ii) The intimation shall be treated as the notice for recovery.

(iii) If amount of tax or interest specified in the intimation remains unpaid on the expiry of the period specified in the said intimation, the Proper Officer shall proceed to recover such amount in accordance with various modes of recovery prescribed under Rule 143 to Rule 147 or Rule 155 to Rule 157 or Rule 160.

6. MODES OF RECOVERY

The following modes of recovery are prescribed under the CGST Rules –

(I) Recovery by Deduction from any money owed which may be under control of Proper Officer or Specified Officer:

(i) Section 79(1)(a) of the CGST Act states that the Proper Officer may deduct or may ask any other Specified Officer to deduct the amount due from the taxpayer from any money owing to such taxpayer, which may be under the control of the Proper Officer or the Specified Officer. (Section 79(1)(a) of CGST Act, 2017)

(ii) Rule 143 of CGST Rules, 2017 prescribes the procedure of recovery in this regard. It states that if any amount payable by a taxpayer under any of the provisions of the CGST Act or the rules made thereunder is not paid, the Proper Officer may ask the Specified Officer in FORM GST DRC-09 electronically, to deduct the amount from any money owing to such taxpayer. (Rule 143 of CGST Rules, 2017)

(iii) As per explanation to Rule 143 of the CGST Rules, 2017, “Specified Officer” means any officer of the Central Government or a State Government or the Government of a Union territory or a local authority, or of a Board or Corporation or a company owned or controlled, wholly or partly, by the Central Government or a State Government or the Government of a Union territory or a local authority.

(iv) Proper officer for recovery through deduction from any money owed is the concerned Deputy Commissioner /Assistant Commissioner.

(II) Recovery by detaining & sale of goods belonging to the defaulting taxpayer under the control of proper officer or such other specified officer:

(i) As per Section 79(1)(b) of the CGST Act, 2017, the Proper Officer may recover or may ask any other Specified Officer to recover the amount payable by detaining and selling any goods belonging to the defaulting taxpayer, which are under the control of the Proper Officer or the Specified Officer.

(ii) Rule 144 of the CGST Rules, 2017 lays down the procedure to be followed by the Proper Officer, viz., the Deputy/Assistant Commissioner, for recovery of dues by sale of goods belonging to taxpayer under his control. (Rule 144 of CGST Rules, 2017)

(iii) The Proper Officer shall prepare an inventory and estimate the market value of such goods and proceed to sell only so much of the goods as may be required for recovering the amount payable along with the administrative expenditure incurred on the recovery process.

(iv) The said goods shall be sold through a process of auction, including e-auction, for which a notice shall be issued in FORM GST DRC-10, indicating the goods to be sold and the purpose of sale.

(v) Minimum time period of 15 days to be given for submission of Bid or Auction date. However, if the goods are of perishable or hazardous nature or if the expenses of keeping them in custody is likely to exceed their value, the Proper Officer may sell them forthwith.

(vi) The Proper Officer may specify the amount of pre-bid deposit to be furnished in the manner specified, to make the bidders eligible to participate in the auction. Such pre-bid deposits are required to be returned to the unsuccessful bidders and forfeited in case the successful bidder fails to make the payment of the full amount.

(vii) The proper officer shall issue a notice to the successful bidder in FORM GST DRC-11 requiring him to make the payment within a period of fifteen days from the date of auction. On payment of the full bid amount, the proper officer shall transfer the possession of the said goods to the successful bidder and issue a certificate in FORM GST DRC-12.

(viii) If the defaulter pays the amount under recovery, including the expenses incurred on the process of recovery, before the issue of the notice FORM GST DRC-10, the Proper Officer shall cancel the process of auction and release the goods.

(9ix) The Proper Officer shall cancel the process and proceed for re-auction where no bid is received or the auction is considered to be non-competitive due to lack of adequate participation or due to low bids.

(x) Rule 144A of the CGST rules, 2017 lays down the procedure for recovery of penalty by sale of goods or conveyance detained or seized in transit. If the person transporting any goods or the owner of such goods fails to pay the amount of penalty specified under Section 129 (3) of the CGST Act, 2017 within fifteen days from the date of receipt of the copy of the order passed by the Proper Officer, he shall proceed with the sale or disposal of the goods or conveyance detained or seized by preparing an inventory and estimating the market value of such goods or conveyance. If the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the period of fifteen days may be reduced. The said goods or conveyance shall be sold through the process of auction, including e-auction after issuing notice in FORM GST DRC-10. The procedure and safeguards are same as in respect of the goods. (Rule 144A of CGST Rules, 2017) (Section 129(3) of CGST Act, 2017)

(xi) If any appeal has been filed by the concerned person then the proceedings for recovery of penalty by sale of goods or conveyance detained or seized in transit shall be deemed to be stayed. However, this provision shall not be applicable in respect of goods of perishable or hazardous nature.

