Power to order provisional attachment of property, bank A/C draconian in nature: SC

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

A bench of Justices D Y Chandrachud and M R Shah said the exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do 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,” the bench said.

It also clarified that the expression “necessary so to do for protecting the government revenue” implicates that it cannot be protected without ordering a provisional attachment.

The top court said the Commissioner is 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 apex court’s judgement came against an order of Himachal Pradesh High Court which dismissed the writ petition instituted under Article 226 of the Constitution challenging orders of provisional attachment.

The petitioner Radha Krishan Industries challenged the orders issued on October 28, 2020 by the Joint Commissioner of State Taxes and Excise, Parwanoo in Himachal Pradesh provisionally attaching the appellant’s receivables from its customers.  The provisional attachment was ordered while invoking Section 83 of the Himachal Pradesh Goods and Service Tax Act, 20172 and Rule 159 of Himachal Pradesh Goods and Service Tax Rules, 2017.