The bench of Justices Chandrachud and M. R. Shah were dealing with contours of the power of provisional attachment of property, including bank accounts, to protect revenue, under the Himachal Pradesh GST Act, 2017. Section 83 of the said Act provides that where during the pendency of any proceedings under the Act, 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.
"The earlier view was that the 'opinion' should be a subjective opinion. Now, the position is that there should be some tangible material to form the opinion. Although 'order in writing' does not mean that the order should be like a judgement, but it must show an application of mind...A balance has to be maintained between protecting the interests of revenue and protecting genuine business", the bench had opined at the outset.
"The country needs to come out of this tax culture that 'businesses are all fraudulent'! Even where 12 crore tax has been paid, just because some tax is still due, you can't start attaching property! If there is any alienation of assets or the assessee is winding up or going into liquidation, it is understandable...but just because you have the account numbers, you can't start attaching and even block the receivables!", remarked Justice Chandrachud.
The judge spoke of introducing a mechanism of assessment of the tax officers with a view to inculcate accountability- "Tax officers raise huge demands after assessment – of 10,000 crores! If this is reduced to 1000 crores by the Appellate Tribunal or the Supreme Court, it must go into the assessment of the tax officer! There is no accountability at all", reflected Justice Chandrachud.
"The problem is in the fine print. In order to make the GST Act workable, the message must percolate to the actual authorities- Why the legislation has made certain provisions, what is the purpose behind them?...For example, the Act provides for filing of an appeal from any order on a deposit of that tax, interest and penalty which is undisputed, plus 10% of the balance", continued the judge.
Justice Chandrachud also criticised the exercise of the power of provisional attachment as a "pre-emptive strike"- "The law is that when it is necessary to protect the interest of revenue, because there is a likelihood that revenue will not be able to enforce the assessment order, there may be an order for provisional attachment. You cannot just go on attaching only because there is to be an assessment order! It cannot be a pre-emptive strike!"
The bench also pulled up the respondent-authorities in the instant case over the stand that providing an opportunity for hearing in connection with an order of attachment was a discretion-"How can you file such a counter-affidavit? The rules say that the assessee will be given an opportunity for filing objections and of a hearing!"
"This is a draconian law. It needs to be structured. The tax authorities have to abide by the mandate of the law, the letter and the spirit of the law. This is a very important issue. That is why we are taking this up, because once we laid down the law, it applies to the entire country", said Justice Chandrachud.
In the instant case, on 19 January 2019, a provisional attachment was levied under Section 83 of the Himachal Pradesh Goods and Services Tax Act 2017. On 30 January 2019, the provisional attachment was lifted after the petitioner had submitted a representation under Rule 159(5). Yet on 28 October 2020, a fresh order of provisional attachment was passed based on allegations pertaining to the same period and cause of action. The petitioner submitted a representation on 4 November 2020 specifically seeking an opportunity of being heard; and an order was passed on 6 November 2020 rejecting the representation and confirming the provisional attachment without dealing with the issues which have been raised by the petitioner and without furnishing an opportunity of being heard.
On the above foundation, it has been submitted before the Supreme Court that the power to order a provisional attachment under Section 83 is a draconian power and strict compliance with the provisions of the statute is necessary. In the present case, it has been submitted that the petitioner has paid as much as Rs 12 crores towards revenue demands of the State in the assessment year and there was no question of the provisional attachment being necessitated to protect the interest of the revenue.
