M/S RADHA KRISHAN INDUSTRIES versus STATE OF HIMACHAL PRADESH & ORS. on 20 April 2021

SUPREME COURT REPORTS

[2021] 3 S.C.R.

AM/S RADHA KRISHAN INDUSTRIES

v.

STATE OF HIMACHAL PRADESH & ORS.

(Civil Appeal No 1155 of 2021)

BAPRIL 20, 2021

[DR DHANANJAYA Y CHANDRACHUD ANDM R SHAH, JJ.]

Himachal Pradesh Goods and Service Tax Act, 2017: s. 83 –Power of the Commissioner to order provisional attachment of theCproperty of the assessee – Interpretation of – On facts, case of GSTfraud initiated against appellant’s supplier – During the course ofproceedings, issuance of orders by the Joint Commissioner u/s 83for provisional attachment of the appellant’s receivables from itscustomers – Writ petition under/Art. 226 challenging orders ofDprovisional attachment – Dismissed by the High Court holding thatthere was an alternative and efficacious remedy of an appeal u/s.107 – On appeal, held: Joint Commissioner while ordering aprovisional attachment u/s. 83 was acting as a delegate of theCommissioner in pursuance of the delegation effected u/s.5(3) andan appeal against the order of provisional attachment was notEavailable u/s.107(1) – Thus, the writ petition before the High Courtchallenging the order of provisional attachment was maintainable,being the only remedy available – There was non-application ofmind by the Joint Commissioner to the provisions of s. 83, renderingthe provisional attachment illegal – There was a breach of theFmandatory requirement of r. 159(5), entitlement to submit objectionsand an opportunity of being heard, and the Commissionermisconstrued in holding that he had a discretion on whether or notto grant an opportunity of being heard – Furthermore, there wereno pending proceedings against the appellant, the mere fact thatproceedings u/s. 74 had concluded against the supplier, would notGsatisfy the requirements of s. 83 – Thus, the order of provisionalattachment was ultra vires s. 83 – Also the High Court did not considerthat both the earlier and the subsequent orders of provisionalattachment were on the same grounds, without there being anychange in the circumstances – Thus, the order passed by the HighH

Court is set aside – Himachal Pradesh Goods and Service Tax Rules,2017 – r.159.

s. 83 – Power to order provisional attachment of the propertyof the taxable person – Exercise of – Held: Conditions prescribedby the statute for a valid exercise of the power is to be strictly fulfilled– Exercise of the power for ordering a provisional attachment mustbe preceded by the formation of an opinion by the Commissionerthat it is necessary so to do for the purpose of protecting the interestof the government revenue – Formation of an opinion by theCommissioner must be based on tangible material.

Interpretation of statutes: Taxing statute – Interpretation of –Held: Provision must be construed on its plain terms – Purposeunderlying the provision is to be seen – An interpretation whicheffectuates the purpose must be preferred particularly when it issupported by the plain meaning of the words used.

Constitution of India: Art. 226 – Writ jurisdiction – Principlesof law for entertaining writ petition under Art. 226 – Explained.

Allowing the appeal, the Court

HELD: 1.1 The Joint Commissioner while ordering aprovisional attachment under section 83 of the Himachal PradeshGoods and Service Tax Act, 2017 was acting as a delegate of theCommissioner in pursuance of the delegation effected underSection 5(3) and an appeal against the order of provisionalattachment was not available under Section 107 (1).[Para 72][467-D]

1.2 The writ petition before the High Court under Article226 of the Constitution challenging the order of provisionalattachment was maintainable. The High Court erred in dismissingthe writ petition on the ground that it was not maintainable.[Para72][467-E]

1.3 The power to order a provisional attachment of theproperty of the taxable person including a bank account isdraconian in nature and the conditions which are prescribed bythe statute for a valid exercise of the power must be strictlyfulfilled.[Para 72][467-F-G]

1.4 The exercise of the power for ordering a provisionalattachment must be preceded by the formation of an opinion by A

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Athe Commissioner that it is necessary so to do for the purpose ofprotecting the interest of the government revenue. Beforeordering a provisional attachment the Commissioner must forman opinion on the basis of tangible material that the assessee islikely to defeat the demand, if any, and that therefore, it isnecessary so to do for the purpose of protecting the interest ofBthe government revenue. The expression “necessary so to dofor protecting the government revenue” implicates that theinterests of the government revenue cannot be protected withoutordering a provisional attachment; the formation of an opinion bythe Commissioner under Section 83(1) must be based on tangibleCmaterial bearing on the necessity of ordering a provisionalattachment for the purpose of protecting the interest of thegovernment revenue.[Para 72][467-G-H; 468-A-C]

1.5 In the facts of the instant case, there was a clear non-application of mind by the Joint Commissioner to the provisionsDof Section 83, rendering the provisional attachment illegal.[Para72][468-D]

1.6 Under the provisions of rule 159(5), the person whoseproperty is attached is entitled to dual procedural safeguards: anentitlement to submit objections on the ground that the propertyEwas or is not liable to attachment; and an opportunity of beingheard. There has been a breach of the mandatory requirement ofRule 159(5) and the Commissioner was clearly misconceived inlaw in coming into conclusion that he had a discretion on whetheror not to grant an opportunity of being heard. The Commissioneris duty bound to deal with the objections to the attachment byFpassing a reasoned order which must be communicated to thetaxable person whose property is attached.[Para 72][468-E-G]

1.7 A final order having been passed under Section 74(9),the proceedings under Section 74 are no longer pending as aresult of which the provisional attachment must come to an end;Gand the appellant having filed an appeal against the order undersection 74(9), the provisions of sub-Sections 6 and 7 of Section107 will come into operation in regard to the payment of the taxand stay on the recovery of the balance as stipulated in thoseprovisions, pending the disposal of the appeal. [Para 72][468-H;469-A-B]H

2. The principles of law for entertaining the petition underArticle 226 of the Constitution are:

(i) The power under Article 226 of the Constitution to issuewrits can be exercised not only for the enforcement offundamental rights, but for any other purpose as well;

(ii) The High Court has the discretion not to entertain awrit petition. One of the restrictions placed on the powerof the High Court is where an effective alternate remedy isavailable to the aggrieved person;

(iii) Exceptions to the rule of alternate remedy arise where(a) the writ petition has been filed for the enforcement of afundamental right protected by Part III of the Constitution;(b) there has been a violation of the principles of naturaljustice; (c) the order or proceedings are wholly withoutjurisdiction; or (d) the vires of a legislation is challenged;

(iv) An alternate remedy by itself does not divest the HighCourt of its powers under Article 226 of the Constitutionin an appropriate case though ordinarily, a writ petitionshould not be entertained when an efficacious alternateremedy is provided by law;

(v) When a right is created by a statute, which itselfprescribes the remedy or procedure for enforcing the rightor liability, resort must be had to that particular statutoryremedy before invoking the discretionary remedy underArticle 226 of the Constitution. This rule of exhaustion ofstatutory remedies is a rule of policy, convenience anddiscretion;

(vi) In cases where there are disputed questions of fact,the High Court may decide to decline jurisdiction in a writpetition. However, if the High Court is objectively of theview that the nature of the controversy requires theexercise of its writ jurisdiction, such a view would not readilybe interfered with. [Para 27][435-G-H; 436-A-F]

Seth Chand Ratan v. Pandit Durga Prasad (2003) 5SCC 399 : [2003] 3 SCR 75; Babubhai Muljibhai Patel A

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Av. Nandlal Khodidas Barot (1974) 2 SCC 706 : [1975]2 SCR 71; Rajasthan SEB v. Union of India (2008) 5SCC 632 : [2008] 7 SCR 1025 – relied on.

Assistant Commissioner (CT) LTU, Kakinada andOthers v. Glaxo Smith Kline Consumer Health CareBLimited AIR 2020 SC 2819; Whirlpool Corporation v.Registrar of Trademarks, Mumbai (1998) 8 SCC 1 :[1998] 2 Suppl. SCR 359; Harbanslal Sahnia v. IndianOil Corpn. Ltd. (2003) 2 SCC 107 – referred to.

