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Who Can Exercise Power Under Section 83 Of CGST Act, 2017

Any case under diverse tax laws, including GST, might take an adequate amount of time. The pendency of any proceedings could likely delay the earning of revenue by the government. Further, the taxpayer may transfer his/her property to another person before the end of the proceedings.

What is the meaning of attachment of property?

If the government attaches the property of any individual, the person cannot transfer the said property to anyone else. Even if he/she does manage to transfer the attached property, the transfer will be deemed void and therefore not recognised by law. Even bank accounts can be attached – he/she will not be allowed to transfer his funds to any other account.

Interpretation of Section 83 of the CGST Act

During the pendency of some specified proceedings under the CGST Act 2017, the Commissioner can pass an order for attachment of property including bank accounts of the taxpayer to protect the interests of the revenue.

Such order may stay in effect up to 1 year if no action is taken.

To put an encumbrance on the said property, a copy of this order can be sent to the concerned Revenue Authority, Transport Authority or any such kind of authority. This encumbrance cannot be removed unless commissioner give the instruction to do so.

What are the Circumstances under Which Section 83 of CGST act Can Be Invoked?

Under these circumstances under which section 83 can be invoked :-

  1. Section 62: Assessment of non-filers of returns
  2. Section 63: Assessment of unregistered persons
  3. Section 64: Summary assessment in certain special cases
  4. Section 67: Proceedings related to inspection, search and seizure
  5. Section 73: Demand raised in cases other than those involving fraud or willful misrepresentation of facts
  6. Section 74: Demand raised in cases involving fraud or willful misrepresentation of facts

In any other case, there is no any such kind of provision to attach the property of such taxpayer. Accordingly, for proceedings closed, CGST Act- Section 79 (recovery of taxes) gets attracted for attachment of property by the GST officer. It applies on all those cases where the proceedings are completed and the taxpayer is declared as a defaulter.

Therefore, Section 83 (provisional attachment of the property) applies only in limited cases when few proceedings are pending before the tax authorities as listed above.

Reference- In the matter of M/s. Valerius Industries Limited V/S Union of India on 28/08/2019 before DB of Gujarat High Court.

In the said case(name mentioned above) case, it is observed that it is only the opinion of the Commissioner which is condition precedent for taking action under the CGST Act, 2017- Section 83 for provisional attachment of any property. However, any exercise of powers by any other officer (other than Commissioner) shall be in violation of the mandate of Section 83 and consequently, the provisional attachment shall be illegal.

Our final conclusions may be summarized as under:

  1. The power delivered upon the authority under Section 83 of the Act for provisional attachment could be termed as a very stringent and significant power. Such power should be used sparingly and only on elementary weighty grounds and reasons.
  2. The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a justified apprehension that the assessee may default the eventual collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme caution & care.
  3. The power under Section 83 of the CGST Act for provisional attachment should be used only if there is enough material on record to vindicate the satisfaction that the assessee is about to wholly or partialy dispose of his / her property with a view to thwarting the ultimate collection of demand and in order to get the said objective, the attachment need to be of the properties and to that extent, it is needed to take this objective.
  4. The power under Section 83 of the Act should not use as a tool to harass the assesse and should not use irreversible detrimental effect on the business of the assesse.
  5. The bank account & trading assets attachment should be resorted to only as a last scale. Under Section 83 of the CGST Act, the provisional attachment should not be equated with the attachment at the time of recovery proceedings.
  6. The authority before exercising power under Section 83 of the Act for provisional attachment should take into consideration 2 things:
    • Whether it is a revenue neutral situation
    • The statement of “input tax or output liability”.

Having regard to the amount paid by reversing the ITC if the interest of the revenue is adequately secured, then the authority may not be justified in invoking their power under Section 83 of the Act for provisional attachment purpose.

Disclaimer: Nothing implied in this document is to be made as a legal opinion and the content is to be used strictly for educative purposes only.