2021-TIOL-179-SC-GST Radha Krishan Industries Vs State of HP
GST - s.83 - Once the final order of assessment is passed u/s 74, the order of provisional attachment must cease to subsist: SC
GST - s.83 - Order passed by Jt. Commr. as a delegate of Commissioner was not subject to an appeal u/s 107(1) since expression 'adjudicating authority' does not include Commissioner - only remedy is invocation of writ jurisdiction: SC
GST - Rule 159(5) - Commissioner's understanding that granting an opportunity of being heard was at his discretion is flawed - fundamental breach of principles of natural justice: SC
Facts:
+ This appeal arises from a judgment and order dated 1 January 2021 of a Division Bench of the High Court of Himachal Pradesh. The High Court dismissed the writ petition instituted under Article 226 of the Constitution challenging orders of provisional attachment on the ground that an alternate remedy is available.
+ The appellant challenged the orders issued on 28 October 2020 by the Joint Commissioner of State Taxes and Excise, Parwanooprovisionally 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, 2017and Rule 159 of Himachal Pradesh Goods and Service Tax Rules, 2017. While dismissing the writ petition on grounds of maintainability the High Court was of the view that the appellant had an 'alternative and efficacious remedy' of an appeal under Section 107 of the HPGST Act.
+ Order states that the appellant was found to be involved in an ITC fraud amounting to Rs. 5.03 crores during 2017-18 and 2018-19.
+ On 27 November 2020, the third respondent issued a notice to show cause to the appellant under Section 74(1) of the HP GST Act for recovering the ITC, interest and penalty. The notice was issued on the basis that the appellant had claimed ITC on the supplies received from GM Powertech and since the inward supplies made by GM Powertech were found to be fake, the appellant's claim of ITC was also in question. + The orders of provisional attachment and the order passed by the Commissioner on 21 October 2020 delegating his powers under Section 83 of the HPGST Act to the third respondent, were challenged by the appellant before the High Court in a writ petitionunder Article 226.
+ While dismissing the writ petition, the High Court held that it was undisputed that the third respondent and the Divisional Commissioner, who has been appointed as Commissioner (Appeals) under the GST Act, are constituted under the HPGST Act, and therefore, it is assumed that there is no illegal or irregular exercise of jurisdiction.
+ The High Court further observed that even if there is some defect in the procedure followed during the hearing of the case, it does not follow that the authority acted without jurisdiction, and though the order may be irregular or defective, it cannot be a nullity so long as it has been passed by the competent authority.
+ The High Court held that when a statutory forum of appeal exists, an appeal should "not be entertained ignoring the statutory dispensation". + The High Court held that it was fortified in this view by the fact that the writ petition filed by GM Powertech, has also not been entertained and that it has been relegated to avail of the alternative remedy.
+ According to the respondent, the appellant failed to exercise this option (of inspecting the contents of the appellant's case file) and did not reply to the show cause notice dated 27 November 2020. Thereafter, on 18 February 2021, an order under Section 74(9) of the HPGST Act was passed by the third respondent confirming a tax demand of Rs. 8,30,27,218. This order under Section 74(9) has been assailed by the appellant before the appellate authority under Section 107.
+ The dismissal of the petition challenging the orders of provisional attachment is in question in the present proceedings.
Held:
++ 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);
++ The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable;
++ The High Court has erred in dismissing the writ petition on the ground that it was not maintainable;
++ 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; ++ 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 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;
++ 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;
++ 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;
++ Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards: (a) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and (b) An opportunity of being heard;
++ 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 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; ++ A final order having been passed under Section 74(9), the proceedings under Section 74 are no longer pending as a result of which the provisional attachment must come to an end; and
++ The appellant having filed an appeal against the order under section 74(9), the provisions of sub-Sections 6 and 7 of Section 107 will come into operation in regard to the payment of the tax and stay on the recovery of the balance as stipulated in those provisions, pending the disposal of the appeal. Conclusion:
++ Appeal allowed by setting aside the impugned judgment and order of the High Court dated 1 January 2021.
++ Writ petition filed by the appellant under Article 226 of the Constitution shall stand allowed by setting aside the orders of provisional attachment dated 28 October 2020.
- Appeal/Petition allowed: SUPREME COURT OF INDIA |