3.1 The marginal note to Section 83 of the Himachal PradeshCGoods and Service Tax Act, 2017 provides some indication ofParliamentary intent. Section 83 provides for “provisionalattachment to protect revenue in certain cases”. Marginal notes,it is well-settled, do not control a statutory provision but providesome guidance in regard to content. Put differently, a marginalnote indicates the drift of the provision. With these prefatoryDcomments, the judgment must turn to the essential task ofstatutory construction. The language of the statute has to beinterpreted bearing in mind that it is a taxing statute which comesup for interpretation. The provision must be construed on itsplain terms. Equally, in interpreting the statute, regard must beEto the purpose underlying the provision. An interpretation whicheffectuates the purpose must be preferred particularly when it issupported by the plain meaning of the words used. [Para 40][443-D-G]

3.2 Sub-Section (1) of Section 83 can be bifurcated intoFseveral parts. The first part provides an insight on when in pointof time or at which stage the power can be exercised. The secondpart specifies the authority to whom the power to order aprovisional attachment is entrusted. The third part defines theconditions which must be fulfilled to validate the power or orderinga provisional attachment. The fourth part indicates the mannerGin which an attachment is to be leveled. The final and the fifthpart defines the nature of the property which can be attached.Each of these special divisions, while they are not watertightcompartments, ultimately and together they aid in validating anunderstanding of the statute. Each of the five parts is interpretedHand explained as:

(i) The power to order a provisional attachment is entrustedduring the pendency of proceedings under any one of sixspecified provisions: Sections 62, 63, 64, 67, 73 or 74. Inother words, it is when a proceeding under any of theseprovisions is pending that a provisional attachment can beordered;

(ii) The power to order a provisional attachment has beenvested by the legislature in the Commissioner;

(iii) Before exercising the power, the Commissioner mustbe “of the opinion that for the purpose of protecting theinterest of the government revenue, it is necessary so todo”;

(iv) The order for attachment must be in writing;

(v) The provisional attachment which is contemplated is ofany property including a bank account belonging to thetaxable person; and the manner in which a provisionalattachment is levied must be specified in the rules madepursuant to the provisions of the statute. [Para 41][443-H;444-A-F]

3.3 Before the Commissioner can levy a provisionalattachment, there must be a formation of “the opinion” and thatit is necessary “so to do” for the purpose of protecting theinterest of the government revenue. The power to levy aprovisional attachment is draconian in nature. By the exercise ofthe power, a property belonging to the taxable person may beattached, including a bank account. The attachment is provisionaland the statute has contemplated an attachment during thependency of the proceedings under the stipulated statutoryprovisions. An attachment which is contemplated in Section 83is, in other words, at a stage which is anterior to the finalizationof an assessment or the raising of a demand. Conscious as thelegislature was of the draconian nature of the power and theserious consequences which emanate from the attachment of anyproperty including a bank account of the taxable person, itconditioned the exercise of the power by employing specificstatutory language which conditions the exercise of the power.The language of the statute indicates first, the necessity of the A

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Aformation of opinion by the Commissioner; second, the formationof opinion before ordering a provisional attachment; third theexistence of opinion that it is necessary so to do for the purposeof protecting the interest of the government revenue; fourth,the issuance of an order in writing for the attachment of anyproperty of the taxable person; and fifth, the observance by theBCommissioner of the provisions contained in the rules in regardto the manner of attachment. Each of these components of thestatute are integral to a valid exercise of power. In other words,when the exercise of the power is challenged, the validity of itsexercise will depend on a strict and punctilious observance ofCthe statutory pre-conditions by the Commissioner. Whileconditioning the exercise of the power on the formation of anopinion by the Commissioner that “for the purpose of protectingthe interest of the government revenue, it is necessary so todo”, it is evident that the statute has not left the formation ofopinion to an unguided subjective discretion of the Commissioner.DThe formation of the opinion must bear a proximate and live nexusto the purpose of protecting the interest of the governmentrevenue. [Para 48][449-A-G]

Statutes

3.4 By utilizing the expression “it is necessary so to do”the legislature has evinced an intent that an attachment isEauthorized not merely because it is expedient to do so (orprofitable or practicable for the revenue to do so) but because itis necessary to do so in order to protect interest of thegovernment revenue. Necessity postulates that the interest ofthe revenue can be protected only by a provisional attachmentwithout which the interest of the revenue would stand defeated.FNecessity in other words postulates a more stringent requirementthan a mere expediency. A provisional attachment under Section83 is contemplated during the pendency of certain proceedings,meaning thereby that a final demand or liability is yet to becrystallized. An anticipatory attachment of this nature must strictlyGconform to the requirements, both substantive and procedural,embodied in the statute and the rules. The exercise of unguideddiscretion cannot be permissible because it will leave citizensand their legitimate business activities to the peril of arbitrarypower. Each of these ingredients must be strictly applied beforea provisional attachment on the property of an assessee can beHlevied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to makepreemptive strikes on the property of the assessee, merelybecause property is available for being attached. There must bea valid formation of the opinion that a provisional attachment isnecessary for the purpose of protecting the interest of thegovernment revenue. [Para 49][449-G-H; 450-A-D]

3.5 These expressions in regard to both the purpose andnecessity of provisional attachment implicate the doctrine ofproportionality. Proportionality mandates the existence of aproximate or live link between the need for the attachment andthe purpose which it is intended to secure. It also postulates themaintenance of a proportion between the nature and extent ofthe attachment and the purpose which is sought to be served byordering it. Moreover, the words embodied in sub-Section (1) ofSection 83, would leave no manner of doubt that while ordering aprovisional attachment the Commissioner must in the formationof the opinion act on the basis of tangible material on the basis ofwhich the formation of opinion is based in regard to the existenceof the statutory requirement. [Para 50][450-E-G]

Vishwanath Realtor v. State of Gujarat Special CivilNo. 7210 of 2015, decided on 29 April 2015 –approved.

3.6 The test of the existence of “tangible material” isadopted. Section 83 of the HPGST Act uses the expression“opinion” as distinguished from “reasons to believe”. Theformation of the opinion must be based on tangible material whichindicates a live link to the necessity to order a provisionalattachment to protect the interest of the government revenue.[Para 51][452-B-C]

Commissioner of Income Tax v. Kelvinator of IndiaLimited (2010) 2 SCC 723 : [2010] 1 SCR 768; IncomeTax Officer, Ward No. 162 (2) v. Techspan India PrivateLimited (2018) 6 SCC 685 : [2018] 4 SCR 328 –referred to.

3.7 Rule 159 prescribes modalities for effecting a provisionalattachment of property. A significant aspect of Rule 159(5) is that A

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Aupon the levy of a provisional attachment, the person whoseproperty is attached is empowered to file an objection within sevendays on the ground that the property was or is not liable toattachment. In using the expression “was or is no longer liablefor attachment”, the delegate of the legislature has comprehendedtwo alternative situations. The first, evidenced by the use of theBwords “was” indicates that the property was on the date of theattachment in the past not liable to be attached. That is the reasonfor the use of the past tense “was”. The expression “is not liableto attachment indicates a situation in praesenti. Even if theproperty, arguably, was validly attached in the past, the personCwhose property has been attached may demonstrate to theCommissioner that it is not liable to be attached in the present.[Para 52, 55][452-C-D; 454-H; 455-A-C]

3.8 Sub-Rule (5) of rule 159 contains clear language to theeffect that a person whose property is attached is entitled to twoDprocedural entitlements: first, the right to submit an objectionon the ground that the property was not or is not liable to beattached; and second, an opportunity of being heard to the personfiling an objection. This is a clear indicator that in addition to thefiling of an objection, the person whose property is attached isentitled to an opportunity of being heard. This is in consonanceEwith the principles of natural justice and ensures that a fairprocedure is observed. On facts, it is not open to theCommissioner to hold the view that the only safeguard undersub-Rule 5 is to submit an objection without an opportunity of apersonal hearing. Such a construction would be plainly contraryFto sub-Rule 5 which contemplates both the submission of anobjection to the attachment and an opportunity of being heard.The opportunity of being heard can be availed of as a matter ofright by the person whose property is attached. Both the right tosubmit an objection and to be afforded an opportunity of being heard are valuable safeguards. The consequence of a provisionalGattachment is serious. It displaces the person whose property isattached from dealing with the property. Where a bank accountis attached, it prevents the person from operating the account. Abusiness entity whose bank account is attached is seriouslyprejudiced by the inability to utilize the proceeds of the accountHfor the purpose of business. The dual procedural safeguards

