Provisional attachment under GST law draconian: Top court

Tribune News Service

New Delhi, April 20

The power to order a provisional attachment of property, including the bank account of a taxable person, under the GST law is draconian in nature and must be based on tangible material, the Supreme Court said on Tuesday.

Deciding an appeal against an order of the Himachal Pradesh High Court, a Bench headed by Justice DY Chandrachud said the exercise of such power must be preceded by the formation of an opinion by the Commissioner that it’s necessary to do so for the purpose of protecting the interest of the government revenue.

“Before ordering a provisional attachment, the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting the interest of the government revenue,” it said, quashing an order passed by a Joint Commissioner and upheld the by the High Court.

The Commissioner was duty-bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attached, the Bench said, clarifying that the expression “necessary so to do for protecting the government revenue” implicated that it could not be protected without ordering a provisional attachment.

The verdict — which lays down parameters for exercise of powers to order provisional attachment — came on a petition filed by Radha Krishan Industries challenging an October 28, 2020, order of the Himachal Pradesh High Court dismissing a petition against orders for provisional attachment. The assessee was represented by senior counsel Puneet Bali and advocate Surjeet Bhadu.

The Joint Commissioner of State Taxes and Excise, Parwanoo, had provisionally attached the appellant’s receivables from its customers. The provisional attachment order was passed under Section 83 of the Himachal Pradesh Goods and Service Tax Act, 2017, and Rule 159 of Himachal Pradesh Goods and Service Tax Rules, 2017.