Building on the discussion in part one, the attention now turns to the amendment to Section 83 of India’s Central Goods and Services Tax Act (the CGST Act) and the various questions that arise as a result. This article analyses the interpretation of the phrase “initiation of any proceedings”, which would determine the trigger point for invoking the power of attachment under Section 83, in light of the decision of the Supreme Court in Armour Security (India) v Commissioner, CGST, Delhi East Commissionerate & Anr. (Armour Security).
Amendment to Section 83 of the CGST Act
Consequent to the decision of the Supreme Court in Radha Krishan Industries v State of Himachal Pradesh (Radha Krishan), the central government amended Section 83 with effect from January 1 2022, through the Finance Act, 2021. The amendment introduced three significant changes:
It changed the language of the provision from “during the pendency of proceedings” to “after the initiation of any proceeding”;
It expanded the scope of attachment to include proceedings under the relevant chapters of the CGST Act, rather than limiting it to specific sections, as was the case prior to the amendment; and
It provided for the attachment of properties belonging to persons other than the taxable person, such as beneficiaries of fraudulent transactions.
The amendments raise several questions. This article limits itself to one aspect, i.e., the impact of the phrase “initiation of any proceeding”.
Does the substitution of “pendency of proceedings” with “initiation of any proceeding” permit tax authorities to attach properties after the mere issuance of summons or an intimation to inspect premises, without a show cause notice (SCN) being issued or an opinion being formed as to the nature of the contravention? Can tax authorities attach properties even before arriving at a conclusion regarding the exact nature of the allegation or the quantum of the demand against the assessee?
Despite the language of Section 83 undergoing an amendment, the principles laid down by the Supreme Court in Radha Krishan are still valid, in as much as the power of provisional attachment continues to be “draconian in nature”.
This power must be exercised with care and caution, and only after the tax authorities frame the exact allegations against the assessees. This view is buttressed by Central Board of Excise and Customs Instruction No. 20/16/05/2021-GST dated February 23 2021, which clarified that because the remedy of attachment under Section 83 is extraordinary in nature, due diligence must be exercised, and it must not be resorted to in a routine/mechanical manner.
Furthermore, the Supreme Court in Kesari Nandan Mobile v Office of Assistant Commissioner (2025) reaffirmed the principles laid down in Radha Krishan and reiterated the “draconian” nature of provisional attachment and the need for strict compliance with the statutory language.
Importing Armour Security into Section 83
From the above discussion, it is obvious that, historically, provisional attachment has been understood to be a punitive provision, the power of which has to be exercised by the Department of Revenue based on tangible material and with circumspection. Merely because the provision uses the term “initiation of any proceeding”, it does not necessarily imply that the tax authorities have been given a carte blanche power to attach properties without proper ‘formation of mind’.
Against this background, it is apposite to refer to the law laid down in Armour Security regarding the term “initiation of any proceeding” and apply it in the context of Section 83. In so far as the phraseology is concerned, Section 6(2)(b) and Section 83 refer to the initiation of proceedings, albeit in different contexts.
In Armour Security, the Supreme Court ruled that formal proceedings are only initiated after the tax authorities ‘form their mind’ regarding the exact allegations against the assessee and commence formal adjudication proceedings by way of the issuance of an SCN. The court specifically noted that an SCN marks the commencement of a process that culminates in an order passed by the adjudicating authority and certainty of the subject matter arises only at the stage of issuance of the SCN.
To this extent, the law laid down in Armour Security, in so far as it defines ‘initiation of proceedings’, is applicable for attachment envisaged under Section 83. It can be contended that “initiation of any proceeding” under Section 83 would necessarily imply ‘forming of mind’ by the tax authorities and the subsequent issuance of an SCN to the assessee. This interpretation balances the Department of Revenue’s interests and taxpayers’ rights.
Concluding remarks
Considering the above, if the Department of Revenue initiates attachment proceedings before the framing of a SCN, it could very well be argued that the actions of the department are at odds with the understanding of the law laid down by the Supreme Court in Armour Security. It is vital for concerned parties to remain aware of these developments and adopt appropriate and timely legal remedies when confronted with such circumstances.
The views expressed in this article are entirely personal.