inserted in sub-Rule 5 of Rule 159 demand strict compliance.The Commissioner who hears the objections must pass a reasonedorder either accepting or rejecting the objections. To allow theCommissioner to get by without passing a reasoned order willmake his decision subjective and defeat the purpose of subjectingit to judicial scrutiny. The Commissioner must deal with theobjections and pass a reasoned order indicating whether, and ifnot, why the objections are not being accepted. Sub- Rule 6 ofRule 159 allows for the release of a property which either was oris no longer liable for attachment. The form in which such anorder has to be passed, namely form GST DRC-23, states that“now there is no such proceeding pending against the defaultingperson which warrants attachment” of the account or as the casemay be, the property. Sub- Rules 5 and 6 do not expresslycontemplate a situation in which the person whose property isattached can object on the ground that the attachment is in excessof the amount likely to be due for which proceedings have beenlaunched under the Act. Nor does it provide for a specificopportunity to the taxable person to offer any alternative form ofsecurity in lieu of the attachment. Such an opportunity must beread in to the provision to allow for a fair working in practice.Whether any alternative security that is furnished by the taxableperson should be accepted and if so, its sufficiency, is a matterfor the Commissioner to determine. Undoubtedly, the taxableperson may not have a right to demand that only a particular formof security must be accepted. The Commissioner has to decidewhether the form of security offered would secure the interest ofthe revenue. Where the taxable person sets up the plea that theextent of the attachment is excessive or where the taxable personoffers an alternative form of security, these are also matters whichought to be determined by the Commissioner in the exercise ofpowers under Rule 159(5). The scope of objection can also extendto the nature of the property which is being provisionally attached.[Para 56][455-D-H; 456-A-G]

4.1 The sole ground which weighed with the High Court inholding that the writ proceedings were not maintainable is that“the writ petitioner has not only (an) efficacious remedy, ratheralternative remedy under the GST Act”; and that the writ petitionfiled by the supplier of the appellant against whom similar A

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Aallegations have been leveled had been dismissed by relegatingit to the pursuit of an alternative remedy. It was submitted by theappellant that its supplier had been relegated to the pursuit of analternative remedy since an order of assessment had been passedagainst it; however, insofar as the appellant is concerned, thewrit proceedings were instituted to challenge the levy of aBprovisional attachment under Section 83 and there is noalternative remedy provided under the Act for challenging anorder under Section 83. [Para 59][459-B-D]

4.2 It is evident that the expression ‘adjudicating authority’as defined in s.2(4) does not include among other authorities,Cthe Commissioner. In the instant case, the narration of factsindicates that on 21 October 2020, the Commissioner had inexercise of his powers under Section 5(3) made a delegation interalia to the Joint Commissioner of State Taxes and Excise inrespect of the powers vested under Section 83(1). The JointDCommissioner, in other words, was exercising the powers whichare vested in the Commissioner under Section 83(1) to order aprovisional attachment in pursuance of the delegation exercisedon 21 October 2020. This being the position, clearly the orderpassed by the Joint Commissioner as a delegate of theCommissioner was not subject to an appeal under Section 107(1)Eand the only remedy that was available was in the form of theinvocation of the writ jurisdiction under Article 226 of theConstitution. Thus, the High Court was clearly in error in decliningto entertain the writ proceedings. [Para 62][460-D-G]

4.3 The entire procedure which has been followed by theFJoint Commissioner in the instant case is contrary to theprovisions contained in Section 83 read with Rule 159. The JointCommissioner (acting on behalf of the Commissioner) hasproceeded on an understanding that an opportunity of being heardto the person whose property is provisionally attached is a matterGof discretion, the discretion of being that of the Commissioner.This understanding of the Commissioner is in the teeth of andclearly contrary to the provisions of Rule 159(5). Rule 159(5), asexplained earlier contemplates two safeguards to the person H

whose property is attached. Firstly, it permits such a person tosubmit objections to the order of attachment on the ground thatthe property was or is not liable for attachment. Secondly, Rule159(5) posits an opportunity of being heard. Both requirementsare cumulative. The Commissioner’s understanding that anopportunity of being heard was at the discretion of theCommissioner is therefore flawed and contrary to the provisionsof Rule 159(5). Thus, there has been a fundamental breach of theprinciples of natural justice. [Para 63, 64][460-G-H; 461-D-F]

4.4 The order passed by the Joint Commissioner purportingto justify the levy of a provisional attachment does not indicateany basis for the formation of the opinion that the levy of aprovisional attachment was necessary to protect the interest ofthe government revenue. The order in the file noting refers tothe fact that the case of the supplier had been decided underSection 74 resulting in an additional demand of Rs. 39 crores onaccount of a fraudulent claim of Input Tax Credit (ITC) for FY2017-18 and 2018-19. The supplier is alleged to have passed onthe ITC to various Registered Tax Persons situated in HimachalPradesh by issuing invoices inter alia to the appellant during 2018-19 for which a case under Section 74 had been initiated. Theorder records that the appellant had claimed ITC of Rs 3.25 croreson the strength of the invoices issued by the supplier. The ordermerely records that the submissions which were urged by theappellant on 5 August 2020 “are not sustainable”. “In view ofthe facts involved in the case”, the Joint Commissioner concludedthat it is necessary at this stage to safeguard the governmentrevenue and since the appellant had sold goods to F company-customer of the appellant the payment due to it was being attachedprovisionally. The order of the Joint Commissioner containsabsolutely no basis for the formation of the opinion that aprovisional attachment was necessary to safeguard the interestof the revenue. No tangible material has been disclosed. Therecord clearly reveals a breach of the mandatory pre- conditionsfor the valid exercise of powers under Section 83 of the HPGSTAct. [Para 66][464-E-H; 465-A-B]

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A4.5 The order of provisional attachment under Section 83(1)is to be issued “during the pendency of any proceedings underSection 62 or Section 63 or Section 64 or Section 67 or Section73 or Section 74”. In the instant case, the notice to show causeunder Section 74(1) of the HPGST Act was issued to the appellanton 27 November 2020. After the High Court dismissed the writBpetition, this Court was moved under Article 136 of theConstitution. Notice was issued in the Special Leave Petition on4 February 2021 returnable on 19 February 2021. A day beforethe case was listed, on 18 February 2021, an ex parte order waspassed by the Joint Commissioner u/s. 74 (9) of the HPGST ActCconfirming the demand of Rs 8,30,27,218 in the notice to showcause. [Para 67][465-C-D]

4.6 The order of provisional attachment was passed beforethe proceedings against the appellant were initiated under Section74 of the HPGST Act. Section 83 of the Act requires that thereDmust be pendency of proceedings under the relevant provisionsmentioned against the taxable person whose property is soughtto be attached. The submission that merely because proceedingswere pending/concluded against another taxable entity, that isthe supplier, the powers of Sections 83 could also be attractedagainst the appellant cannot be accepted. This interpretationEwould be an expansion of a draconian power such as that containedin Section 83, which must necessarily be interpreted restrictively.Given that there were no pending proceedings against theappellant, the mere fact that proceedings under Section 74 hadconcluded against the supplier, would not satisfy the requirementsFof Section 83. Thus, the order of provisional attachment was ultravires Section 83 of the Act. [Para 68][465-E-G]

4.7 The appellant, having filed an appeal under Section 107,is required to comply with the provisions of sub-Section (6) ofSection 107 while the recovery of the balance is deemed to beGstayed under the provisions of sub-Section (7). Under Section83, the order of provisional attachment may be passed duringthe pendency of any proceedings under Section 62 or Section 63or Section 64 or Section 67 or Section 73 or Section 74. Therefore,once the final order of assessment is passed under Section 74

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the order of provisional attachment must cease to subsist.Therefore, after the final order under Section 74 of the HPGSTAct was passed on 18 February, 2021, the order of provisionalattachment must come to an end. [Para 70][466-E-G]

4.8 Moreover, an order of provisional attachment wasissued by the Joint Commissioner which was withdrawn on 30January 2019, after considering the representations made by thepetitioner. On the very ground, without any material change incircumstances. Another order of provisional attachment came tobe issued by another Joint Commissioner. Therefore, it was thecontention of the petitioner before the High Court that thesubsequent order of provisional attachment is in substance andeffect an order reviewing the earlier order withdrawing the orderof provisional attachment which was not permissible and thereforethe subsequent order of provisional attachment is withoutjurisdiction. The High Court has not considered this aspect. Boththe earlier and the subsequent orders of provisional attachmentare on the same grounds. Therefore, unless there was a changein the circumstances, it was not open for the Joint Commissionerto pass another order of provisional attachment, after the earlierorder of provisional attachment was withdrawn after consideringthe representations made by the petitioner. This is an additionalground to set aside the subsequent order of provisionalattachment. [Para 71][466-G-H; 467-A-C]

5. The order of the High Court is set aside. The writpetition filed by the appellant is allowed by setting aside theorders of provisional attachment. [Para 73-74][469-B-C]

Valerius Industries v. Union of India 2019 (30) GSTL15(Gujarat); Jai Ambey Filament Pvt Ltd v. Union ofIndia 2021 (44) GSTL 41 (Gujarat); Patran SteelRolling Mill v. Assistant Commissioner of State Tax Unit2019 (20) GSTL 732 (Gujarat) – approved.