(III) Recovery from third person:

(i) As per Section 79(1)(c) of the CGST Act, 2017, the Proper Officer, viz., the Deputy/Assistant Commissioner, may issue a notice in writing to any other person from whom money is due or may become due to the defaulting taxpayer or who holds or may subsequently hold money for or on account of such defaulting taxpayer, asking to pay to the Government the money becoming due or being held, within the time specified in the notice. (Section 79(1)(c) of CGST Act, 2017)

(ii) The procedure has been prescribed in Rule 145 of the CGST Rules, 2017. (Rule 145 of CGST Rules, 2017)

(iii) The proper officer may serve a notice in FORM GST DRC-13 to the third person mentioned above, directing him to deposit the amount specified in the notice.

(iv) If the third person makes the payment of the amount specified in the notice in FORM GST DRC-13, the Proper Officer shall issue a certificate in FORM GST DRC-14 to the third person, indicating the details of the liability to be discharged and liability discharged.

(v) Every person to whom the notice FORM GST DRC-13 is issued, shall be bound to comply with such notice. If the said notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment,

(vi) In case the third person to whom the said notice in FORM GST DRC-13 has been issued, fails to make the payment to the Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of the CGST Act or the rules made thereunder shall follow.

(v) The Proper Officer may, at any time, amend or revoke the said notice or extend the time for making any payment in pursuance of the notice.

(vi) If the third person makes any payment in compliance with the said notice then the same shall be deemed to have made the payment under the authority of the defaulting taxpayer and such payment being credited to the Government shall be deemed to constitute a discharge of the liability of such third person to the defaulting taxpayer to the extent of the amount specified in the receipt.

(vii) The third person to whom the notice in FORM GST DRC-13 has been issued, shall be personally liable to the Government to the extent of the liability discharged or to the extent of the liability of the defaulting taxpayer for tax, interest and penalty, whichever is less.

(viii) If the third person to whom the notice in FORM GST DRC-13 is served, proves to the satisfaction of the Proper Officer that the money demanded or any part thereof was not due to the defaulting taxpayer or that he did not hold any money for or on account of such taxpayer at the time the notice was served, nor the money demanded or any part thereof is likely to become due to the taxpayer then such third person shall not pay to the Government any money or part thereof.

(IV) Recovery through execution of a decree:

Rule 146 of the CGST Rules, 2017 provides that if any amount is payable to the defaulting taxpayer in the execution of a decree of a Civil Court for the payment of money or for sale in the enforcement of a mortgage or charge, the Proper Officer, viz., the Deputy or Assistant Commissioner shall send a request in FORM GST DRC-15 to the said court and the court shall, subject to the provisions of the Code of Civil Procedure, 1908 (5 of 1908), execute the attached decree and credit the net proceeds for settlement of the amount recoverable. (Rule 146 of CGST Rules, 2017)

(V) Recovery through sale of movable or immovable property:

(i) As per provisions of Section 79(1)(d) of the CGST Act, 2017, the Proper Officer, viz., the Deputy or Assistant Commissioner may distrain any movable or immovable property belonging to or under the control of the defaulting taxpayer and detain the same until the amount payable is paid. In case any part of the amount payable or of the cost of the distress or keeping of the property, remains unpaid within the specified period then he may proceed to sell the said property and the sale proceeds may be appropriated against the amount payable and the costs, including cost of sale remaining unpaid. Balance or surplus amount, if any, shall be refunded to such defaulting taxpayer. (Section 79(1)(d) of CGST Act, 2017)

(ii) Rule 147 of the CGST Rules, 2017 lays down the procedure for recovery of due by sale of movable or immovable property. (Rule 147 of CGST Rules, 2017)

(iii) The Proper Officer shall prepare a list of movable and immovable property belonging to the defaulter, estimate their value as per the prevalent market price and issue an order of attachment or distraint and a notice for sale in FORM GST DRC-16, prohibiting any transaction with regard to such movable and immovable property.

(iv) The Proper Officer should send a copy of the order of attachment or distraint to the concerned Revenue Authority or Transport Authority or any such Authority, to place encumbrance on the said movable or immovable property. The attachment or distraint shall be removed only on the written instructions from the Proper Officer to that effect.

