The article contains about provisions for provisional attachment under section 83. Judgements are provided to understand the cases when the order passed might be illegal and liable to be quashed.
Section 83 of the CGST Act empowers the Commissioner to attach provisionally any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122. But such powers must be invoked judiciously and according to the law.
The Hon’ble Supreme Court in the case of M/S Radha Krishan Industries Civil Appeal No 1155 of 2021 held on 20-04-2021 analysis the provisions of section 83 in para 41 of the judgment. The para is reproduced as under with proposed amendments yet to be notified.
Sub-Section (1) of Section 83 can be bifurcated into several parts. The first part provides an insight on when in point of time or at which stage the power can be exercised. The second part specifies the authority to whom the power to order a provisional attachment is entrusted. The third part defines the conditions which must be fulfilled to validate the power or ordering a provisional attachment. The fourth part indicates the manner in which an attachment is to be levelled. The final and the fifth part defines the nature of the property which can be attached. Each of these special divisions which have been explained above is for convenience of exposition. While they are not watertight compartments, ultimately and together they aid in validating an understanding of the statute. Each of the above five parts is now interpreted and explained below:
(i) The power to order a provisional attachment is entrusted during the pendency of proceedings under any one of six specified provisions: Sections 62, 63, 64, 67, 73 or 74. In other words, it is when a proceeding under any of these provisions is pending that a provisional attachment can be ordered;
The new amendment yet to be notified as “any proceeding under Chapter XII, Chapter XIV or Chapter XV” has been inserted in place of any proceeding under sections 62, 63, 64, 67, 73, or 74
(ii) The power to order a provisional attachment has been vested by the legislature in the Commissioner;
(iii) Before exercising the power, the Commissioner must be “of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do”;
(iv) The order for attachment must be in writing
(v) The provisional attachment which is contemplated is of any property including a bank account belonging to the taxable person; and
The new amendment yet to be notified as “or any person specified in sub-section (1A) of section 122” has been inserted after the words belonging to the taxable person.
(vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute.
Effect of New Amendents
At present, pending proceedings are required under any of the six sections i.e. 62, 63, 64, 67, 73 or 74. After implementation of the amendment pending proceedings shall be required under any of the twenty four sections i.e. Chapter XII (sections 59 to 64), Chapter XIV (sections 67 to 72) and Chapter XV (sections 73 to 84).
The next proposed amendment regarding to provisional attachment of any property including a bank account may be belonging to the person section specified under section 122(1A) of the CGST Act in addition to the taxable person.
Section 122(1A) states that “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.”
The person other than taxable person whose instance any of the transactions stated under clauses (i), (ii), (vii) or clause (ix) of the section 122(1) is conducted and such person retains the benefit happened by virtue of the said transactions.
Clause (i) – 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;
Clause (ii) – 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;
Clause (vii) – 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;
Clause (ix) – takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;
Plethora of cases have been available and decided by various Hon’ble Courts of the land against the GST Authorities because the relevant authority invoked the proceedings under section 83 very casually and not following the provisions enumerated under the law. The CBIC also issued guidelines in this regard vide CIRCULAR NO. CBEC-20/16/05/2021-GST/359, DATED 23-2-2021.
In para 3.1.5 of the circular, they said that 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. The collective evidence based on the proceedings/enquiry conducted in the case, must indicate that prima facie a case has been made out against the taxpayer before going ahead with any provisional attachment. The remedy of attachment being by its very nature, extraordinary has to be resorted to with utmost circumspection and with maximum care and caution.
Case-Laws on following cases are provided for knowledge of the readers: –
In the absence of any proceedings initiated or pending against the writ applicant under Sections 62, 63, 64, 67, 73 or 74 of the CGST Act, the respondent could not have invoked Section 83 of the Act for the purpose of provisional attachment.
Provisional Attachment order against the person other than Taxable Person
Not to Intimate the customer why his account has been freezed by the banker, is impermissible.
Petitioner should be allowed to operate the bank account over and above the amount likely to be freezed.
Provisional Attachment carried out by the authority other than the Commissioner
Family members accounts cannot be attached if they are not taxable persons
Proceeding initiated without issuing the notice. Proceedings are not valid, therefore, order for attaching of bank account is set aside.
Cash Credit Account cannot be attached provisionally
Discretion has to be exercised in a just and judicious manner even proceedings are pending under section 67
Formation of opinion must be based on some credible material but not to be seemed as mechanical exercise of power under section 83
Provisional Attachment cannot be continued beyond the period of one year
The effect of Section 83 of the Act shall come to an end as soon as the proceedings pending in any of the Sections i.e. 63 or 64 or 67 or 73 or 74 is over because pendency of the proceedings is the essential condition
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