Rajasthan SEB v. Union of India (2008) 5 SCC 632 :[2008] 7 SCR 1025; GM Powertech and Others v. Stateof H.P CWP No. 5462 of 2020; Calcutta Discount Co.

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1155 of2021.

From the Judgment and Order dated 01.01.2021 of the High Courtof Himachal Pradesh at Shimla in Civil Writ Petition No. 5648 of 2020.

C

Puneet Bali, Sr. Adv., Surjeet Bhadu, Hittan Nehra, Sachin Jain,Aditya Soni, Advs. for the Appellant.

Akshay Amritanshu, Ankit Kumar Lal, Advs. for the Respondents.

The Judgment of the Court was delivered by D

DR DHANANJAYA Y CHANDRACHUD, J.

A Factual Background

B Submissions

B.1 Maintainability of the writ petition before the High Court E

B.2 Challenge on merits: improper invocation of Section 83

C Legal Position

C.1 Maintainability of writ petition before the High Court C.2 Provisional Attachment F

C.3 Delegation of authority under CGST Act D Analysis E Summary of findings G

A Factual Background

1. This appeal raises significant issues of public importance,engaging as it does, the interface between citizens and their businesseswith the fiscal administration. Legislation enacted for the levy of goodsand services tax confers a power on the taxation authorities to impose aprovisional attachment on the properties of the assessee, including bank H

Aaccounts. The legislation in Himachal Pradesh, which comes up forinterpretation in the present case, has conferred the power on theCommissioner to order provisional attachment of the property of theassessee, subject to the formation of an opinion that such attachment isnecessary in the interest of protecting the government revenue. Whatspecifically, is the ambit of this power? What are the safeguards availableBto the citizen? In interpreting the law, the court has to chart a coursewhich will ensure a fair exercise of statutory powers. The legitimateconcerns of citizens over arbitrary exercises of power have to beprotected while ensuring that the legislative purpose in entrusting theauthority to order a provisional attachment is fulfilled. The rule of law inCa constitutional framework is fulfilled when law is substantively fair,procedurally fair and applied in a fair manner. Each of these threecomponents will need to be addressed in the course of interpreting thetax statute in the present case.

2. This appeal arises from a judgment and order dated 1 JanuaryD2021 of a Division Bench of the High Court of Himachal Pradesh. TheHigh Court dismissed the writ petition instituted under Article 226 of theConstitution challenging orders of provisional attachment on the groundthat an alternate remedy is available. The appellant challenged the ordersissued on 28 October 2020 by the Joint Commissioner of State Taxesand Excise, Parwanoo[1] provisionally attaching the appellant’s receivablesEfrom its customers. The provisional attachment was ordered while invokingSection 83 of the Himachal Pradesh Goods and Service Tax Act, 2017[2]and Rule 159 of Himachal Pradesh Goods and Service Tax Rules, 2017[3].While dismissing the writ petition on grounds of maintainability the HighCourt was of the view that the appellant had an ‘alternative andFefficacious remedy’ of an appeal under Section 107 of the HPGST Act.

3. At issue in this case is whether the orders of provisionalattachment issued by the third respondent against the appellant on28 October 2020 are in consonance with the conditions stipulated inSection 83 of the HPGST Act. The answer to this will require the courtGto embark on an interpretative journey of unravelling the substantive andprocedural content of the power. The preliminary issue is whether the 1 “third respondent’’

2 “HPGST Act’’H3 “HPGST Rules’’

High Court was right in concluding that the provisional attachment couldnot be challenged in a petition under Article 226.

4. The facts in the context of which this case arises are thus: theappellant manufactures lead according to the specific requirements ofits clients, and has a factory at village Meerpur Gurudwara, Kala-Ambin the District of Sirmaur of Himachal Pradesh. The appellant has beenin the same line of business since 2008. Upon the introduction of theGoods and Services tax[4], the appellant migrated to and was registeredunder GST - GSTIN No. O2AAKFR7402H2ZE - with effect from1 July 2017.

5. On 3 October 2018, a notice[5] was issued to the appellant underSection 74 of the HPGST Act and the Central Goods and Services TaxAct[6 ]by the third respondent requiring it to appear on 9 October 2018and produce (i) invoices pertaining to inward and outward supplies forthe years 2017-18 and 2018-19; (ii) party-wise summary/ledger of inwardsupplies; (iii) proof of payment of GST with a commodity-wise breakup;and (iv) copies of GSTR-1, GSTR-2 and GSTR-3 returns from July2017 to July 2018. The appellant appeared before the third respondentand submitted original tax invoices pertaining to inward and outwardsupplies for 2017-18 and 2018-19 by a letter dated 15 October 2018.

6. On 10 October 2018, a ‘detection case’ was registered againstGM Powertech, Kala-Amb[7], one of the suppliers of the appellant, underSection 74 of the HPGST Act and the CGST Act read with Section 20of the Integrated Goods and Services Tax Act, 2017[8]. This was througha search and seizure under Section 67 of the HPGST Act and CGSTAct. The partners of GM Powertech were arrested on 3 December2018 on the ground of raising fraudulent claims of input tax credit[9] fromfake/fictitious firms in Delhi and Kanpur.

7. The appellant received a memo byan e-mail dated 15 December2018 from the third respondent directing it to be present on 17 December 4 “GST’’

5 The respondents before this Court have stated that the said document was in fact amemo under Section 70 of HPGST Act and not a show cause notice, and it wasinadvertently mentioned that it was a notice issued under Section 74 of the HPGSTAct.

6 “CGST Act’’

7 “GM Powertech’’

8 “IGST Act’’

9 “ITC’’

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A2018 for explaining the allegedly illegal claim of ITC made during 2017-18 and 2018-19. By its letter dated 17 December 2018, the appellantcontended that it had validly claimed ITC as it fulfilled the conditionsunder Section 16 and other provisions of the HPGST Act and the CGSTAct.

B8. On 9 January 2019, a notice[10] was issued to Fujikawa Power,Bagbania, BBN Baddi, one of the customers of the appellant, forprovisionally attaching an amount of Rs. 5 crores due to the appellant,under Section 83 of the HPGST Act. On 19 January 2019, the thirdrespondent passed an order of provisional attachment in respect ofreceivables worth Rs. 5 crores due from Fujikawa Power. This orderCinadvertently referred to Sarika Industries instead of the appellant. Theappellant responded bya representation dated 29 January 2019, claiminginter alia, that the order of attachment was without affording a hearing.The appellant also claimed that on 26 December 2018, they had noticedthat the ITC had been blocked without prior notice. On 30 January 2019,Dthe notice of attachment was withdrawn by the third respondent.

