When Does a GST “Proceeding” Begin? Clearing the Fog Around Section 83 and MSME Protection

One of the most unsettling ambiguities in GST law today is the absence of a definition for the term “Proceeding” under the CGST Act or Rules. This lack of clarity has significant implications — especially under Section 83, which empowers authorities to provisionally attach a taxpayer’s property. The issue becomes critical when businesses, particularly MSMEs, find their bank accounts or assets frozen without even receiving a Show Cause Notice (SCN).

At My GST Solution, a GST consultancy firm from Kolkata serving MSMEs across India, we often handle such issues where clarity on “when proceedings begin” could make or break a business.

Section 83 and the Missing Definition

Section 83(1) of the CGST Act states:

“Where, after the initiation of any proceeding under Chapter XII, XIV or XV, the Commissioner is of the opinion… he may provisionally attach any property…”

But since “proceeding” is undefined, it opens the door for wide and potentially harsh interpretations by revenue authorities — particularly for provisional attachment orders.

Broad View: Enquiry = Proceeding?

The CBIC guideline dated 23.02.2021 (F. No. CBEC-20/16/05/2021-GST/359) uses “proceeding” and “enquiry” almost interchangeably. It allows action under Section 83 if a prima facie case exists, even if no formal SCN is issued. Moreover, it suggests that ongoing investigation itself is sufficient to consider a proceeding as “initiated.”

For MSMEs already struggling with cash flow and compliance, such an interpretation can be disastrous. Imagine your working capital locked — not due to any concluded finding, but simply because an officer feels a case may emerge.

Judicial View: Not So Fast

Courts, however, have not supported this loose interpretation.

In Valerious Industries v. Union of India (2019), the Gujarat High Court held that a search under Section 67 does not automatically justify attachment under Section 83.
The Supreme Court, in Radhe Krishan Industries v. State of Himachal Pradesh, clarified that formal proceedings must be pending against the taxpayer — and action against another entity doesn’t justify attachment of your property

These rulings make it clear: Provisional attachment is a serious, restrictive measure that cannot be triggered on assumptions or indirect links

So What Should Qualify as a “Proceeding”?

This is the core question. Can mere enquiry be treated as a proceeding? Or should it begin only when:

A notice under Section 73, or 74 is issued?
Formal investigation is initiated in writing?
A summons or inspection is conducted?

As things stand today, there’s no definitive answer, and the lack of consistency between administrative action and court rulings only adds to the uncertainty for small businesses.

The MSME Dilemma

For MSMEs, who rely on smooth cash flow and limited resources, provisional attachments can be devastating. That’s why My GST Solution offers specialized GST support for MSMEs — providing:

Handling GST notices and summons
Defending against provisional attachment
Resolving complex compliance issues with expertise backed by retired senior GST officers

We believe in fair, affordable, and efficient GST services, tailored for MSMEs that don’t have legal teams or deep pockets.

What Needs to Be Done?

The GST department should urgently issue a clear definition or clarification on what qualifies as a “proceeding” for the purpose of Section 83. Until then, taxpayers will remain at risk of arbitrary actions not supported by law.

In Conclusion

Ambiguity in law should never become a weapon against the taxpayer. If you are a business struggling with GST complexities — whether it’s ITC reconciliation, notices, or even provisional attachment — trust My GST Solution.

We combine legal insight with real-world experience to help you stay compliant without losing peace of mind.