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Understand the provision of provisional attachment under GST with relevant case laws. Section 83 of CGST Act empowers the Commissioner to attach any property for protecting government revenue.

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. The other limbs of this section are that:

1. That action of provisional attachment may be taken after the initiation of any proceeding under Chapter XII (sections 59 to 64), Chapter XIV (sections 67 to 72) or Chapter XV (sections 73 to 84);

2. Such action shall be necessary to do for protecting the interest of the revenue of the Government and

3. Such action shall be done by passing an order in writing.

Maximum life of this order shall be one year from the date of order. It shall be automatically ceased immediate after expiry of one year.

CGST RULE 

Rule 159 of the CGST Rules is prescribing the forms and giving opportunity to the person whose property is attached, to file the objection.

Sub-rule (1) – Provisional Attachment Order shall be passed in the form GST DRC-22.

Sub-rule (2) – The encumbrance on the movable or immovable property shall be removed by the concern authority after written instructions from the commissioner.

Sub-rule (3) – Where property attached is perishable or hazardous nature that shall be released immediately after the person concern pays market price of such property or the amount that is become payable by such person whichever is less.

Sub-rule (4) – If the person concern fails to pay the amount towards property being perishable or hazardous nature as per sub-rule (3) then the commissioner may dispose of such property and the amount realized thereby shall be adjusted against the tax, interest, penalty, fee or any other amount payable such person.

Sub-rule (5) – The person concern may file an objection in form GST DRC-22A that the property attached was or is not liable to attachment. The commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC- 23. The time limit of seven days to file the objection has been removed vide notification no. 40/2021. Now the objection can be filed any time.

Sub-rule (6) – Release order shall be passed in form DRC-23.

CIRCULARS

The CBIC issued guidelines for provisional attachment of property under section 83 of the CGST Act, 2017 vide CIRCULAR NO. CBEC-20/16/05/2021-GST/359, DATED 23-2-2021.

In number of cases Hon’ble High Courts have also made observations on the modalities of implementation of provisions of section 83 of the Act by the tax officers.

According to the circular:

Cases fit for provisional attachment of property.

Where taxable person has:

a) supplied any goods or services or both without issue of any invoice, in violation of the provisions of the Act or the rules made there under, with an intention to evade tax; or

b) issued any invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made there under; or

c) availed input tax credit using the invoice or bill referred to in clause (b) or fraudulently availed input tax credit without any invoice or bill; or

d) collected any amount as tax but has failed to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; or

e) fraudulently obtained refund; or

f) passed on input tax credit fraudulently to the recipients but has not paid the commensurate tax.

Types of property that can be attached

  • The value of attached property should be as near as possible to the estimated amount of pending revenue against such person.
  • More than one property may be attached in case value of one property is not sufficient to cover the estimated amount of pending revenue against such person.
  • The provisional attachment can be made only of the property belonging to the taxable person, against whom the proceedings mentioned under section 83 of the Act are pending. From 01-01-2022 vide notification no. 39/2021 provisional attachment can be made of the property belonging to any person specified in sub-section (1A) of section 122.
  • Movable property should normally be attached only if the immovable property, available for attachment, is not sufficient to protect the interests of revenue.
  • Attachment does not hamper normal business activities of the taxable person. This would mean that raw materials and inputs required for production or finished goods should not normally be attached by the Department.
  • In cases where the movable property, including bank account, belonging to taxable person has been attached, such movable property may be released if taxable person offers, in lieu of movable property, any other immovable property which is sufficient to protect the interest of revenue. 

Attachment Period 

Provisional Attachment shall cease to have effect after the expiry of a period of one year from the date of the provisional attachment order or if an order in FORM GST DRC-23 for release of such property is made by the Commissioner.

Any Person as per section 122(1A) of the CGST Act

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.

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 utilises 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 and

Clause (ix) – takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;

CASE LAWS

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.

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 matters are provided for knowledge of the readers: –

  • No Pending Proceedings under any of the sections specified under section 83.
  • Banker not intimated the customer why his account has been freezed.
  • 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 or they are not covered under any person stated under section 122(1A).
  • Proceeding initiated without issuing the notice.
  • 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.
  • 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 is over.
  • Proposal to replace the security not entertained.
  • 50000.00 cost fixed upon the Department due to arbitrary order passed under section 83
  • One line order (in order to protect the interest of the Revenue) shall not stand in the legal scrutiny as it does not reveal any tangible material which are available with the Revenue.
  • Stock and attachment of sundry debtors are not permissible.

No Pending Proceedings under any of the sections specified under section 83 – In the absence of any proceedings initiated or pending against the writ applicant under Chapter XII, Chapter XIV or Chapter XVof the CGST Act, the respondent could not have invoked Section 83 of the Act for the purpose of provisional attachment.

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 or they are not covered under any person stated under section 122(1A).

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

Proposal to replace the security not entertained. The taxpayer made proposal to replace the attachment of current account and fixed deposits with immovable property i.e. land.

Rs.50000.00 cost fixed upon the Department due to arbitrary order passed under section 83

One line order (in order to protect the interest of the Revenue) shall not stand in the legal scrutiny as it does not reveal any tangible material which are available with the Revenue.

  • M/s KPN TRAVELS INDIA LTD Vs DIRECTOR GENERAL OF GST INTELLIGENCE, CHENNAI – Date of Order 20-04-2022 – HIGH COURT OF MADRAS

Stock and attachment of sundry debtors are not permissible.

To reach to me for any suggestions, rectifications, amendments and/or further clarifications in regard of this article my email address is pkmgstupdate@gmail.com.

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4 Comments

  1. Paresh says:

    Superb information sir,

    I have some doubts, kindly clarify them:

    1) Can the commissioner delegates his power to the subordinate officer to attach bank account procedure?

    2) Recently, the GST officer has bank attached on the basis of 2 consecutive months’ returns pending without giving any intimation/notice except system issued notice u/s 46 by default, and without any ASMT-13 (summary DRC-7) issued can the officer has invoked the power u/s. 83 ?

    3) Why the officer does not give the opportunity being of heard before attaching the bank account?
    (guide me, can the officer directly notice sent to bankers as well as taxpayer also?

    Thank for advance

  2. Paresh says:

    Superb information sir,

    in deep, what is the nature and section of intimation or notice issue before going to attach bank account?

    Whether such notice can be issued other than commission? (or the commissioner delegates his power to a subordinate officer?)

    Can the bank attachment procedure be held on the basis of only two returns pending?

    Guide us

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