9. According to the respondents, after the case of GM Powertechwas investigated, tax evasion was detected. GM Powertech was foundto have claimed and utilized ITC against invoices issued by “fake fictitiousfirms without actual movement of goods…” GM Powertech had issuedEinvoices to various recipients in Himachal Pradesh including the appellant.On 4 July 2020, the third respondent issued an intimation to the appellantunder Section 74(5) of the HPGST Act of tax ascertained as beingpayable[11], advising it to pay tax, interest and penalty of Rs. 5.03 crores.The appellant was given an opportunity to file its submissions against theascertainment of the amount by 4 August 2020.F

10. A tax liability of Rs 39.48 crores was confirmed against GMPowertech on the conclusion of the proceedings against it. GMPowertech was found to have no business establishment or property inHimachal Pradesh and the case was considered to fall into the categoryof a serious tax fraud.G

11. On 21 October 2020, the Commissioner of State Taxes andExcise, Himachal Pradesh[12 ]delegated his powers under Section 83 ofthe HPGST Act to the third respondent. In exercise of the powers 10 “SCN’’11 Form GST DRC-01AH12 “second respondent/Commissioner’’

delegated by the Commissioner, the third respondent issued two ordersof provisional attachment[13] dated 28 October 2020 attaching thereceivables of the appellant from its customers, Fujikawa Power andM/s Deepak International. The attachment order issued to FujikawaPower under Rule 159(1) of the HPGST Rules noted that it owed aboutRs. 4 crores to the appellant. The order states that the appellant wasfound to be involved in an ITC fraud amounting to Rs.5,03,82,554/-(Rs. 5.03 crores) during 2017-18 and 2018-19. The order, in its relevantpart, provides:

“In order to protect the interests of revenue and in exercise of thepowers conferred/delegated by Commissioner of the State Taxes& Excise, HP vide office order No.12-4/78-EXN-Tax-Part-278/22(a)- 26780-82 dated 21.10.2020 under section 83 of the Act, I,U.S. Rana, Joint Commissioner of State Taxes & Excise, SouthEnforcement Zone, Parwanoo, hereby provisionally attach thepayment to the extent of Rs.5,03,82,554/- of M/s Radha KrishanIndustries, Kala-Amb. Henceforth, no payment shall be allowedto be made from your company to M/s RadhaKrishan Industrieswithout the prior permission of this department / office.”

A similar order was issued to Deepak International, noting that apayment of Rs. 2.91 crores was owed by it to the appellant.

12. On 4 November 2020, the appellant filed a representation andobjections against the attachment and denied liability. By an order dated6 November 2020, the third respondent rejected the objections of theappellant. The third respondent stated that collectively payments “only”worth Rs. 4.92 crores from both of the appellant’s customers wereattached.

13. On 27 November 2020,the third respondent issued a notice toshow cause to the appellant under Section 74(1) of the HPGST Act forrecovering the ITC, interest and penalty. The notice was issued on thebasis that the appellant had claimed ITC on the supplies received fromGM Powertech and since the inward supplies made by GM Powertechwere found to be fake, the appellant’s claim of ITC was also in question.

14. The orders of provisional attachment and the order passed bythe Commissioner on 21 October 2020 delegating his powers under 13 DRC-22 vide Memo No EXN-JCSTE/SEZParwanoo/2020-21/1171 and EXN-JCSTE/SEZ Parwanoo/2020-21/1167 (“orders of provisional attachment’’)

A

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ASection 83 of the HPGST Act to the third respondent, were challengedby the appellant before the High Court in a writ petition[14 ]under Article226.

15. While dismissing the writ petition, the High Court held that itwas undisputed that the third respondent and the Divisional Commissioner,Bwho has been appointed as Commissioner (Appeals) under the GSTAct, are constituted under the HPGST Act, and therefore, it is assumedthat there is no illegal or irregular exercise of jurisdiction. The HighCourt further observed that even if there is some defect in the procedurefollowed during the hearing of the case, it does not follow that the authorityacted without jurisdiction, and though the order may be irregular orCdefective, it cannot be a nullity so long it has been passed by the competentauthority.

16. The High Court held that a writ is ordinarily not maintainablewhen there exists an alternative remedy. The exceptions to this rule arewhere the statutory authority has not acted in accordance with theDprovisions of the legislation; or acted in defiance of the fundamentalprinciples of judicial procedure or where an order has been passed inviolation of the principles of natural justice. The High Court held that itwould not entertain a petition under Article 226 of the Constitution, if anefficacious remedy is available to the aggrieved person or where theEstatute under which the action complained of has been taken contains amechanism for redressal of grievances. The High Court held that whena statutory forum of appeal exists, an appeal should “not be entertainedignoring the statutory dispensation”.

17. Noting that the appellant has an alternative and efficaciousFremedy of appeal under Section 107 of the HPGST Act, the High Courtrefused to entertain the writ petition. The High Court held that it wasfortified in this view by the fact that the writ petition filed by GMPowertech, has also not been entertained and that it has been relegatedto avail of the alternative remedy.

G18. Subsequent to the dismissal of the writ petition by the HighCourt, certain developments have taken place. On 12 January 2021, theappellant sought toinspect the files for GM Powertech and stated thatno documents in this regard had been provided to it in context of theproceedings initiated under Section 74. In response, the third respondent allowed the appellant to inspect the contents of the appellant’s case file.According to the respondent, the appellant failed to exercise this optionand did not reply to the show cause notice dated 27 November 2020.Thereafter, on 18 February 2021, an order under Section 74(9) of theHPGST Act was passed bythe third respondent confirming a tax demandof Rs. 8,30,27,218. This order under Section 74(9) has been assailed bythe appellant before the appellate authority under Section 107. Thedismissal of the petition challenging the orders of provisional attachmentis in question in the present proceedings.

A

B

B Submissions

19. Mr Puneet Bali, learned senior counsel appearing on behalf ofthe appellant addressed the following submissions:

C

B.1Maintainability of the writ petition before the HighCourt:

(i) No efficacious alternative remedy is available againstthe orders of provisional attachment passed under Section83 of the HPGST Act. The jurisdiction to pass an orderunder Section 83 is conferred on the Commissioner ofState Taxes. Although the power stands delegated tothe third respondent, the order is still deemed to be passedby the Commissioner (second respondent). Under theGST Act, an appeal against the order of the Commissionerlies before the GST Appellate Tribunal which has notbeen constituted till date. Thus, the only remedy availableto the appellant was by filing a writ petition; D

E

D

E

(ii) Reliance was placed on Whirlpool Corporation vFRegistrar of Trademarks, Mumbai[15]to argue thatan alternative remedy is not a bar to the exercise of thewrit jurisdiction of the High Court if the writ petition isfiled for enforcement of fundamental rights; where therehas been a violation of the principles of natural justice;where the order or the proceedings are wholly withoutGjurisdiction; or when the vires of an Act is challenged;

(iii) The third respondent had withdrawn the earlier ordersof provisional attachment issued in January 2019 after H

Aconsidering the representation filed by the appellant. Theimpugned orders of provisional attachment were issuedon 28 October 2020, on the same set of facts andallegations. Thus, the impugned orders of provisionalattachment amount to a review of the earlier orders bythe same respondent, which is contrary to the HPGSTBAct, as it does not provide for powers of review;

(iv) The impugned orders of provisional attachment are inviolation of the procedure established under sub-rule (5)of Rule 159 of HPGST Rules, which provides that anopportunity of being heard is to be given against theCprovisional attachment as a mandatory requirement. Inthis case, the appellant filed objections to the orders ofprovisional attachment on 4 November 2020 and theobjections were rejected by the third respondent on 6November 2020, without providing an opportunity ofDbeing heard to the appellant;

(v) The reliance placed by the High Court on the judgmentin the case of GM Powertech and others v State ofH.P[16] to state that a similar petition was not entertainedis misplaced. In that case, GM Powertech had challengedEthe order of assessment in the writ petition, while theappellant has challenged the orders of provisionalattachment made prior to the assessment. Additionally,the case of GM Powertech did not fall within theexceptions to the rule of alternate remedy; F(vi)The High Courts should not have dismissed the writpetitionon grounds of maintainability if the facts of thecase are not disputed by the State as held in RajasthanState Electricity Board v Union of India[17]; and

(vii) Reliance was placed on Calcutta Discount Co. Ltd.Gv Income Tax Officer, Companies District I,Calcutta[18 ]and Commissioner of Income Tax,Gujarat v M/s A Raman and Co.[19 ]to argue that the 16 CWP No. 5462 of 202017 2008 (5) SCC 63218 AIR 1961 SC 372H19 AIR 1968 SC 49

High Court can exercise its powers under Article 226 ofthe Constitution to issue an order prohibiting the taxofficer from proceedings to assess the liability, if theconditions precedent to the exercise of such jurisdictionhave not been met.

