PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

10. PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES (I) The provisions of Section 83(1) of the CGST Act, 2017 provide for provisional attachment in certain cases. The said provision provides that if after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV of the CGST Act, the Pr. Commissioner/Commissioner in order to protect the interest of the Government revenue may pass an order to attach provisionally, any property, including bank account, belonging to the defaulting taxpayer/person specified in Section 122(1A) of the CGST Act, 2017 in the manner prescribed. (II) The provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the above said order. (III) The following guidelines have been prescribed by CBIC Vide Instructions No. CBEC-20/16/05/2021-GST/359, dated 23.02.2021, with regard to Provisional Attachment of Property- (i) There must be pendency of a proceeding against a defaulting taxpayer/person under sections mentioned in Section 83 of the CGST Act, 2017. (ii) The Commissioner must have formed the opinion that provisional attachment of the property belonging to the defaulting taxpayer/person is necessary for the purpose of protecting the interest of the Government Revenue. (iii) For forming an opinion under Section 83 of the CGST Act, 2017 it is important that the Pr. Commissioner/Commissioner must exercise due diligence and carefully examine all the facts of the case, including the nature of offence, amount of revenue involved, establish nature of business and extent of investment in capital assets and reasons to believe that the defaulting taxpayer/person against whom the proceedings are pending, may dispose of or remove the property if not attached provisionally. (iv) The basis, on which Commissioner has formed the opinion should be duly recorded on file. (v) 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 of the CGST Act, 2017. (vi) The collective evidence, based on the proceedings/enquiry conducted in the case, must indicate that the prima-facie a case has been made out against the defaulting taxpayer/person, before going ahead with any provisional attachment. The remedy of attachment being, by its very nature, extraordinary has to be resorted to without utmost circumspection and with maximum care and caution. (IV) Procedure for Provisional Attachment of Property : (i) Upon forming the opinion to attach any property, including bank account, of the defaulting taxpayer/ person, the Pr. Commissioner/ Commissioner should duly record on file the basis on which he has formed such an opinion and pass an order in FORM GST DRC-22 , mentioning therein the details of property being attached. (ii) A copy of the order of attachment should be sent to the concerned Revenue authority or Transport Authority or Bank or the relevant authority to place encumbrance on the said movable or immovable property. The property, thus attached, shall be removed only on the written instructions from the commissioner. (iii) A copy of such attachment order should be provided to the said defaulting taxpayer/person so that objections, if any, can be made by him within the time frame prescribed under Rule 159 of the CGST Rules, 2017 in FORM GST DRC-22A . (iv) If the objection is filed, the Pr. Commissioner/Commissioner should provide a Personal hearing. (v) After considering the facts in the written objections, even those not filed within the time prescribed, as well as during a personal hearing, the Pr. Commissioner/Commissioner should form a reasoned view whether the property is still required to be attached or not and pass an order to this effect. (vi) In case, the Pr. Commissioner/Commissioner is satisfied that the property is no longer liable for attachment, he may release such property by issuing order in FORM GST DRC 23. (vii) Each such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of order of attachment. (viii) If the provisionally attached properties are of perishable/ hazardous nature, then such property shall be released to the defaulting taxpayer/person by issuing order in FORM GST DRC-23 , after such person pays an amount equivalent to the market price of such property or the amount that is or may become payable by him. (ix) In case the defaulting taxpayer/person fails to pay the said amount, then the said property of perishable or hazardous nature may be disposed of and the amount recovered from such disposal of property shall be adjusted against the arrears of tax, interest, penalty, fee or any other amount payable. The sale proceeds thus obtained must be deposited with the Government Treasury or Branch of any nationalized bank in fixed deposit and the receipt thereof must be retained for record, so that same can be adjusted against the amount determined to be recoverable from the said defaulting taxpayer/person. (x) As the remedy of attachment being extraordinary, needs to be resorted to with utmost circumspection and with maximum care and caution. It normally should not be invoked in cases of technical nature and should be resorted to mainly in cases where there is an evasion of tax or where wrongful input tax credit is availed or utilized or wrongfully passed on. (V) Tyes of cases fit for provisional attachment: The following are some of the type of cases, where provisional attachment can be considered to be resorted to, subject to specific facts of the case: (i) Where taxable person has supplied any goods and/or services without issue of any invoice, with an intention to evade tax or issued any invoice or bill without supply of goods and/or services or availed input tax credit using the invoice or bill without receiving the goods or services. (ii) Fraudulently availed input tax credit without any invoice or bill. (iii) Collected any amount as tax but failed to pay the same to the Government beyond a period of three months from the date of which such payment becomes due. (iv) Fraudulently obtained refund. (v) Passed input tax credit fraudulently to the recipients but has not paid the commensurate tax. (VI) Types of property to be attached: (i) The provisional attachment of property shall be to the extent it is required to protect the interest of revenue, i.e., the value of attached property should be as near as possible to the estimated amount of pending revenue. (ii) More than one property may be attached in case value of one property is not sufficient to cover the estimated amount of pending revenue. Further, different properties of the taxpayer can be attached at different points of time subject to the conditions specified in Section 83 of the CGST Act, 2017. (iii) The provisional attachment can be made only of the property belonging to the defaulting taxpayer/ person, against whom the proceedings are pending. (iv) Movable property should normally be attached only if the immovable property, available for attachment, is not sufficient to protect the interests of revenue. (v) The attachment should not hamper normal business activities of the taxpayer/person. This would mean that raw materials and inputs required for production of finished goods should not normally be attached by the Department. (vi) In cases where the movable property, including bank account, belonging to the defaulting taxpayer/person has been attached, such movable property may be released if he offers, in lieu of movable property, any other immovable property which is sufficient to protect the interest of revenue. It should be free from any subsisting charge, liens, mortgages or encumbrances, property tax fully paid up to date and not involved in any legal dispute. The defaulting taxpayer/person must produce the original title needs and other necessary information relating to the property, for the satisfaction of the concerned officer. (vii) As the provisional attachment of property is resorted to protect the interests of the revenue and may also affect the working capital of the taxable person, it should be ensured that in all such cases, the investigation and adjudication are completed at the earliest, well within the period of attachment, so that the due liability of tax as well as interest, penalty etc. arising upon adjudication can be recovered and the purpose of attachment is achieved. (viii) If the property to be provisionally attached consists of the share or interest of the concerned taxpayer/person in property belonging to him and another as co-owners, the provisional attachment shall be made by order to the concerned person prohibiting him from transferring the share or interest or charging it in any way. (ix) All property exempted from attachment and sale for execution of a Decree of a Civil Court by the Code of Civil Procedure, 1908 (5 of 1908), shall be exempt from provisional attachment.