(v) Rule 147(3) of the CGST Rules, 2017 provides that if the property subjected to attachment or distraint is an immovable property then the order of attachment or distraint shall be affixed on the said property and shall remain affixed till the confirmation of sale. If such property is a movable property then the Proper Officer shall seize the said property and it shall either be taken by the Proper Officer himself or an officer authorised by him. (Rule 147(3) of CGST Rules, 2017)

(vi) Rule 147(4) of the CGST Rules, 2017 states that the property attached or distrained shall be sold through auction, including e-auction, for which a notice should be issued in FORM GST DRC- 17 indicating the property to be sold and the purpose of sale. (Rule 147(4) of CGST Rules, 2017)

(vii) If the property for sale is in the form of Negotiable Instrument or Share in a Corporation then the Proper Officer, instead of selling it by public auction, may sell such instrument or a share through a broker and the said broker, after reducing his commission and from the sale proceeds he shall deposit to the Government account the amount due to be paid for the discharge of the amount under recovery and the balance amount, if any, be paid to the owner of such instrument or a share.

(viii) In respect of the property which is not in the form of Negotiable Instrument or Share in a Corporation, the Proper Officer may recover the amount by auctioning the property. The procedure to be followed for auctioning is same as in the case of goods, which is elaborated in para 3.10(II) above.

(ix) Rule 147(8) of the CGST Rules, 2017 provides that where any claim is preferred or any objection is raised with regard to the attachment or distraint of any property on the ground that such property is not liable to such attachment or distraint, the Proper Officer shall investigate the claim or objection and may postpone the sale for time being. (Rule 147(8) of CGST Rules, 2017)

(x) The person making the claim or objection must adduce evidence to show that on the date of the order he had some interest in, or was in possession of, the property in question under attachment or distraint. (Rule 147(9) of CGST Rules, 2017) (Rule 147(9) of CGST Rules, 2017)

(xi) On investigation if the Proper Officer is satisfied that the reason stated in the claim or objection is correct and such property was not in the possession of the defaulter taxpayer or of any other person on his behalf or if in his possession it was not on his own account or as his own property but on account of trust or partly on his own account and partly on account of some other person, then he (Proper Officer) shall issue an order releasing the property, wholly or to such extent as he deems fit, from attachment or distraint. (Rule 147(10) of CGST Rules, 2017) (Rule 147(10) of CGST Rules, 2017)

(xii) If the Proper Officer is satisfied that the property was in the possession of the defaulter as his own property and not on account of any other person or was in the possession of some other person in trust for him or in the occupancy of a tenant or other person paying rent to him, then he (Proper Officer) shall reject the claim and proceed with the process of sale through auction. (Rule 147(11) of CGST Rules, 2017) (Rule 147(11) of CGST Rules, 2017)

(xiii) The proper officer shall issue a notice in FORM GST DRC-11 to the successful bidder requiring him to 164 | Handbook of GST Law and Procedures make the payment within the specified period and after the payment is made, he shall issue a certificate in FORM GST DRC-12 specifying the details of the property, date of transfer, the details of the bidder and the amount paid. Upon issuance of the said certificate, the rights, title and interest in the property shall be deemed to be transferred to such bidder. However, where the highest bid is made by more than one person and one of them is a co-owner of the property then he shall be deemed to be the successful bidder.

(xiv) Any amount, including stamp duty, tax or fee payable in respect of the transfer of the property shall be paid to the Government by the person to whom the title in such property is transferred.

(xv) Rule 147(14) of the CGST Rules, 2017 provides that if the defaulter pays the amount under recovery, including the expenses incurred on the process of recovery, before the issuance of the notice in FORM GST DRC- 17 the Proper Officer shall cancel the process of auction and release the goods. (Rule 147(14) of CGST Rules, 2017)

(xvi) If no bid is received or the auction is considered to be non-competitive due to lack of adequate participation or due to low bids then the Proper Officer shall cancel the process and proceed for re-auction.

(xvii) Rule 148 of the CGST Rules, 2017 prohibits bidding or purchase by Officer having any duty to perform in connection with any sale. (Rule 148 of CGST Rules, 2017)

(xviii) Rule 149 of the CGST Rules, 2017 prohibits sale on holidays notified by the Government. (Rule 149 of CGST Rules, 2017)

(xix) Rule 150 of the CGST Rules, 2017 provides that the Proper Officer may seek assistance from the officer-in-charge of the jurisdictional police station, as may be necessary in the discharge of his duties. The said Police officer shall depute sufficient number of police officers for providing assistance. (Rule 150 of CGST Rules, 2017)

(xx) Rule 151 of the CGST Rules, 2017 provides for the manner of attachment of any property in debt, which is not secured by a negotiable instrument, a share in a corporation, or other movable property not in the possession of the defaulter, except for property deposited in or in the custody of any Court. The Rule provides that such property in debt shall be attached by a written order in FORM GST DRC-16, prohibiting, the creditor of dept from recovering the debt and the debtor from making payment. In the case of a share, the person in whose name the share may be standing shall be prohibited from transferring the same or receiving any dividend thereon. In the case of any other movable property, the person in possession of the same shall be prohibited from giving it to the defaulter, until the receipt of a further order from the Proper Officer. (Rule 151 of CGST Rules, 2017)

A copy of the order shall be affixed on some conspicuous part of the office of the Proper Officer and another copy shall be sent to the debtor or to the registered address of the share corporation or to the person in possession of the property, as the case may be. The aforesaid debtor may pay the amount of his debt to the Proper Officer, and such payment shall be deemed as paid to the defaulter taxpayer.

