MODES OF RECOVERY - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

6. MODES OF RECOVERY The following modes of recovery are prescribed under the CGST Rules, 2017 (I) Recovery by Deduction from any money owed which may be under control of Proper Officer or Specified Officer: (i) Section 79(1)(a) of the CGST Act, 2017 states that the Proper Officer may deduct or may ask any other Specified Officer to deduct the amount due from the taxpayer from any money owing to such taxpayer, which may be under the control of the Proper Officer or the Specified Officer. (ii) Rule 143 of CGST Rules, 2017 prescribes the procedure of recovery in this regard. It states that if any amount payable by a taxpayer under any of the provisions of the CGST Act, 2017 or the rules made thereunder is not paid, the Proper Officer may ask the Specified Officer in FORM GST DRC-09 electronically, to deduct the amount from any money owing to such taxpayer. (iii) As per explanation to Rule 143 of the CGST Rules, 2017, Specified Officer means any officer of the Central Government or a State Government or the Government of a Union territory or a local authority, or of a Board or Corporation or a company owned or controlled, wholly or partly, by the Central Government or a State Government or the Government of a Union territory or a local authority. (iv) Proper officer for recovery through deduction from any money owed is the concerned Deputy Commissioner /Assistant Commissioner. (II) Recovery by detaining sale of goods belonging to the defaulting taxpayer under the control of proper officer or such other specified officer: (i) As per Section 79(1)(b) of the CGST Act, 2017, the Proper Officer may recover or may ask any other Specified Officer to recover the amount payable by detaining and selling any goods belonging to the defaulting taxpayer, which are under the control of the Proper Officer or the Specified Officer. (ii) Rule 144 of the CGST Rules, 2017 lays down the procedure to be followed by the Proper Officer, viz., the Deputy/Assistant Commissioner, for recovery of dues by sale of goods belonging to taxpayer under his control. (iii) The Proper Officer shall prepare an inventory and estimate the market value of such goods and proceed to sell only so much of the goods as may be required for recovering the amount payable along with the administrative expenditure incurred on the recovery process. (iv) The said goods shall be sold through a process of auction, including e-auction, for which a notice shall be issued in FORM GST DRC-10 , indicating the goods to be sold and the purpose of sale. (v) Minimum time period of 15 days to be given for submission of Bid or Auction date. However, if the goods are of perishable or hazardous nature or if the expenses of keeping them in custody is likely to exceed their value, the Proper Officer may sell them forthwith. (vi) The Proper Officer may specify the amount of pre-bid deposit to be furnished in the manner specified, to make the bidders eligible to participate in the auction. Such pre-bid deposits are required to be returned to the unsuccessful bidders and forfeited in case the successful bidder fails to make the payment of the full amount. (vii) The proper officer shall issue a notice to the successful bidder in FORM GST DRC-11 requiring him to make the payment within a period of fifteen days from the date of auction. On payment of the full bid amount, the proper officer shall transfer the possession of the said goods to the successful bidder and issue a certificate in FORM GST DRC-12 . (viii) If the defaulter pays the amount under recovery, including the expenses incurred on the process of recovery, before the issue of the notice FORM GST DRC-10 , the Proper Officer shall cancel the process of auction and release the goods. (ix) The Proper Officer shall cancel the process and proceed for re-auction where no bid is received or the auction is considered to be non-competitive due to lack of adequate participation or due to low bids. (x) Rule 144A of the CGST rules, 2017 lays down the procedure for recovery of penalty by sale of goods or conveyance detained or seized in transit. If the person transporting any goods or the owner of such goods fails to pay the amount of penalty specified under Section 129(3) of the CGST Act, 2017 within fifteen days from the date of receipt of the copy of the order passed by the Proper Officer, he shall proceed with the sale or disposal of the goods or conveyance detained or seized by preparing an inventory and estimating the market value of such goods or conveyance. If the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the period of fifteen days may be reduced. The said goods or conveyance shall be sold through the process of auction, including e-auction after issuing notice in FORM GST DRC-10. The procedure and safeguards are same as in respect of the goods. (xi) If any appeal has been filed by the concerned person then the proceedings for recovery of penalty by sale of goods or conveyance detained or seized in transit shall be deemed to be stayed. However, this provision shall not be applicable in respect of goods