Supreme Court to halt property seizures for Extraction of GST Dues.
Shambhavi Sharma / 2021-04-29 12:08:00

The Supreme Court has ruled that revenue authorities cannot bind citizens' property on a temporary basis under the “draconian” clauses of the Goods and Service Tax (GST) law unless there is a “dire necessity” to protect the state's revenue interests.
Small companies that have been embroiled in conflicts with tax authorities about unfair reckoning of dues and precipitate intervention will be relieved by the judgement handed down Tuesday by a bench consisting of Justice D.Y. Chandrachud and M.R. Shah.
The Himachal Pradesh government had provisionally attached RadhaKrishan Industries' bank accounts and receivables from its clients in order to recover dues arising from tax, interest, and penalty for a total of Rs 5.03 crore.
This was later increased to Rs 8.30 crore by a new tax demand released in February of this year. Industry and tax experts applauded the decision.
Further Contentions by Apex Court
  • According to Abhishek Jain, tax partner at EY India, “the supreme court of India, holding a similar opinion, reversed the judgement of the high court of Himachal Pradesh, ruling that... the provisional attachment of the property is punitive in nature.”
  • “The Supreme Court's ruling that temporary attachment to property should only be used where no other option is open will shield taxpayers from unnecessary harassment.”
  • The dispute resulted from an order released in October 2020 by the joint commissioner of state taxes and excise, southern implementation district, in Parwanoo (Himachal Pradesh), for the provisional attachment of payments that Fujikawa Power and Deepak International, RadhaKrishan Industries' customers, were required to make to the company in order to recover Rs 5.03 crore.
  • The order was released after the Himachal revenue authorities discovered an input tax scam involving RadhaKrishan's supplier, GM Powertech, which claimed and used input tax credit based on invoices issued by fictitious and fraudulent firms.
  • Even though RadhaKishan claimed it had paid GST production tax of Rs 12.49 crore between 2017-18 and 2018-19, which was more than the contested input tax credit of Rs 3.25 crore that RadhaKrishan was accused of fraudulently reporting, the company was dragged into the mess.
  • The state revenue authorities reopened the case in October last year, alleging that the payment of Rs 12 crore in tax did not mean RadhaKrishan did not participate in input tax evasion, despite the fact that an attachment notice had been removed in the month of January 2019.
  • The provisional extend act was asked under Section 83 of the Himachal Pradesh GST Act, 2017 and Rule 159 of the Himachal Pradesh Goods and Service Tax Rules, 2017.                                  
  • The company's appeal against temporary attachment orders under Article 226 of the Constitution was rejected by the Himachal Pradesh High Court.
  • At first glance, the Joint Commissioner's order does not seem to have any ground for the conclusion that the levy of a provisional attachment was required to safeguard the government's revenue interests.” -Supreme Court Justice Chandrachud.

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