By the Finance Act, 2021, S.83(1), has been substituted by the following;
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 Govt. 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.
The old sub-section (1), prior to the above substitution was as under;
(1)Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, 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 in such manner as may be prescribed.
The date of implementation of the above provision is yet to be notified.
The new Sub-Section (1A) to Section 122 of the CGST Act, 2017 w.e.f. 1.1.2021, reads as under;
(1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.
Analysis by the author.─By this amendment;
i) “after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV”, have been substituted for the following words;
“during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74”,
ii) the words “or any person specified in sub-section (1A) of section 122”, have been added.
Meaning thereby that;
i) the scope of provisional attachment has been increased to a great extent as under;
a) initiation of any proceedings u/s 59 to S.64, 67 to S.72 & S.73 to 84 are now covered the purpose of provisional attachment of property.
S.71, which deals with “Access to Business Premises”, has now been included under the phrase “initiation of any proceeding”.
Recently, in the case of Kanal Enterprise v. State of Gujarat (2021) 35 J.K.Jain’s GST & VR 8 (Guj), it was held that there is no power vested in the authorities to invoke the provisions of S.83 during the pendency of the proceedings instituted u/s 71(1) of the Act. In fact, there cannot be any proceedings, which could be instituted u/s 71 of the Act. Therefore, the order of attachment u/s 83 of the Act was quashed and set aside.
In another case of Proex Fashion Pvt. Ltd. v. Government of India & Ors. (2021) 35 J.K.Jain’s GST & VR 141(Del), the order attaching the Bank account giving reference of S.71, was declared ultra vires the statutory powers of the respondent and was quashed since S.71─Acess to Business was not covered within the scope of provisional attachment of property u/s 83.
There is much difference between “initiation of any proceeding” and “during the pendency of any proceedings”. And as such, now, the Deptt. has legalized its pressure tactics on the taxable person in the form of attachment of Bank Accounts of a going concern under the shelter of amendment in the Act.
It is worth mentioning that in the case of Union of India & Anr. v. Kushal Ltd & Anr. (2021) 35 J.K.Jain’s GST & VR 94 (SC), the Hon’ble Supreme court has kept in abeyance the phrase “No pendency of the proceedings during Investigation”. This case is still pending in the Supreme Court.
To nullify all these judgments announced in favour of the party, S.83(1) has been amended by the CBIC/Govt. by plugging correct interpretation by different courts in favour the Taxable person in the wake of fundamental right of citizens of India to carry on the business smoothly. And this shows non friendly approach of the CBIC leading to lot of public money being wasted on legal matters by the Govt.. While carrying out amendment to S.83(1), the Govt. has completely ignored the adverse comments made in the judgment of Vinodkumar Murlidhar v. State of Gujarat(2021) 35 J.K.Jain’s GST & VR 95 (Guj), wherein the court while quashing the orders of provisional attachment of two bank accounts, commented adversely on Mechanical exercise of the power by the assessing authorities and held that Mechanical exercise of the power u/s 83, CGST Act, for Attachment of bank accounts of a going concern is an abuse to the legal provisions without application of mind. And a mechanical or casual exercise of such power will dilute the very efficacy of the provisions of provisional attachment of the bank accounts.
ii) Now, by the second limb of the amendment,
the property of the person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to be attached provisionally.
It is a good step to book the person indulging in fraudulent activities, which are increasing day by day.