of perishable or hazardous nature. (III) Recovery from third person: (i) As per Section 79(1)(c) of the CGST Act, 2017, the Proper Officer, viz., the Deputy/Assistant Commissioner, may issue a notice in writing to any other person from whom money is due or may become due to the defaulting taxpayer or who holds or may subsequently hold money for or on account of such defaulting taxpayer, asking to pay to the Government the money becoming due or being held, within the time specified in the notice. (ii) The procedure has been prescribed in Rule 145 of the CGST Rules, 2017. (iii) The proper officer may serve a notice in FORM GST DRC-13 to the third person mentioned above, directing him to deposit the amount specified in the notice. (iv) If the third person makes the payment of the amount specified in the notice in FORM GST DRC-13 , the Proper Officer shall issue a certificate in FORM GST DRC-14 to the third person, indicating the details of the liability to be discharged and liability discharged. (v) Every person to whom the notice FORM GST DRC-13 is issued, shall be bound to comply with such notice. If the said notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment, (vi) In case the third person to whom the said notice in FORM GST DRC-13 has been issued, fails to make the payment to the Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of the CGST Act, 2017 or the rules made thereunder shall follow. (vii) The Proper Officer may, at any time, amend or revoke the said notice or extend the time for making any payment in pursuance of the notice. (viii) If the third person makes any payment in compliance with the said notice then the same shall be deemed to have made the payment under the authority of the defaulting taxpayer and such payment being credited to the Government shall be deemed to constitute a discharge of the liability of such third person to the defaulting taxpayer to the extent of the amount specified in the receipt. (ix) The third person to whom the notice in FORM GST DRC-13 has been issued, shall be personally liable to the Government to the extent of the liability discharged or to the extent of the liability of the defaulting taxpayer for tax, interest and penalty, whichever is less. (x) If the third person to whom the notice in FORM GST DRC-13 is served, proves to the satisfaction of the Proper Officer that the money demanded or any part thereof was not due to the defaulting taxpayer or that he did not hold any money for or on account of such taxpayer at the time the notice was served, nor the money demanded or any part thereof is likely to become due to the taxpayer then such third person shall not pay to the Government any money or part thereof. (IV) Recovery through execution of a decree : Rule 146 of the CGST Rules, 2017 provides that if any amount is payable to the defaulting taxpayer in the execution of a decree of a Civil Court for the payment of money or for sale in the enforcement of a mortgage or charge, the Proper Officer, viz., the Deputy or Assistant Commissioner shall send a request in FORM GST DRC-15 to the said court and the court shall, subject to the provisions of the Code of Civil Procedure, 1908 (5 of 1908), execute the attached decree and credit the net proceeds for settlement of the amount recoverable. (V) Recovery through sale of movable or immovable property: (i) As per provisions of Section 79(1)(d) of the CGST Act, 2017, the Proper Officer, viz., the Deputy or Assistant Commissioner may distrain any movable or immovable property belonging to or under the control of the defaulting taxpayer and detain the same until the amount payable is paid. In case any part of the amount payable or of the cost of the distress or keeping of the property, remains unpaid within the specified period then he may proceed to sell the said property and the sale proceeds may be appropriated against the amount payable and the costs, including cost of sale remaining unpaid. Balance or surplus amount, if any, shall be refunded to such defaulting taxpayer. (ii) Rule 147 of the CGST Rules, 2017 lays down the procedure for recovery of due by sale of movable or immovable property. (iii) The Proper Officer shall prepare a list of movable and immovable property belonging to the defaulter, estimate their value as per the prevalent market price and issue an order of attachment or distraint and a notice for sale in FORM GST DRC-16 , prohibiting any transaction with regard to such movable and immovable property. (iv) The Proper Officer should send a copy of the order of attachment or distraint to the concerned Revenue Authority or Transport Authority or any such Authority, to place encumbrance on the said movable or immovable property. The attachment or distraint shall be removed only on the written instructions from the Proper Officer to that effect. (v) Rule 147(3) of the CGST Rules, 2017 provides that if the property subjected to attachment or distraint is an immovable property then the order of attachment or distraint shall be affixed on the said property and shall remain affixed till the confirmation of sale. If such property is a movable property