B.2Challenge on merits: improper invocation ofSection 83

(i) The power of provisional attachment under Section 83of the HPGST Act is a drastic power and must beexercised with extreme care and caution;

(ii) The power under Section 83 of the HPGST Act cannotbe exercised unless there is sufficient material on recordto justify that the assessee is about to dispose of thewhole or part of its property to thwart the ultimatecollection of tax;

(iii) The existence of relevant material is a pre-condition tothe formation of an opinion by the Commissioner;

(iv) The third respondent failed to show any material onrecord to indicate that the appellant is a “fly by nightoperator” or is disposing off assets to defeat thecollection of tax;

(v) The stated reason for provisional attachment- theinitiation of proceedings and passing of an order underSection 74 against the appellant’s supplier, GMPowertech-is insufficient to invoke the powers ofprovisional attachment against the appellant;

(vi) The third respondent has failed to show that there is athreat to the interests of the revenue on account of theappellant’s alleged involvement in the said ITC fraud ofGM Powertech;

(vii) The appellant has paid an output tax of Rs.12,49,90,267.14 (Rs. 12.49 crores) for the relevantperiod, which is more than the ITC of Rs. 3.25 croreswhich the appellant has allegedly taken fraudulently; A

B

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D

E

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A(viii)Even if the revenue has to attach the properties of theassessee, immovable properties must be attached.Attachment of bank accounts and trading assets shouldbe a last resort only as it paralyses the business of theassessee; B(ix)The pendency of proceedings under Sections 62, 63, 64,67, 73 or 74, of the HPGST Act, is a pre-condition forinvoking the provisions of Section 83 of the HPGST Act;(x)The provisional attachment of the appellant’s assets wasmade on 28 October 2020, beforethe proceedings wereCinitiated against the appellant under Section 74 of theHPGST Act on 27 November 2020. Thus, the provisionalattachment was made without jurisdiction and in violationof Section 83;

(xi) The provisions of Section 83 of the HPGST Act do notDprovide for making provisional attachment a second time,once the first attachment is withdrawn. Moreover, theHPGST Act, does not providethe third respondent thepower of review to review his earlier decision regardingprovisional attachment; E(xii)The first provisional attachment against the appellantwas “withdrawn completely with immediate effect” inJanuary 2019 and the same had gained finality. Thus,the impugned orders of provisional attachmentfor thesecond time, are without the authority of law and shouldbe set aside; F(xiii)Provisional attachment of 100% of the alleged amountis not permissible as per law;

(xiv) While Section 83 of the HPGST Act does not providefor the percentage of alleged amount to be attached, thepowers under this section must be guided by otherGprovisions of the Act;

(xv) Under Section 74 of the HPGST Act, once the taxdemand becomes payable, an assessee can onlychallenge this demand in appeal after depositing 10% ofthe disputed amount and the remaining demand is stayed.

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In contrast, the provisional attachment of 100% of thealleged amount even before the finalisation of the taxdemand is contrary to the legislative intent;

(xvi) Thethird respondent has taken a contradictory stand withrespect to collection of tax from the appellant. Even if itis admitted that the transaction between the appellantand GM Powertech was a fake transaction withoutactual movement of goods, it follows that the appellantcannot claim refund of ITC and nor would the appellantbe liable to pay tax on outward supplies. However, theappellant has already paid Rs. 12.49 crores of tax onoutward supplies;

(xvii) The third respondent has raised a demand ofRs. 39 crores against GM Powertech for illegally availingITC. Once the tax demand has been confirmed againstGM Powertech, refusal to grant ITC to the appellantwould amount to double collection of tax.

20. Opposing these submissions, Mr Akshay Amritanshu, learnedcounsel appearing on behalf of the State of Himachal Pradesh, submittedthat:

(i) The SLP should be dismissed as the appellant has analternate and efficacious remedy of an appeal underSection 107 of the HPGST Act. Moreover, the SLP hasbeen rendered infructuous due to the order dated 18February 2021 under Section 74(9) of the HPGST Actand the consequent appeal filed by the appellant againstthis order before the appellate authority;

(ii) In paragraph 4 of the impugned judgment, it has beennoted that the appellant had admitted that it had analternative remedy by way of an appeal under Section107 of the HPGST Act;

(iii) The delegation of powers under Section 83 of the HPGSTAct by the second respondent to the third respondentdoes not imply that there was an irregular or illegalexercise of jurisdiction by the second respondent; A

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432SUPREME COURT REPORTS[2021] 3 S.C.R.

A(iv)The order under Section 74(9) against GM Powertechhas not been challenged and has gained finality. Since ithas been found that all purchases of GM Powertechwere fraudulent, there could have been no outward saleto the appellant. Thus, the transaction between GMPowertech and appellant would also be fraudulent; B

(v) The orders of provisional attachment were issued afterthe proceedings against GM Powertech had concluded;(vi)GM Powertech had no property or businessestablishment in Himachal Pradesh. In order to avoid aCsimilar situation against the appellant and to protect theinterests of revenue, the impugned orders of provisionalattachment were passed;

(vii) The proceedings of provisional attachment under Section83 of the HPGST Act had concluded after rejection ofDthe objections filed by the appellant on 6 November 2020.The appellant participated in these proceedings and didnot challenge the orders of provisional attachment. Thus,the appellant is estopped from challenging the initiationof proceedings under Section 83 of the HPGST Act; E(viii)The impugned orders of provisional attachment werebased on a fresh set of allegations, after the proceedingsagainst GM Powertech had been concluded and it wasfound that GM Powertech had no business or propertiesin Himachal Pradesh; F(ix)After the appellant filed objections to the orders ofprovisional attachment, it was in the discretion of theCommissioner whether or not to grant an opportunity ofa hearing to the appellant;

(x) Merely because the appellant has paid Rs. 12 crores oftax, does not imply that the appellant did not engage inGthe ITC fraud;

(xi) There was no violation of the principles of natural justiceas an order of provisional attachment does not require aprior notice to be issued to the assessee; H

(xii) The necessary prerequisites for triggering Section 83 ofAthe HPGST Act were complied with;

(xiii) The appellant had not sought any prior stay on the ordersof provisional attachment and thus, it is not conceivablethat the business of the appellant has become paralyzeddue to these orders; B

(xiv) The provisional attachment is not only for the purposeof recovery, but is intended to safeguard the interests ofthe revenue while the proceedings are pending; and

(xv) The legislature did not provide any quantum or percentagefor the purpose of provisional attachment under Section83 of the Act. Thus, a comparison with other provisionsof the HPGST Act, including Section 107, is incorrect.

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C Legal Position

21. The following issues arise in the present case:

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(i) Whether a writ petition challenging the orders ofprovisional attachment was maintainable under Article226 of the Constitution before the High Court; and

(ii) If the answer to (i) is in the affirmative, whether theorders of provisional attachment constitute a validEexercise of power.

22. The appellant has advanced submissions on and adverted tothe merits of the proceedings initiated under Section 74 of the HPGSTAct. The order dated 18 February 2021 under Section 74 (9) of theHPGST Act is not in challenge before this Court. An appeal against theorder is pending before the appellate authority under Section 107 of theHPGST Act. We will not adjudicate upon the merits of the order undersection 74(9). This judgment is confined to the two issues formulatedabove.

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23. We shall now review the position of law on the questionsbefore us.

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C.1 Maintainability of writ petition before the High Court

24. The High Court has dealt with the maintainability of the petitionunder Article 226 of the Constitution. Relying on the decision of this H

ACourt in Assistant Commissioner (CT) LTU, Kakinada and othersv Glaxo Smith Kline Consumer Health Care Limited[20], the HighCourt noted that although it can entertain a petition under Article 226 ofthe Constitution, it must not do so when the aggrieved person has aneffective alternate remedy available in law. However, certain exceptionsto this “rule of alternate remedy” include where, the statutory authorityBhas not acted in accordance with the provisions of the law or acted indefiance of the fundamental principles of judicial procedure; or hasresorted to invoke provisions, which are repealed; or where an orderhas been passed in violation of the principles of natural justice. Applyingthis formulation, the High Court noted that the appellant has an alternateCremedy available under the GST Act and thus, the petition was notmaintainable.

25. In this background, it becomes necessary for this Court, todwell on the “rule of alternate remedy” and its judicial exposition. InWhirlpool Corporation v Registrar of Trademarks, Mumbai[21], aDtwo judge Bench of this Court after reviewing the case law on this point,noted:

“14. The power to issue prerogative writs under Article 226 ofthe Constitution is plenary in nature and is not limited by any otherprovision of the Constitution. This power can be exercised by theEHigh Court not only for issuing writs in the nature of habeas corpus,mandamus, prohibition, quo warranto and certiorari for theenforcement of any of the Fundamental Rights contained in PartIII of the Constitution but also for “any other purpose”.

