Power of provisional attachment under GST is draconian in nature

Last updated: 13 January 2022

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The Supreme Court has ruled that the power of provisional attachment under GST is 'draconian' and must be exercised with strict adherence to statutory conditions. The court set aside a Himachal Pradesh High Court decision that dismissed a company's challenge to a provisional attachment order, stating that such powers require careful justification. This ruling clarifies that the Revenue Department cannot arbitrarily attach assets without fulfilling the prescribed legal requirements.

Court :
Himachal Pradesh High Court

Brief :
The Hon’ble Supreme Court of India observed that the Hon’ble HP HC has erred in dismissing the writ petition on the ground that it was not maintainable and set aside the judgment passed and the orders of provisional attachment. Held that, 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.

Citation :
Civil Appeal No 1155 of 2021 dated April 20, 2021

M/S Radha Krishan Industries v. the State of HP [Civil Appeal No 1155 of 2021 dated April 20, 2021]

This Appeal was filed against the judgment and order of the Hon’ble Himachal Pradesh High Court (“HP HC”) wherein, the Court dismissed the writ petition challenging orders of provisional attachment on the ground that an alternate and efficacious remedy is available to the Appellant and held that when a statutory forum of appeal exists, an appeal should not be entertained ignoring the statutory dispensation. The Appellant challenged the orders of provisional attachment, issued by the Revenue Department attaching the Appellant’s receivables from its customers for alleged involvement in illegal claim of Input Tax Credit (“ITC”) amounting to INR 5,03,82,554/- during 2017-18 and 2018-19, while invoking Section 83 of the Himachal Pradesh Goods and Services Tax Act, 2017 ("HPGST Act") and Rule 159 of Himachal Pradesh Goods and Services Tax Rules, 2017 ("HPGST Rules").

The Hon’ble Supreme Court of India observed that the Hon’ble HP HC has erred in dismissing the writ petition on the ground that it was not maintainable and set aside the judgment passed and the orders of provisional attachment. Held that, 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.

FAQ :

Provisional attachment under GST is a power that allows the Revenue Department to attach a taxable person's property, including bank accounts, to safeguard government revenue.

The Supreme Court described the power of provisional attachment as 'draconian' and emphasised that the conditions prescribed by statute for its valid exercise must be strictly fulfilled.

The Supreme Court intervened because the Himachal Pradesh High Court had dismissed the company's writ petition on the grounds of an alternative remedy, without properly considering the merits of the challenge to the provisional attachment order.

The company challenged a provisional attachment order issued by the Revenue Department for alleged involvement in illegal Input Tax Credit claims amounting to over INR 5 crore.

This ruling means that tax authorities must strictly comply with legal requirements before imposing provisional attachments, providing businesses with greater protection against arbitrary actions.