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The Revenue Department had ordered for provisional attachment on Appellant’s receivables from their customers. Aggrieved, the Appellant had preferred a Writ Petition before the Himachal Pradesh HC challenging the vires of attachment order passed by the Revenue u/s. 83 of the CGST Act. However, the HC dismissed such Appeal as the Appellant had the option of alternative remedy under the CGST Act.
Aggrieved, the Appellant approached the SC on questions, whether the orders of provisional attachment are in consonance with the conditions stipulated in Section 83 and whether the HC was right in concluding that the provisional attachment not be challenged in a writ petition. Upon referring to Section 83 of the CGST Act, it was observed by the SC that:
In view of the above, it was further observed that before the Commissioner can levy a provisional attachment, there must be a formation of ‘the opinion’ and that it is necessary ‘so to do’ for the purpose of protecting the interest of the Government Revenue. The power to levy a provisional attachment is draconian in nature.
It was further observed that, conscious as the legislature was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, it conditioned the exercise of the power by employing specific statutory language which conditions the exercise of the power.
Firstly, the language of the statute indicates the necessity of the formation of opinion by the Commissioner. Secondly, the formation of opinion before ordering a provisional attachment. Thirdly, the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue. Fourthly, the issuance of an order in writing for the attachment of any property of the taxable person; and lastly, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment.
It was further observed that each of these components of the statute is integral to a valid exercise of power. It is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the Government Revenue.
In respect to the Rules for provisional attachment, the SC observed that in terms of Rule 159(5) of the CGST Rules, the person whose property is attached is entitled to dual procedural safeguards: (i) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and (ii) An opportunity of being heard. It was further observed that even if the property, arguably, was validly attached in the past, the person whose property has been attached may demonstrate to the Commissioner that it is not liable to be attached in the present.
The second significant aspect of sub-Rule (5) is the mandatory requirement of furnishing an opportunity of being heard to the person whose property is attached. In the instant case, there has been a breach of the mandatory requirement of Rule 159(5) and the Commissioner was clearly misconceived in law in coming into conclusion that he had a discretion on whether or not to grant an opportunity of being heard.
The SC further observed that Revenue while ordering a provisional attachment u/s. 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected u/s 5(3) and an appeal against the order of provisional attachment was not available u/s 107 (1). As the Appeal was not maintainable under the CGST Act, it was observed that the Writ Petition before the HC was sustainable.
In view of the above observations, the SC set aside the judgement of the Himachal Pradesh HC and allowed the Appeal.
Radha Krishna Industries vs. State of Himachal Pradesh and Ors. [Civil Appeal No 1155 of 2021]
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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