The Supreme Court on Tuesday ruled that the energy to order a provisional attachment of home, such as a bank account, of an assessee below the GST law is “draconian in nature” and can not be applied as an “unguided subjective discretion” of the tax authorities.
A bench comprising justices DY Chandrachud and MR Shah mentioned a provisional attachment is contemplated through the pendency of particular proceedings, implying a final demand or liability is but to be crystallised. So, an anticipatory attachment of assets should strictly conform to the specifications, each substantive and procedural, embodied in the statute and the guidelines, it mentioned.
The SC’s ruling comes at a time when the government is showcasing the current months’ surge in GST collections as proof of productive anti-evasion actions. Earlier, through the hearing of the case, the apex court noted that “Parliament had aimed to give the GST as a citizen-friendly tax structure”.
Justice Chandrachud also orally observed that the taxman really should not see all “businesses as being fraudulent”, and mentioned the nation required to come out of such mindset. “Even when `12-crore tax has been paid (by Radha Krishna Industries), 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 unlock the receivables,” the judge had mentioned.
“The commissioner must be alive to the fact that such provisions are not intended to make pre-emptive strikes on the property of the assessee, merely because property is available. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue,” the bench mentioned in its 61-web page judgment.
The formation of the opinion by the Commissioner should bear a proximate and live nexus to the goal of safeguarding the interest of the government income, it mentioned, whilst permitting an appeal filed by M/s Radha Krishna Industries against the Himachal Pradesh High Court’s order of January 1, 2021, that upheld its provisional attachment of properties below the Himachal Pradesh Goods and Service Tax Act, 2017.
Justice Chandrachud, writing for the bench, mentioned that the circumstances which are prescribed by the statute for a valid physical exercise of the energy, based on tangible material, should be strictly fulfilled.
In this case, the HC in January had dismissed the lead manufacturer’s plea for quashing of the provisional attachment below Section 83 of the 2017 Act. The SC discovered that there was a clear non-application of the thoughts by the Commissioner and he misconceived it to be his discretion whether or not he permitted the appellant chance of hearing or not.