The Supreme Court said that Parliament’s purpose of GST as Citizen-Friendly Tax Structure has been defeated by the manner in which it has been enforced.
On 19 January 2019, a provisional attachment was levied under Section 83 of the Himachal Pradesh Goods and Services Tax Act 2017. On 30 January 2019, the provisional attachment was lifted after the petitioner had submitted a representation under Rule 159(5). Yet on 28 October 2020, a fresh order of provisional attachment was passed based on allegations pertaining to the same period and cause of action.
The petitioner submitted a representation on 4 November 2020 specifically seeking an opportunity of being heard; and an order was passed on 6 November 2020 rejecting the representation and confirming the provisional attachment without dealing with the issues which have been raised by the petitioner and without furnishing an opportunity of being heard.
It has been submitted before the Apex Court that the power to order a provisional attachment under Section 83 is a draconian power and strict compliance with the provisions of the statute is necessary. In the present case, it has been submitted that the petitioner has paid as much as Rs 12 crores towards revenue demands of the State in the assessment year and there was no question of the provisional attachment being necessitated to protect the interest of the revenue.
The division bench of Justices Chandrachud and M. R. Shah said that the country needs to come out of this tax culture that ‘businesses are all fraudulent’! Even where 12 crore tax has been paid, 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 block the receivables.
“The problem is in the fine print. In order to make the GST Act workable, the message must percolate to the actual authorities- Why has the legislation made certain provisions, what is the purpose behind them? For example, the Act provides for filing of an appeal from any order on a deposit of that tax, interest and penalty which is undisputed, plus 10% of the balance,” the Apex court remarked.
The Supreme Court held that this is a draconian law. It needs to be structured. The tax authorities have to abide by the mandate of the law, the letter and the spirit of the law.