Provisional Attachment Power
In Goods and Services Tax (GST), there is a provision whichallows the revenue department to attach assets, including bank accounts, of ataxpayer.
However, before this is initiated, there are conditions whichmust be fulfilled.
This power is given to the commissioner by the State andCentral GST, who may do so when he deems such action necessary to protect theinterest of government revenue. The same must be done in writing.
Eligibility to activate this power includes not payment ofsome tax, paying less tax, or receiving erroneous refund, or fraud in input taxcredit, etc.
M/s Radha Krishan Industries (Petitioner) vs State of HimachalPradesh and others (Respondents)
In this case regarding the use of Provisional AttachmentPower of GST, the Joint Commissioner of State Taxes and Excise, Parwanoo,Himachal Pradesh had provisionally attached company M/s Radha Krishan’s receivablesclaiming the latter was involved in tax credit fraud.
This attachment was of Rs 5 crore.
The company challenged the order in the state’s High Court. TheHigh Court concluded that the writ is not maintainable, “...we are of theconsidered view that the writ petitioners have alternative efficacious remedyavailable and these writ petitions are not maintainable.” (Read the judgement online)
Supreme Court’s observation
The Supreme Court of India was hearing an appeal on HimachalPradesh High Court’s order denying relief to the taxpayer Radha Krishan Industries.
The Supreme Court observed that the Provisional AttachmentPower is “draconian” in nature. Further, the necessity of strict fulfilment ofthe conditions required to implement this power was called upon by the Court.
The Court overturned the High Court’s order claiming thatthe High Court had erred in concluding that the petition is not maintainable.
During the course, the Supreme Court examined theProvisional Attachment Provisions and observed their draconian nature.
Further, the following specific steps have been clarifiedwhich must be met before this power is called into action:
1. Formation of opinion by the commissioner.
2. Formation of opinion before ordering aprovisional attachment.
3. Existence of opinion that provisional attachmentis necessary to protect the interests of government revenue. Further, it mustbe postulated that provisional attachment is the only way to protect therevenue.
4. The order has to be issued in writing.
5. Observance of rules and manner of attachment bythe commissioner.
Balancing department’s interests with public protection
All in all, the Supreme Court observes and lays down processsuch that there is no unguided discretion in exercise of power. Why? So thatthe individuals and their bona fide businesses are not subject to whims ofarbitrary power.