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.
Section 83 of CGST Act, 2017—Provisional Attachment — The appellant challenged an order dated 28 October 2020 under Section 83. On 9 January 2019, an order of provisional attachment was issued under Section 83 by which a payment of Rs 5 crores due to the appellant from its supplier was attached on the ground that the appellant had availed of ITC of Rs 3.25 crores. Thereafter, on 27 November 2020, a SCN was issued to the appellant under Section 74(1). The appellant instituted writ proceedings before the Himachal Pradesh High Court challenging the proceedings initiated under Section 83. The writ petition was dismissed by the High Court on the ground that the appellant had an alternative remedy available in law. The court observed that as per section 83, (i) the power to order a provisional attachment is entrusted during the pendency of proceedings under any one of six specified provisions: Sections 62, 63, 64, 67, 73 and 74; (ii) the power to order a provisional attachment has been vested by the legislature in the Commissioner; (iii) Before exercising the power, the Commissioner must be “of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do”; (iv) The order for attachment must be in writing; (v) The provisional attachment which is contemplated is of any property including a bank account belonging to the taxable person; and (vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute. The court observed that a provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The court observed that the order passed by the Joint Commissioner does not indicate any basis for the formation of the opinion that the levy of a provisional attachment was necessary to protect the interest of the government revenue. The record clearly reveals a breach of the mandatory pre-conditions for the valid exercise of powers under Section 83 of the HPGST Act. The court observed that the order of provisional attachment was passed before the proceedings against the appellant were initiated under Section 74. Given that there were no pending proceedings against the appellant, the mere fact that proceedings under Section 74 had concluded against supplier, would not satisfy the requirements of Section 83. Thus, the order of provisional attachment was ultra vires Section 83 of the Act.
Held that:- The Hon’ble Supreme Court allowed the appeal and set aside the impugned judgment and order of the High Court dated 1 January 2021and held that (i) The Joint Commissioner while ordering a provisional attachment under Section 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected under Section 5(3) and an appeal against the order of provisional attachment was not available under Section 107 (1); (ii) The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable; (iii) The High Court has erred in dismissing the writ petition on the ground that it was not maintainable; (iv) The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled; (v) 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. (vi) The expression “necessary so to do for protecting the government revenue” implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment; (vii) The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue; (viii) In the facts of the present case, there was a clear non-application of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal; (ix) 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 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.
Section 83 of CGST Act, 2017—Provisional Attachment — The appellant challenged an order dated 28 October 2020 under Section 83. On 9 January 2019, an order of provisional attachment was issued under Section 83 by which a payment of Rs 5 crores due to the appellant from its supplier was attached on the ground that the appellant had availed of ITC of Rs 3.25 crores. Thereafter, on 27 November 2020, a SCN was issued to the appellant under Section 74(1). The appellant instituted writ proceedings before the Himachal Pradesh High Court challenging the proceedings initiated under Section 83. The writ petition was dismissed by the High Court on the ground that the appellant had an alternative remedy available in law. The court observed that as per section 83, (i) the power to order a provisional attachment is entrusted during the pendency of proceedings under any one of six specified provisions: Sections 62, 63, 64, 67, 73 and 74; (ii) the power to order a provisional attachment has been vested by the legislature in the Commissioner; (iii) Before exercising the power, the Commissioner must be “of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do”; (iv) The order for attachment must be in writing; (v) The provisional attachment which is contemplated is of any property including a bank account belonging to the taxable person; and (vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute. The court observed that a provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The court observed that the order passed by the Joint Commissioner does not indicate any basis for the formation of the opinion that the levy of a provisional attachment was necessary to protect the interest of the government revenue. The record clearly reveals a breach of the mandatory pre-conditions for the valid exercise of powers under Section 83 of the HPGST Act. The court observed that the order of provisional attachment was passed before the proceedings against the appellant were initiated under Section 74. Given that there were no pending proceedings against the appellant, the mere fact that proceedings under Section 74 had concluded against supplier, would not satisfy the requirements of Section 83. Thus, the order of provisional attachment was ultra vires Section 83 of the Act.
Held that:- The Hon’ble Supreme Court allowed the appeal and set aside the impugned judgment and order of the High Court dated 1 January 2021and held that (i) The Joint Commissioner while ordering a provisional attachment under Section 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected under Section 5(3) and an appeal against the order of provisional attachment was not available under Section 107 (1); (ii) The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable; (iii) The High Court has erred in dismissing the writ petition on the ground that it was not maintainable; (iv) The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled; (v) 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. (vi) The expression “necessary so to do for protecting the government revenue” implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment; (vii) The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue; (viii) In the facts of the present case, there was a clear non-application of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal; (ix) 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.