then the Proper Officer shall seize the said property and it shall either be taken by the Proper Officer himself or an officer authorised by him. (vi) Rule 147(4) of the CGST Rules, 2017 states that the property attached or distrained shall be sold through auction, including e-auction, for which a notice should be issued in FORM GST DRC- 17 indicating the property to be sold and the purpose of sale. (vii) If the property for sale is in the form of Negotiable Instrument or Share in a Corporation then the Proper Officer, instead of selling it by public auction, may sell such instrument or a share through a broker and the said broker, after reducing his commission and from the sale proceeds he shall deposit to the Government account the amount due to be paid for the discharge of the amount under recovery and the balance amount, if any, be paid to the owner of such instrument or a share. (viii) In respect of the property which is not in the form of Negotiable Instrument or Share in a Corporation, the Proper Officer may recover the amount by auctioning the property. The procedure to be followed for auctioning is same as in the case of goods. (ix) Rule 147(8) of the CGST Rules, 2017 provides that where any claim is preferred or any objection is raised with regard to the attachment or distraint of any property on the ground that such property is not liable to such attachment or distraint, the Proper Officer shall investigate the claim or objection and may postpone the sale for time being. (x) The person making the claim or objection must adduce evidence to show that on the date of the order he had some interest in, or was in possession of, the property in question under attachment or distraint. (Rule 147(9) of CGST Rules, 2017) (xi) On investigation if the Proper Officer is satisfied that the reason stated in the claim or objection is correct and such property was not in the possession of the defaulter taxpayer or of any other person on his behalf or if in his possession it was not on his own account or as his own property but on account of trust or partly on his own account and partly on account of some other person, then he (Proper Officer) shall issue an order releasing the property, wholly or to such extent as he deems fit, from attachment or distraint. (Rule 147(10) of CGST Rules, 2017) (xii) If the Proper Officer is satisfied that the property was in the possession of the defaulter as his own property and not on account of any other person or was in the possession of some other person in trust for him or in the occupancy of a tenant or other person paying rent to him, then he (Proper Officer) shall reject the claim and proceed with the process of sale through auction. (Rule 147(11) of CGST Rules, 2017) (xiii) The proper officer shall issue a notice in FORM GST DRC-11 to the successful bidder requiring him to make the payment within the specified period and after the payment is made, he shall issue a certificate in FORM GST DRC-12 specifying the details of the property, date of transfer, the details of the bidder and the amount paid. Upon issuance of the said certificate, the rights, title and interest in the property shall be deemed to be transferred to such bidder. However, where the highest bid is made by more than one person and one of them is a co-owner of the property then he shall be deemed to be the successful bidder. (xiv) Any amount, including stamp duty, tax or fee payable in respect of the transfer of the property shall be paid to the Government by the person to whom the title in such property is transferred. (xv) Rule 147(14) of the CGST Rules, 2017 provides that if the defaulter pays the amount under recovery, including the expenses incurred on the process of recovery, before the issuance of the notice in FORM GST DRC- 17 the Proper Officer shall cancel the process of auction and release the goods. (xvi) If no bid is received or the auction is considered to be non-competitive due to lack of adequate participation or due to low bids then the Proper Officer shall cancel the process and proceed for re-auction. (xvii) Rule 148 of the CGST Rules, 2017 prohibits bidding or purchase by Officer having any duty to perform in connection with any sale. (xviii) Rule 149 of the CGST Rules, 2017 prohibits sale on holidays notified by the Government. (xix) Rule 150 of the CGST Rules, 2017 provides that the Proper Officer may seek assistance from the officer-in-charge of the jurisdictional police station, as may be necessary in the discharge of his duties. The said Police officer shall depute sufficient number of police officers for providing assistance. (xx) Rule 151 of the CGST Rules, 2017 provides for the manner of attachment of any property in debt, which is not secured by a negotiable instrument, a share in a corporation, or other movable property not in the possession of the defaulter, except for property deposited in or in the custody of any Court. The Rule provides that such property in debt shall be attached by a written order in FORM GST DRC-16 , prohibiting, the creditor of dept from recovering the debt and the debtor from making payment. In the case of