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PROVISIONAL ATTACHMENT OF PROPERTY UNDER CGST SECTION 83 — DELEGATION OF POWERS? By Sanjeev Kumar Sabberwal SUPERINTENDENT, CENTRAL GOODS AND SERVICES TAX, NOIDA

Section 83 of CGST provides for provisional attachment of any property, including bank account of the taxable person during the course of investigation i.e., before issuance of SCN/Assessment order/notice. The Commissioner is empowered to order provisional attachment of any property under Section 83 of CGST Act, 2017 and the Section 83 is reproduced as under :- SECTION 83. Provisional attachment to protect revenue in certain cases. - (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). In terms of the Section 83, a Commissioner should be of the opinion needed to protect interest of Government Revenue. Thus, the power of attachment of property should be exercised by Commissioner after forming an opinion that it is necessary for protecting the interest of Government Revenue. The opinion should be subjective, recorded and on a reasonable basis. Rule 159 of CGST Rules, 2017, prescribes the procedure for subject attachment and is as under :- 159. Provisional attachment of property. - (1) Where the Commissioner decides to attach any property, including bank account in accordance with the provisions of section 83, he shall pass an order in FORM GST DRC-22 to that effect mentioning therein, the details of property which is attached. (2) The Commissioner shall send a copy of the order of attachment to the concerned Revenue Authority or Transport Authority or any such Authority to place encumbrance on the said movable or immovable property, which shall be removed only on the written instructions from the Commissioner to that effect. (3) Where the property attached is of perishable or hazardous nature, and if the taxable person pays an amount equivalent to the market price of such property or the amount that is or may become payable by the taxable person, whichever is lower, then such property shall be released forthwith, by an order in FORM GST DRC-23, on proof of payment. (4) Where the taxable person fails to pay the amount referred to in sub-rule (3) in respect of the said property of perishable or hazardous nature, 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 by the taxable person. (5) Any person whose property is attached may, within seven days of the attachment under sub-rule (1), file an objection to the effect that the property attached was or is not liable to attachment, and 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. (6) The Commissioner may, upon being satisfied that the property was, or is no longer liable for attachment, release such property by issuing an order in FORM GST DRC-23. During last 30 months of GST regime, in a number of cases, this power of provisional attachment of property and bank account has been exercised. It has been observed that in some cases the orders of provisional attachment of the property were passed under Section 83 of the CGST Act, 2017 by the officers’ subordinate to the Commissioner. This issue came up in the case of M/s. Valerius Industries v. Union of India [2019 (30) G.S.T.L. 15 (Guj.)] where High Court of Gujarat held that - 35. In the case in hand, Section 83 makes it abundantly clear that it is the Commissioner’s opinion which is relevant. The Legislature has thought fit to confer this power upon the Commissioner. Whether such power conferred upon the Commissioner by the legislature could have been delegated to the three subordinate officers referred to above by virtue of the order dated 15th January, 2018 passed in exercise of power under sub-section (3) of Section 5 read with clause 19 of Section 2 of the Act and the rules framed thereunder. In our opinion, the answer has to be in the negative. Although there is no specific challenge to the order dated 15th January, 2015 passed by the Commissioner of State Tax delegating his power under Section 83 to the subordinate officers, yet, we are of the view that by virtue of such order, such impugned order of provisional attachment cannot be defended. Further, in Para 36 of the above judgement it was held that :- Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion. But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a pre-condition to the formation of opinion. The use of the word “may” indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, though subjective, must be based on some credible material disclosing that is necessary to provisionally attach the goods or the bank account for the purpose of protecting the interest of the government revenue. The issue was also discussed in the recent judgment in the case of M/s. Enprocon Enterprise Ltd. v. Assistant Commissioner of State Tax [2020-TIOL-115-HC-AHM-GST]. The gist from the relevant paras has been reproduced as under :- PARA-5 :- The issue is no longer res integra, in view of the decision of this Court rendered on 28th August, 2019, in the case of Valerius Industries v. Union of India [Special Civil Application No. 13132 of 2019] [2019-TIOL-2094-HC-AHM-GST]. A Co-ordinate Bench of this Court, to which one of us, Mr. J.B. Pardiwala, J., is a party had the occasion to consider two questions, (i) the power of Commissioner of State Tax to delegate his powers under Section 83 of the Act to the Assistant Commissioner, and (ii) assuming for the moment that it is permissible for the Commissioner to delegate his powers to the Assistant Commissioner, what is expected of the Assistant Commissioner while exercising his delegated powers under Section 83 of the Act, for the purpose of provisional attachment. PARA 9 :- ……………………….What is lacking in the present case is the credible material, in its true sense, for the purpose of arriving at the subjective satisfaction that the order of provisional attachment is necessary for the purpose of protecting the interest of the Revenue. In the case of Valerius Industries (Supra), we have taken the view that the Commissioner ought not to have delegated his powers of provisional attachment under Section 83 of the Act to the Assistant Commissioner. Therefore, in the case on hand, the order of provisional attachment as well as the order of prohibition are not sustainable on two counts, i.e. (i) the order has been passed by the Assistant Commissioner, and (ii) the order has been passed without any credible materials, available for the purpose of passing such order of provisional attachment. PARA 10. ………. The order of provisional attachment passed by the Assistant Commissioner, so far as the immovable property is concerned, is hereby quashed and set aside…………. In view of the above judgment, the proper officers to issue attachment orders under Section 83 of the CGST Act, 2017 is the Commissioner of the Central Tax. Therefore, the provisional attachment orders issued by the subordinate proper officers are not proper and cannot be defended. The action for provisional attachment of property in terms of Section 83 of the CGST Act, 2017 should be ordered by Commissioner of the Central Tax under the GST law. [Published in 2020 (34) G.S.T.L. J59] _______