15. Under Article 226 of the Constitution, the High Court, havingFregard to the facts of the case, has a discretion to entertain or notto entertain a writ petition. But the High Court has imposed uponitself certain restrictions one of which is that if an effective andefficacious remedy is available, the High Court would not normallyexercise its jurisdiction. But the alternative remedy has beenconsistently held by this Court not to operate as a bar in atGleast three contingencies, namely, where the writ petitionhas been filed for the enforcement of any of the FundamentalRights or where there has been a violation of the principleof natural justice or where the order or proceedings are 20AIR 2020 SC 2819H21 (1998) 8 SCC 1 (“Whirlpool’’)

A

wholly without jurisdiction or the vires of an Act ischallenged. There is a plethora of case-law on this point but tocut down this circle of forensic whirlpool, we would rely on someold decisions of the evolutionary era of the constitutional law asthey still hold the field.”

(emphasis supplied)

B

26. Following the dictum of this Court in Whirlpool (supra), inHarbanslal Sahnia v Indian Oil Corpn. Ltd.[22], this court noted that

“7. So far as the view taken by the High Court that the remedy byway of recourse to arbitration clause was available to the appellantsand therefore the writ petition filed by the appellants was liable tobe dismissed is concerned, suffice it to observe that the rule ofexclusion of writ jurisdiction by availability of an alternative remedyis a rule of discretion and not one of compulsion. In anappropriate case, in spite of availability of the alternativeremedy, the High Court may still exercise its writjurisdiction in at least three contingencies: (i) where thewrit petition seeks enforcement of any of the fundamentalrights; (ii) where there is failure of principles of naturaljustice; or (iii) where the orders or proceedings are whollywithout jurisdiction or the vires of an Act is challenged.(See Whirlpool Corpn. v. Registrar of Trade Marks [(1998)8 SCC 1].) The present case attracts applicability of the first twocontingencies. Moreover, as noted, the appellants’ dealership,which is their bread and butter, came to be terminated for anirrelevant and non-existent cause. In such circumstances, we feelthat the appellants should have been allowed relief by the HighCourt itself instead of driving them to the need of initiatingarbitration proceedings.” (emphasis supplied)

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DEF

27. The principles of law which emerge are that :

(i) The power under Article 226 of the Constitution to issuewrits can be exercised not only for the enforcement ofGfundamental rights, but for any other purpose as well;

(ii) The High Court has the discretion not to entertain a writpetition. One of the restrictions placed on the power of the 22 (2003) 2 SCC 107

H

AHigh Court is where an effective alternate remedy isavailable to the aggrieved person;

(iii) Exceptions to the rule of alternate remedy arise where (a)the writ petition has been filed for the enforcement of afundamental right protected by Part III of the Constitution;B(b) there has been a violation of the principles of naturaljustice;(c) the order or proceedings are wholly withoutjurisdiction; or (d) the vires of a legislation is challenged;

(iv) An alternate remedy by itself does not divest the High Courtof its powers under Article 226 of the Constitution in anCappropriate case though ordinarily, a writ petition shouldnot be entertained when an efficacious alternate remedy isprovided by law;

(v) When a right is created by a statute, which itself prescribesthe remedy or procedure for enforcing the right or liability,resort must be had to that particular statutory remedy beforeinvoking the discretionary remedy under Article 226 of theConstitution. This rule of exhaustion of statutory remediesis a rule of policy, convenience and discretion; and D

(vi) In cases where there are disputed questions of fact, theEHigh Court may decide to decline jurisdiction in a writpetition. However, if the High Court is objectively of theview that the nature of the controversy requires the exerciseof its writ jurisdiction, such a view would not readily beinterfered with.

F28. These principles have been consistently upheld by this Courtin Seth Chand Ratan v Pandit Durga Prasad[23], Babubhai MuljibhaiPatel v Nandlal Khodidas Barot[24] and Rajasthan SEB v. Union ofIndia,[25]among other decisions.

C.2 Provisional Attachment

G29. At this stage, we will advert to relevant precedents outliningthe contours of the power of provisional attachment and specifically, inthe context of provisions worded similarly to Section 83 of the HPGSTAct.

23 (2003) 5 SCC 39924 (1974) 2 SCC 706H25 (2008) 5 SCC 632

30. The decision of this Court in Raman Tech Process EnggCo and Anr v Solanki Traders[26]was concerned with the power of acivil court under Order 38 Rule 5 of the CPC to order an attachmentbefore judgment. In that case, proceedings had been instituted by therespondent, for the recovery of moneys due for the supply of material tothe appellant. The plaintiff moved an application under Order 38 Rule 5,for a direction to the defendants to furnish security for the suit claim andif they failed to do so, for attachment before judgment. This Courtdescribed the power of attachment before judgment in the followingterms:

“5. The power under Order 38, Rule 5 Civil Procedure Code is adrastic and extraordinary power. Such power should not beexercised mechanically or merely for the asking. It should be usedsparingly and strictly in accordance with the Rule. The purposeof Order 38, Rule 5 not to convert an unsecured debt into asecured debt. Any attempt by a plaintiff to utilize the provisions ofOrder 38 Rule 5 as a leverage for coercing the defendant to settlethe suit claim should be discouraged. Instances are not wantingwhere bloated and doubtful claims are realized by unscrupulousplaintiffs, by obtaining orders of attachment before judgment andforcing the defendants for out of court settlements, under threatof attachment.

6. A defendant is not debarred from dealing with his propertymerely because a suit is filed or about to be filed against him.Shifting of business from one premises to another premises orremoval of machinery to another premises by itself is not a groundfor granting attachment before judgment. A plaintiff should show,prima facie, that his claim is bona fide and valid and also satisfythe court that the defendant is about to remove or dispose of thewhole or part of his property, with the intention of obstructing ordelaying the execution of any decree that may be passed againsthim, before power is exercised under Order 38, Rule 5 CPC.Courts should also keep in view the principles relating to grant ofattachment before judgment [internal citation omitted].”

31. A body of precedent has emerged in the High Courts on theexercise of the power under Section 83 of the CGST Act (akin to the A

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AState GST Act[27]). The shared learning which emerges from thesedecisions of the High Court needs recognition. In Valerius Industriesv Union of India[28], the Gujarat High Court laid down the principles forthe construction of Section 83 of the SGST/CGST Act. The High Courtnoted that a provisional attachment on the basis of a subjective satisfaction,absent any cogent or credible material, constitutes malice in law. It furtherBoutlined the principles for the exercise of the power:

“52. […]

The order of provisional attachment before the assessment orderis made, may be justified if the assessing authority or any otherCauthority empowered in law is of the opinion that it is necessaryto protect the interest of revenue. However, the subjectivesatisfaction should be based on some credible materials orinformation…It is not any and every material, howsoever vagueand indefinite or distant, remote or far-fetching, which wouldwarrant the formation of the belief.D

(1) The power conferred upon the authority under Section 83of the Act for provisional attachment could be termed as avery drastic and far-reaching power. Such power shouldbe used sparingly and only on substantive weighty groundsand reasons.

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(3) The power of provisional attachment under Section 83 ofthe Act should be exercised by the authority only if there isa reasonable apprehension that the assessee may defaultthe ultimate collection of the demand that is likely to beraised on completion of the assessment. It should, therefore,Fbe exercised with extreme care and caution.

(4) The power under Section 83 of the Act for provisionalattachment should be exercised only if there issufficient material on record to justify the satisfactionthat the assessee is about to dispose of wholly or anyGpart of his/her property with a view to thwarting theultimate collection of demand and in order to achievethe said objective, the attachment should be of the 27 “SGST Act’’H28 2019 (30) GSTL 15 (Gujarat)

properties and to that extent, it is required to achievethis objective.

(5) The power under Section 83 of the Act should neitherbe used as a tool to harass the assessee nor should itbe used in a manner which may have an irreversibledetrimental effect on the business of the assessee.

(6) The attachment of bank account and trading assetsshould be resorted to only as a last resort or measure.The provisional attachment under Section 83 of theAct should not be equated with the attachment in thecourse of the recovery proceedings.

(7) The authority before exercising power under Section 83 ofthe Act for provisional attachment should take intoconsideration two things:

(i) whether it is a revenue neutral situation.

(ii) the statement of “output liability or input credit”. Havingregard to the amount paid by reversing the input tax creditif the interest of the revenue is sufficiently secured, thenthe authority may not be justified in invoking its power underSection 83 of the Act for the purpose of provisionalattachment.”(emphasis supplied)

32. In the same vein, in Jai Ambey Filament Pvt Ltd v Unionof India[29], the Gujarat High Court reiterated that the subjectivesatisfaction as to the need for provisional attachment must be based oncredible information that the attachment is necessary. This opinion cannotbe formed based on “imaginary grounds, wishful thinking, howsoeverlaudable that may be.” The High Court further held, that on his opinionbeing challenged, the competent officer must be able to show the materialon the basis of which the belief is formed.