a share, the person in whose name the share may be standing shall be prohibited from transferring the same or receiving any dividend thereon. In the case of any other movable property, the person in possession of the same shall be prohibited from giving it to the defaulter, until the receipt of a further order from the Proper Officer. A copy of the order shall be affixed on some conspicuous part of the office of the Proper Officer and another copy shall be sent to the debtor or to the registered address of the share corporation or to the person in possession of the property, as the case may be. The aforesaid debtor may pay the amount of his debt to the Proper Officer, and such payment shall be deemed as paid to the defaulter taxpayer. (xxi) Rule 152 of the CGST Rules, 2017 provides that if the property to be attached is in the custody of any court or Public Officer, the Proper Officer, viz., the Deputy or Assistant Commissioner, shall send the order of attachment to such court or officer, requesting that the property and any interest or dividend payable thereon, may be held till the recovery of the amount payable. (xxii) If the property to be attached consists of an interest of the defaulter, being a partner, the Proper Officer may issue an order charging the share of such partner in the partnership property and profits with payment of the amount due under the certificate. He may, by the same or subsequent order, appoint a receiver of the share of such partner in the profits and any other money due to him in respect of the partnership. He may also direct enquiries and make an order for the sale of such interest. In such case, the other partners shall be at liberty to redeem the interest charged or purchase the same. (Rule 153 of the CGST Rules, 2017) (xxiii) The amounts realised from the sale of goods, movable or immovable property, for the recovery of dues from a defaulter shall, in the following sequence- (a) be appropriated against the administrative cost of the recovery process; (b) be appropriated against the amount to be recovered or to the payment of the penalty payable; (c) be appropriated against any other amount due from the defaulter under the GST law; (d) the balance, if any, shall be credited to the electronic cash ledger of the owner of the goods or conveyance, as the case may be, in case the person is registered under the Act. If the said person is not required to be registered under the CGST Act, the said amount shall be credited to the bank account of the person concerned. If it is not possible to pay the balance of sale proceeds in the aforesaid manner to the person concerned within six months from the date of sale of such goods or conveyance or such further period allowed by the Proper Officer, such balance of sale proceeds shall be deposited with the Fund. (VI) Recovery through land revenue authority: Section 79(1)(e) of the CGST Act, 2017 read with Rule 155 of the CGST Rules, 2017 stipulate that the Proper Officer, viz. Deputy or Assistant Commissioner, shall send a certificate in FORM GST DRC-18 , specifying the amount due from such person, to the District Collector or to any officer authorised by the Government, in which such defaulter taxpayer/person owns any property or resides or carries on his business. The said Collector or the said officer, on receipt of such certificate, shall proceed to recover the amount specified thereunder, as if it were an arrear of land revenue. (VII ) Recovery through court: Section 79(1)(f) of the CGST Act, 2017 read with Rule 156 of the CGST Rules, 2017 prescribe that the Proper Officer, viz., the Deputy or Assistant Commissioner, file an application in FORM GST DRC-19 to the appropriate Magistrate and the Magistrate shall proceed to recover from such person the amount specified thereunder, as if it were a fine imposed under the Code of Criminal Procedure, 1973. (VIII) Recovery through surety: Section 79(2) of CGST Act, 2017 read with Rule 157 of the CGST Rules, 2017 prescribe that where the terms of any bond or other instrument executed under the CGST Act, 2017 or any rules or regulations made thereunder provide that any amount due under such instrument should be recovered in the manner laid down in Section 79(1) of the CGST Act, 2017, then the Proper Officer may recover the amount from the person standing as surety for the amount due from the defaulter taxpayer/person, as if he was the defaulter. (IX) Recovery of CGST Dues by Proper Officer of State Tax or Union Territory Tax : Section 79(3) of CGST Act, 2017 empowers the officers of State Tax or Union Territory Tax to recover any amount of tax, interest or penalty payable by a defaulter taxpayer to the Government under any of the provisions of the CGST Act, 2017 or the rules made thereunder, as if it were an arrear of State tax or Union territory tax and credit the amount so recovered to the account of the Government. If the amount of arrears recovered is less than the amount due to the Central Government and State Government, then the amount shall be credited to the account of the respective Governments in proportion to the amount due to each Government.