(xxi) Rule 152 of the CGST Rules, 2017provides that if the property to be attached is in the custody of any court or Public Officer, the Proper Officer, viz., the Deputy or Assistant Commissioner, shall send the order of attachment to such court or officer, requesting that the property and any interest or dividend payable thereon, may be held till the recovery of the amount payable. (Rule 152 of CGST Rules, 2017)

(xxii) If the property to be attached consists of an interest of the defaulter, being a partner, the Proper Officer may issue an order charging the share of such partner in the partnership property and profits with payment of the amount due under the certificate. He may, by the same or subsequent order, appoint a receiver of the share of such partner in the profits and any other money due to him in respect of the partnership. He may also direct enquiries and make an order for the sale of such interest. In such case, the other partners shall be at liberty to redeem the interest charged or purchase the same. (Rule 153 of the CGST Rules, 2017) (Rule 153 of CGST Rules)

(xxiii) The amounts realised from the sale of goods, movable or immovable property, for the recovery of dues from a defaulter shall, in the following sequence-

(a) be appropriated against the administrative cost of the recovery process;

(b) be appropriated against the amount to be recovered or to the payment of the penalty payable;

(c) be appropriated against any other amount due from the defaulter under the GST law;

(d) the balance, if any, shall be credited to the electronic cash ledger of the owner of the goods or conveyance, as the case may be, in case the person is registered under the Act. If the said person is not required to be registered under the CGST Act, the said amount shall be credited to the bank account of the person concerned. If it is not possible to pay the balance of sale proceeds in the aforesaid manner to the person concerned within six months from the date of sale of such goods or conveyance or such further period allowed by the Proper Officer, such balance of sale proceeds shall be deposited with the Fund.

(VI) Recovery through land revenue authority:

Section 79(1)(e) of the CGST Act, 2017 read with Rule 155 of the CGST Rules, 2017 stipulate that the Proper Officer, viz. Deputy or Assistant Commissioner, shall send a certificate in FORM GST DRC-18, specifying the amount due from such person, to the District Collector or to any officer authorised by the Government, in which such defaulter taxpayer/person owns any property or resides or carries on his business. The said Collector or the said officer, on receipt of such certificate, shall proceed to recover the amount specified thereunder, as if it were an arrear of land revenue. (Section 79(1)(e) of CGST Act, 2017) (Rule 155 of CGST Rules, 2017)

(VII) Recovery through court:

Section 79(1)(f) of the CGST Act, 2017 read with Rule 156 of the CGST Rules, 2017 prescribe that the Proper Officer, viz., the Deputy or Assistant Commissioner, file an application in FORM GST DRC-19 to the appropriate Magistrate and the Magistrate shall proceed to recover from such person the amount specified thereunder, as if it were a fine imposed under the Code of Criminal Procedure, 1973. (Rule 156 of CGST Rules, 2017)

(VIII) Recovery through surety

Section 79(2) of CGST Act, 2017 read with Rule 157 of the CGST Rules, 2017 prescribe that where the terms of any bond or other instrument executed under the CGST Act, 2017 or any rules or regulations made thereunder provide that any amount due under such instrument should be recovered in the manner laid down in Sectio79(1), then the Proper Officer may recover the amount from the person standing as surety for the amount due from the defaulter taxpayer/person, as if he was the defaulter. (Section 79(2) of CGST Act, 2017) (Section 79(1) of CGST Act, 2017) (Rule 157 of CGST Rules, 2017)

(IX) Recovery of CGST Dues by Proper Officer of State Tax or Union Territory Tax:

Section 79(3) of CGST Act, 2017 empowers the officers of State Tax or Union Territory Tax to recover any amount of tax, interest or penalty payable by a defaulter taxpayer to the Government under any of the provisions of the CGST Act or the rules made thereunder, as if it were an arrear of State tax or Union territory tax and credit the amount so recovered to the account of the Government. If the amount of arrears recovered is less than the amount due to the Central Government and State Government then the amount shall be credited to the account of the respective Governments in proportion to the amount due to each Government. (Section 79(3) of CGST Act, 2017)

7. PAYMENT OF TAX AND OTHER AMOUNT IN INSTALMENTS

(I) As per Section 80 of the CGST Act, 2017, if a taxpayer makes an application for payment of dues of tax and other amount, the Pr. Commissioner/Commissioner may extend the time for payment or allow payment of any amount due under the CGST Act, 2017 other than the self-assessed liability amount, in monthly instalments not exceeding twenty-four, subject to payment of interest under Section 50 and subject to such conditions and limitations as may be prescribed. (Section 80 of CGST Act, 2017) (Section 50 of CGST Act, 2017)

(II) If there is default in payment of any one instalment on its due date then the whole outstanding balance payable on such date shall become due and payable forthwith and will be liable for recovery without any further notice.

