In order to protect the ‘interests of the revenue’ during the ‘pendency of any proceedings’, the Government has the power to provisionally attach the properties of any taxpayer. It is stated that any litigation under GST law might take a considerable amount of time and potentially delay the earning of revenue by the Government. Moreover, the taxpayer may transfer his property to another person before the end of the proceedings. Therefore, the provisions of protecting the interest of the revenue during the pendency of any proceedings was incorporated under GST law. The Central Board of Indirect Taxes (“CBIC”) notifies 1st July 2017 as the Commencement date for Section 83 of the CGST Act 2017, vide Notification 9/2017 Central Tax.
The relevant provisions under Section 83 of the Central Goods and Services Tax (CGST) Act, 2017 (‘CGST Act, 2017’) relating to “Provisional Attachment to Protect Revenue in Certain Cases”, are as under:
Section 83: Provisional Attachment to Protect Revenue in Certain Cases
(CHAPTER XV – DEMANDS AND RECOVERY)
“(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.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).”
It is to be noted that Section 83 of the CGST Act, 2017 can be invoked during the pendency of the following proceedings:
| Section 62: | Assessment of non-filers of returns |
| Section 63: | Assessment of unregistered persons |
| Section 64: | Summary assessment in certain special cases |
| Section 64: | Summary assessment in certain special cases |
| Section 67: | Proceedings related to inspection, search and seizure |
| Section 73: | Demand raised in cases other than those involving fraud or willful misrepresentation of facts |
| Section 74: | Demand raised in cases involving fraud or willful misrepresentation of facts |
Other than above-mentioned circumstances, there is no provision to attach the property of such taxpayer. It is pertinent to note that the Commissioner can issue order any time after issuance of Demand Notice under Sections 63, 73 or 74 of the CGST Act, 2017. Similarly, such notice for attachment shall be made only after the issuance of assessment orders under Sections 62 or 64 of the CGST Act, 2017.
It is to be noted that when proceedings closed, Section 79 of the CGST Act (recovery of taxes) gets attracted for attachment of property by the GST officer.
It is submitted that when the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary to attach provisionally any property, including bank account, belonging to the taxable person, he may give an order in writing. However, the said order shall be issued only when any proceedings are pending under any of the following sections.
1. Proceeding are pending under Section 62- Assessment of non-filers of returns: Any proceedings under Section 62 covering registered persons who fail to file returns under Section 39, 45, and 46 of CGST Act, 2017, after service of notice, the proper office may proceed to assess the tax liability of registered persons to the best of his judgment.
2. Proceeding are pending under Section 63- Assessment of Unregistered Person: When a person fails to obtain registration even though liable to do so or his registration has been cancelled u/s 29(2) and fails to pay tax, the proper officer may proceed to assess the tax liability to be the best of his judgment.
3. Proceeding are pending under Section 64- Summary Assessment in certain special cases: To protect the interest of revenue the Proper Officer may proceed to assess the tax liability of any person and issue an assessment order when he has an evidence showing a tax liability and having previous permission of Additional Commissioner or Joint Commissioner.
4. Proceeding are pending under Section 67- Power of Inspection, search and seizure: Where Joint Commissioner has reason to believe that
i. There is a suppression of supply of goods or services or both; or
ii. stock of goods in hand; or
iii. has claimed an input tax credit in excess of his entitlement; or
iv. indulged in contravention of any provisions of the Act or rules made there under.
v. may authorise in writing any other office to inspect any place of business of the taxable person.
5. Proceeding are pending under Section 73- Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful misstatement or suppression of facts: Where Show Cause Notice (‘SCN’) has been issued u/s 73 seeking to recover the duty not paid, short paid, erroneously refunded or ITC wrongly availed or utilised.
6. Proceeding are pending under Section 74- Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful misstatement or suppression of facts: Where SCN has been issued u/s 74 seeking to recover the duty not paid, short paid, erroneously refunded or ITC wrongly availed or utilised by reason of fraud or any willful misstatement or supersession of facts.
It is submitted that if the Commissioner wants to provisionally attach any property (including bank account), pursuant to the Rule 159 of the Central Goods and Services Tax (CGST) Rules, 2017 (“CGST Rules, 2107”), he will pass an order in FORM GST DRC-22 which will contain the details of the property attached.
Pursuant to Rule 159(5) of CGST Rules, 2017, the taxpayer can file an objection against it stating that such property was not liable to attachment. This objection must be filed within 7 (seven) days of attachment of the property. The Commissioner is then bound to give the taxpayer an ‘opportunity of being heard’. In case he is satisfied with the response given by the taxpayer, he will release the attached property by passing an order in FORM GST DRC-23.
Also, in case the property attached is of a perishable or hazardous nature, the taxpayer will have to either settle the relevant tax dues or pay the market price for the property, whichever is lower. Upon settlement, the Commissioner will release such property by passing an order in FORM GST DRC-23. However, if the taxpayer fails to pay the market price of the property or settle the relevant tax dues, the Commissioner may dispose of the property and apply the proceeds against the dues of the taxpayer.
The DB of Punjab & Haryana High Court in Bindal Smelting Private Limited vs Additional Director General on 20 December, 2019 finds that during the pendency of any proceedings under Section 62 (assessment of non-filers of returns) or Section 63 (assessment of unregistered persons) or Section 64 (summary assessment) or Section 67 (inspection, search and seizure) or Section 73 (determination of tax not paid otherwise than fraud) or Section 74 (determination of tax not paid on account of fraud), the Commissioner may provisionally attach any property including bank account. The power of attachment is not absolute. The attachment is subject to following safeguards:
i) Order should be passed by Commissioner;
ii) Proceeding under Section 62 or 63 or 64 or 67 or 73 or 74 should be pending;
iii) Commissioner must form an opinion
iv) Order should be passed to protect interest of revenue.
v) It must be necessary to attach property.
*****
Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.
Author Bio