(III) Rule 158 of the CGST Rules, 2017 lays down the conditions and limitation for exercising the power to allow payment of tax and other amounts in instalment. (Rule 158 of CGST Rules, 2017)

(IV) The taxpayer has to file an application electronically in FORM GST DRC- 20, seeking extension of time for the payment of taxes or any amount due under the CGST Act or for allowing payment of such taxes or amount in instalments.

(V) The Commissioner shall call for a report from the jurisdictional officer about the financial ability of the taxable person to pay the said amount.

(VI) If the application filed by the taxpayer is found proper and legally acceptable and the report of the jurisdictional officer on financial ability is satisfactory, the Commissioner may issue an order in FORM GST DRC- 21, allowing the taxable person further time to make payment or to pay the amount in monthly instalments, not exceeding twenty-four, as he may deem fit.

(VII) The above said facility of deferred payment of dues or payment of dues in monthly installments, shall not be allowed –

(a) if the taxpayer has defaulted on the payment of any amount due, for which the recovery process is on;

(b) the taxable person has not been allowed to make payment in instalments in the preceding financial year;

(c) the amount for which instalment facility is sought is less than twenty-five thousand rupees.

8. TRANSFER OF PROPERTY TO BE VOID IN CERTAIN CASES

(I) As per Section 81 of the CGST Act, 2017, if the defaulting taxpayer/person creates a charge on or parts with the property belonging to him or in his possession by way of sale, mortgage, exchange, or any other mode of transfer of any of his properties in favour of any other person with the intention of defrauding the Government revenue due from him, then such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the said defaulting taxpayer/person.(Section 81 of CGST Act, 2017)

(II) Such charge or transfer shall not be void if it is made for adequate consideration, in good faith and without notice of the pendency of such proceedings under CGST Act, 2017 or without notice of such tax or other sum payable or with the previous permission of the Proper Officer, viz., the Additional or Joint Commissioner.

9. TAX TO BE FIRST CHARGE ON PROPERTY

(I) In terms of Section 82 of the CGST Act, 2017, any amount payable by a taxpayer/person on account of tax, interest or penalty to the Government shall be a first charge on the property of such taxpayer/ person. (Section 82 of CGST Act, 2017)

(II) In case of conflict in the provisions of Section 82 of the CGST Act, 2017 and the Insolvency and Bankruptcy Code, 2016 (IBC, 2016), the provision of Insolvency and Bankruptcy Code, 2016 shall prevail. (Section 82 of CGST Act, 2017)

10. PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES

(I) The provisions of Section 83(1) of the CGST Act, 2017 provide for provisional attachment in certain cases. The said provision provides that if after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV of the CGST Act, the Pr. Commissioner/Commissioner in order to protect the interest of the Government revenue may pass an order to attach provisionally, any property, including bank account, belonging to the defaulting taxpayer/person specified in Section 122(1A) of the CGST Act, 2017 in the manner prescribed. (Section 83(1) of CGST Act, 2017) (Section 122(1A) of CGST Act, 2017)

(II) The provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the above said order.

(III) The following guidelines have been prescribed by CBIC Vide Instructions No. CBEC-20/16/05/2021-GST/359, dated 23.02.2021, with regard to Provisional Attachment of Property-

(i) There must be pendency of a proceeding against a defaulting taxpayer/person under sections mentioned in Section 83 of the CGST Act, 2017.

(ii) The Commissioner must have formed the opinion that provisional attachment of the property belonging to the defaulting taxpayer/person is necessary for the purpose of protecting the interest of the Government Revenue.

(iii) For forming an opinion under Section 83 of the CGST Act, 2017 it is important that the Pr. Commissioner/ Commissioner must exercise due diligence and carefully examine all the facts of the case, including the nature of offence, amount of revenue involved, establish nature of business and extent of investment in capital assets and reasons to believe that the defaulting taxpayer/person against whom the proceedings are pending, may dispose of or remove the property if not attached provisionally. (Section 83 of CGST Act, 2017)

(iv) The basis, on which Commissioner has formed the opinion should be duly recorded on file.

(v) The power of provisional attachment must not be exercised in a routine/mechanical manner and careful examination of all the facts of the case is important to determine whether the case(s) is fit for exercising power under Section 83.

(vi) The collective evidence, based on the proceedings/enquiry conducted in the case, must indicate that the prima-facie a case has been made out against the defaulting taxpayer/person, before going ahead with any provisional attachment. The remedy of attachment being, by its very nature, extraordinary has to be resorted to without utmost circumspection and with maximum care and caution.

(IV) Procedure for Provisional Attachment of Property :

(i) Upon forming the opinion to attach any property, including bank account, of the defaulting taxpayer/ person, the Pr. Commissioner/ Commissioner should duly record on file the basis on which he has formed such an opinion and pass an order in FORM GST DRC-22, mentioning therein the details of property being attached.

(ii) A copy of the order of attachment should be sent to the concerned Revenue authority or Transport Authority or Bank or the relevant authority to place encumbrance on the said movable or immovable property. The property, thus attached, shall be removed only on the written instructions from the commissioner.

(iii) A copy of such attachment order should be provided to the said defaulting taxpayer/person so that objections, if any, can be made by him within the time frame prescribed under Rule 159 of the CGST Rules, 2017 in FORM GST DRC-22A. (Rule 159 of CGST Rules, 2017)

(iv) If the objection is filed, the Pr. Commissioner/Commissioner should provide a Personal hearing.

(v) After considering the facts in the written objections, even those not filed within the time prescribed, as well as during a personal hearing, the Pr. Commissioner/Commissioner should form a reasoned view whether the property is still required to be attached or not and pass an order to this effect.

(vi) In case, the Pr. Commissioner/Commissioner is satisfied that the property is no longer liable for attachment, he may release such property by issuing order in FORM GST DRC 23.

(vii) Each such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of order of attachment.

(viii) If the provisionally attached properties are of perishable/ hazardous nature, then such property shall be released to the defaulting taxpayer/person by issuing order in FORM GST DRC-23, after such person pays an amount equivalent to the market price of such property or the amount that is or may become payable by him.

(ix) In case the defaulting taxpayer/person fails to pay the said amount, then the said property of perishable or hazardous nature may be disposed of and the amount recovered from such disposal of property shall be adjusted against the arrears of tax, interest, penalty, fee or any other amount payable. The sale proceeds thus obtained must be deposited with the Government Treasury or Branch of any nationalized bank in fixed deposit and the receipt thereof must be retained for record, so that same can be adjusted against the amount determined to be recoverable from the said defaulting taxpayer/person.

(x) As the remedy of attachment being extraordinary, needs to be resorted to with utmost circumspection and with maximum care and caution. It normally should not be invoked in cases of technical nature and should be resorted to mainly in cases where there is an evasion of tax or where wrongful input tax credit is availed or utilized or wrongfully passed on.

(V) Types of cases fit for provisional attachment:

The following are some of the type of cases, where provisional attachment can be considered to be resorted to, subject to specific facts of the case:

(i) Where taxable person has supplied any goods and/or services without issue of any invoice, with an intention to evade tax or issued any invoice or bill without supply of goods and/or services or availed input tax credit using the invoice or bill without receiving the goods or services.

(ii) Fraudulently availed input tax credit without any invoice or bill.

(iii) Collected any amount as tax but failed to pay the same to the Government beyond a period of three months from the date of which such payment becomes due.

(iv) Fraudulently obtained refund.

(v) Passed input tax credit fraudulently to the recipients but has not paid the commensurate tax.

(VI) Types of property to be attached:

(i) The provisional attachment of property shall be to the extent it is required to protect the interest of revenue, i.e., the value of attached property should be as near as possible to the estimated amount of pending revenue.

(ii) More than one property may be attached in case value of one property is not sufficient to cover the estimated amount of pending revenue. Further, different properties of the taxpayer can be attached at different points of time subject to the conditions specified in Section 83 of the CGST Act, 2017.

(iii) The provisional attachment can be made only of the property belonging to the defaulting taxpayer/ person, against whom the proceedings are pending.

(iv) Movable property should normally be attached only if the immovable property, available for attachment, is not sufficient to protect the interests of revenue.

(v) The attachment should not hamper normal business activities of the taxpayer/person. This would mean that raw materials and inputs required for production of finished goods should not normally be attached by the Department.

(vi) In cases where the movable property, including bank account, belonging to the defaulting taxpayer/person has been attached, such movable property may be released if he offers, in lieu of movable property, any other immovable property which is sufficient to protect the interest of revenue. It should be free from any subsisting charge, liens, mortgages or encumbrances, property tax fully paid up to date and not involved in any legal dispute. The defaulting taxpayer/person must produce the original title needs and other necessary information relating to the property, for the satisfaction of the concerned officer.

(vii) As the provisional attachment of property is resorted to protect the interests of the revenue and may also affect the working capital of the taxable person, it should be ensured that in all such cases, the investigation and adjudication are completed at the earliest, well within the period of attachment, so that the due liability of tax as well as interest, penalty etc. arising upon adjudication can be recovered and the purpose of attachment is achieved.

(viii) If the property to be provisionally attached consists of the share or interest of the concerned taxpayer/person in property belonging to him and another as co-owners, the provisional attachment shall be made by order to the concerned person prohibiting him from transferring the share or interest or charging it in any way.

(ix) All property exempted from attachment and sale for execution of a Decree of a Civil Court by the Code of Civil Procedure, 1908 (5 of 1908), shall be exempt from provisional attachment.

11. CONTINUATION AND VALIDATION OF CERTAIN RECOVERY PROCEEDINGS

(I) In terms of Section 84 of the CGST Act, 2017, if any notice of demand in respect of any tax, penalty, interest or any other amount payable (Government dues) is served upon any taxpayer or any other person and any appeal or revision application is filed or any other proceedings is initiated in respect of such demand, then – (Section 84 of CGST Act, 2017)

(a) where such Government dues are enhanced in the appeal, revision or other proceedings, the Pr. Commissioner/Commissioner shall serve upon the taxpayer or any other person another notice of demand in respect of the differential amount and any recovery proceedings in relation to such Government dues be continued;

(b) where such Government dues are reduced in such appeal, revision or in other proceedings then it shall not be necessary to serve a fresh notice of demand but an intimation of such reduction should be given to the concerned taxpayer/person and to the appropriate authority with whom recovery proceedings is pending and the recovery proceedings initiated on the basis of the demand served may be continued in relation to the amount so reduced,

(II) The intimation or notice for the reduction or enhancement of any demand under Section 84 shall be issued in FORM GST DRC- 25.

12. LIABILITY TO PAY IN CERTAIN CASES

(I) To recover the dues and to initiate the recovery procedure, it is a must to have clarity as to from whom the dues of tax is to be recovered. The GST law has inbuilt provisions which impart clarity in this regard to administer and implement GST laws and to reduce litigation on this count.

(II) Liability in case of transfer of business before the date of transfer:

Section 85(1) of the CGST Act, 2017 provides that if a taxpayer transfers his business in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner then the taxpayer and the person to whom the business is transferred shall, jointly and severally, be liable wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from the taxpayer till the time of such transfer, whether or not such dues have been determined before such transfer. (Section 85(1) of CGST Act, 2017)

(III) Exclusive Liability of Transferee of Business from the date of transfer:

The provisions of Section 85(2) of the CGST Act, 2017 stipulate that if the transferee of a business carries on such business either in his own name or in some other name, he shall be liable to pay tax on the supply of goods and/or services effected by him from the date of such transfer. (Section 85(2) of CGST Act, 2017)

(IV) Liability of agent and principal:

As per Section 86 of the CGST Act, 2017, if an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal shall be jointly and severally liable to pay the tax on such goods. (Section 86 of CGST Act, 2017)

(V) Liability in case of amalgamation or merger of companies:

Section 87(1) of the CGST Act, 2017, provides that when two or more companies are amalgamated or merged in pursuance of an order of Court or Tribunal and effective from an earlier date and any two or more of such companies have supplied or received any goods and/or services to or from each other during the period commencing from the effective date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly. (Section 87(1) of CGST Act, 2017)

(VI) As per Section 87(2) of the CGST Act, 2017, companies amalgamating or merging are to be treated as distinct companies for the purpose of GST for period upto the date of Order of Court or Tribunal and the registration certificates of these companies shall be cancelled with effect from the date of the said order. (Section 87(2) of CGST Act, 2017)

(VII) Liability in case of company in liquidation:

(i) Section 88 of the CGST Act, 2017 contains provision for determination of liability in case where the company is under liquidation. When any company is being wound up, whether under the orders of a court or Tribunal or otherwise, the receiver (liquidator) of any assets of a company shall give intimation of his appointment to the Commissioner within thirty days after his appointment. The Pr. Commissioner/ Commissioner has to notify the Liquidator of the amount sufficient to provide for any tax, interest or penalty in FORM GST DRC-24, within 3 months. (Section 88 of CGST Act, 2017)

(ii) The Liability to pay dues of tax, interest or penalty lies on every person who was a Director of Private Company in case of Winding Up of Private Companies, unless he proves to the satisfaction of the Commissioner that such non-recovery cannot be attributed to any gross neglect or breach of duty on his part in relation to the affairs of the company.

(iii) Provision of Companies Act, 2013 not applicable if it is in conflict with the above provision contained in CGST Act, 2017.

(VIII) Liability of Directors of Private Company:

Section 89(1) of the CGST Act, 2017 provides that if any amount of tax, interest or penalty due from a private company in respect of any supply of goods or services or both for any period cannot be recovered, then, every person who was a director of the private company during such period shall, jointly and severally, be liable for the payment of the said amount unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. This provision shall not to apply in case of conversion from Private Company to public Company but applies for recovery of personal penalty imposed on Director. (Section 89(1) of CGST Act, 2017)

(IX) Liability of partners of firm to pay tax:

(i) Section 90 of the CGST Act, 2017 provides for determination of liability of firms or partners in case of partnership firm. The Firm and Partners of Firms are liable to pay any tax, interest or penalty, Jointly and severally. (Section 90 of CGST Act, 2017)

(ii) The liability of Retired Partner shall be only upto the date of his retirement or intimation of date of Retirement to the Commissioner, whether the liability is determined or not, on that date. In case of failure to intimate the date of retirement within one month, the liability of Retired Partner will continue.

(X) Liability of guardians, trustees, etc.:

Section 91 of the CGST Act, 2017 provides that if the business is carried on by any guardian, trustee or agent of a minor or other incapacitated person on behalf of a minor or incapacitated person, the tax, interest or penalty payable shall be recoverable from such guardian, trustee or agent to the extent determined and recoverable from any such minor or incapacitated person. (Section 91 of CGST Act, 2017)

(XI) Liability of Court of Wards, etc.:

Section 92 of the CGST Act, 2017 provides that if the estate or any portion of the estate of a taxpayer is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager appointed by a court, the tax, interest or penalty shall be recoverable from such Court of Wards, Administrator General, Official Trustee, receiver or manager. (Section 92 of CGST Act, 2017)

(XII) Section 93 of the CGST Act, 2017 contains special provision regarding liability to pay tax, interest or penalty in certain specific situations. (Section 93 of CGST Act, 2017)

(i) Liability to pay when person liable to pay dies –

(a) If a business carried on by the person is continued after his death by his legal representative or any other person, then the liability to pay tax, interest or penalty will be on such legal representative or other person.

(b) If the business carried on by the person is discontinued before or after his death then his legal representative shall be liable to pay the tax, interest or penalty due from such person, whether determined before or after his death, from the estate of the deceased to the extent to which the estate is capable of meeting the charge.

(ii) If the taxpayer liable to pay dues of tax, interest or penalty is Hindu Undivided Family (HUF) or an Association of Persons and the property of the HUF or the association of persons is partitioned amongst the various members or groups of members, then each member or group of members shall, jointly and severally, be liable to pay such dues up to the time of the partition, whether such dues were determined before partition or after the partition. (Section 93(2) of the CGST Act, 2017) (Section 93(2) of CGST Act, 2017)

(iii) It the taxpayer liable to pay dues of tax, interest or penalty is a firm and the firm is dissolved then the partners of the firm shall, jointly and severally, be liable to pay such dues from the firm up to the time of dissolution, whether determined before the dissolution or after dissolution. (Section 93(3) of the CGST Act, 2017). (Section 93(3) of CGST Act, 2017)

(iv) If the taxpayer liable to the pay dues of tax, interest or penalty is a guardian of a ward or trustee, on whose behalf the business is carried on by the guardian or is a trustee who carries on the business under a trust for a beneficiary, and if the guardianship or trust is terminated, then the ward or the beneficiary shall be liable to pay such dues from the taxpayer upto the time of the termination of the guardianship or trust, whether such dues are determined before the termination of guardianship or trust or thereafter. (Ref: Section 93(4) of the CGST Act, 2017). (Section 93(4) of CGST Act, 2017)

(XIIII) Liability in other cases:

(i) Section 94 of the CGST Act, 2017 provides that if the taxpayer liable to pay is a firm or an association of persons or a HUF and the business is discontinued then the tax, interest or penalty payable by such firm, association or family up to the date of such discontinuance may be determined as if no such discontinuance had taken place and every person who was a partner of such firm, or a member of such association or family, shall, jointly and severally, be liable for the payment of the said dues, whether such dues are determined prior to or after such discontinuance. (Section 94 of CGST Act, 2017)

(ii) When there is change in constitution of a firm or an association of persons, the partners of the firm or member of association shall, jointly and severally, be liable to pay tax, interest or penalty due from such firm or association for any period before its reconstitution. (Section 94(2) of the CGST Act, 2017). (Section 94(2) of CGST Act, 2017).

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Source: Handbook of GST Law and Procedures for Departmental Officers issued by Ministry of Finance.