33. In Patran Steel Rolling Mill v Assistant Commissionerof State Tax Unit 2[30], the Gujarat High Court cited two instances inwhich provisional attachment would be apposite, these being where theassessee is a ‘fly by night operator’ and if the assessee will not be ableto pay its dues after assessment.

29 2021 (44) GSTL 41 (Gujarat)30 2019 (20) GSTL 732 (Gujarat)

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A34. Similar to the decisions of the Gujarat High Court, other HighCourts have recognized the restrictive nature of the power of provisionalattachment under Section 83 of the SGST Act and the need for it to bebased on adequate substantive material. The High Courts have alsounderscored the extraordinary nature of this power, necessitating duecaution in its exercise.[31]B

A

35. The Delhi High Court, in Proex Fashion Private Limited vGovernment of India[32] outlined the following statutorily stipulatedconditions for the invocation of Section 83 of the SGST Act:

“i)Order should be passed by Commissioner; C

ii)Proceeding under Section 62 or 63 or 64 or 67 or 73 or 74should be pending;

iii)Commissioner must form an opinion;

iv) Order should be passed to protect interest of revenue;Dv)It must be necessary to attach property.”

36. In UFV India Global Education v Union of India[33], thePunjab and Haryana High Court held that pendency of proceedings underthe sections mentioned in Section 83 viz. Sections 62 or 63 or 64 or 67 or73 or 74 is the sine qua non for an order of provisional attachment to beEissued under Section 83.

37. Another case which is relevant for our purposes is the decisionof the Bombay High Court in Kaish Impex Private Limited v Unionof India[34]. In this case, the taxation authorities were enquiring intofraudulent claiming of ITC on the basis of fictitious transactions by anFexport firm in Delhi, against whom proceedings under Section 67 of theCGST Act had been initiated. On tracing the money trail, the petitionerwas summoned under Section 70 of the CGST Act and his bank accountswere provisionally attached under Section 83 of the CGST Act. On dealingwith the question of whether the bank accounts of the petitioner could31 GBindal Smelting Private Limited v Addl. Director General of GST Intelligence,2020 (34 G.S.T.L 592 (P&H); Society for Integrated Development of Urban andRural Areas v Commissioner of Income Tax, A.P. II, Hyd, 2001 (252) ITR 642;Vinod Kumar Murlidhar Prop. Of Chechani Trading Co v. State of Gujarat,Special Civil Application No. 12498 of 2020 dated 9 December 202032 WP(C) 11245 of 2020 dated 6 January 202133 2020 (43) GSTL 472H34 (2020) 6 AIR Bom R 122

be attached, when there were no pending proceedings against him andproceedings were pending against another taxable entity, the High Courtheld that the proceedings referred to under Section 83 of the Act mustbe pending against the taxable entity whose property is being attached.The High Court noted that:

“18. […] Section 83 though uses the phrase ‘pendency of anyproceedings’, the proceedings are referable to section 62, 63, 64,67, 73 and 74 of the Act and none other. The bank account ofthe taxable person can be attached against whom theproceedings under the sections mentioned above areinitiated. Section 83 does not provide for an automaticextension to any other taxable person from an inquiryspecifically launched against a taxable person under theseprovisions. Section 83 read with section 159(2), and the formGST DRC-22 show that a proceeding has to be initiated against aspecific taxable person, an opinion has to be formed that to protectthe interest of Revenue an order of provisional attachment isnecessary. The format of the order, i.e. the form GST DRC-22 also specifies the particulars of a registered taxableperson and which proceedings have been launched againstthe aforesaid taxable person indicating a nexus betweenthe proceedings to be initiated against a taxable personand provisional attachment of bank account of such taxableperson.” (emphasis supplied)

C.3 Delegation of authority under CGST Act

38. The learned counsel for the respondent State, during the courseof his submissions, has also sought to justify the delegation of powers bythe Commissioner to the Joint Commissioner by way of the impugnednotification dated 21 October 2020 for the purpose of attachment ofproperties under Section 83 of the HPGST Act. In this regard, reliancewas placed on Nathanlal Maganlal Chauhan v State of Gujarat,[35]where the Gujarat High Court was considering the validity of a notificationby which the Commissioner of State Tax had delegated all the functionsunder the SGST Act to the Special Commissioner and AdditionalCommissioners of State Tax. In rejecting a challenge to this notification,the High Court held that:

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“39. As pointed out by the Supreme Court in the case of SahniSilk Mills [internal citation omitted], the courts should normallyberigorous while requiring the power to be exercised by thepersons or the bodies authorized by the statutes. As noted above,it is essential that the delegated power should be exercised by theauthority upon whom it is conferred and by no one else. At thesame time, in the present administrative setup, the extreme judicialaversion to delegation should not be carried to an extreme. Thereis only one Commissioner of State Tax in the State of Gujarat, andhaving regard to the enormous functions and duties to be dischargedunder the new tax regime, he has been empowered to delegatehis powers to the Special Commissioner of State Tax and theAdditional Commissioners of State Tax.

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40. We take notice of the fact that the delegation has beenauthorized expressly under Section 5(3) of the Act. We wouldhave definitely interfered if the Special Commissioner or theAdditional Commissioners would have further delegated the powerto officers subordinate to them. Such is not the case over here.

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41. In the impugned notification it has been stated that the functionsdelegated shall be under the overall supervision of theCommissioner. When the Commissioner stated that hisEfunctions were delegated subject to his overall supervision,it did not mean or should not be construed as if he reservedto himself the right to intervene to impose his own decisionupon his delegate. The words in the last part of the impugnednotification would mean that the Commissioner couldcontrol the exercise administratively as to the kinds ofFcases in which the delegate could take action. In otherwords, the administrative side of the delegate’s duties wereto be the subject of control and revision but not the essentialpower to decide, whether to take action or not in a particularcase. Once the powers are delegated for the purpose ofGSection 69 of the Act, the subjective satisfaction, or rather,the reasonable belief should be that of the delegatedauthority.”

(emphasis supplied)

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39. The essence of the present case lies in how the power toorder a provisional attachment under Section 83 of the HPGST Act isconstrued. Before interpreting it, the provision is extracted below forconvenience of reference:

“83. Provisional attachment to protect revenue in certain cases. -(1) Where during the pendency of any proceedings under section62 or section 63 or section 64 or section 67 or section 73 or section74, the Commissioner is of the opinion that for the purpose ofprotecting the interest of the Government revenue, it is necessaryso to do, he may, by order in writing attach provisionally anyproperty, including bank account, belonging to the taxable personin such manner as may be prescribed.

(2) Every such provisional attachment shall cease to have effectafter the expiry of a period of one year from the date of the ordermade under sub-section (1).”

40. The marginal note to Section 83 provides some indication ofParliamentary intent. Section 83 provides for “provisional attachment toprotect revenue in certain cases”. The first point to note is that theattachment is provisional – provisional in the sense that it is in aid ofsomething else. The second point to note is that the purpose is to protectthe revenue. The third point is the expression “in certain cases” whichshows that in order to effect a provisional attachment, the conditionswhich have been spelt out in the statute must be fulfilled. Marginal notes,it is well-settled, do not control a statutory provision but provide someguidance in regard to content. Put differently, a marginal note indicatesthe drift of the provision. With these prefatory comments, the judgmentmust turn to the essential task of statutory construction. The language ofthe statute has to be interpreted bearing in mind that it is a taxing statutewhich comes up for interpretation. The provision must be construed onits plain terms. Equally, in interpreting the statute, we must have regardto the purpose underlying the provision. An interpretation whicheffectuates the purpose must be preferred particularly when it is supportedby the plain meaning of the words used.

41. Sub-Section (1) of Section 83 can be bifurcated into severalparts. The first part provides an insight on when in point of time or atwhich stage the power can be exercised. The second part specifies the A

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Aauthority to whom the power to order a provisional attachment isentrusted. The third part defines the conditions which must be fulfilledto validate the power or ordering a provisional attachment. The fourthpart indicates the manner in which an attachment is to be leveled. Thefinal and the fifth part defines the nature of the property which can beattached. Each of these special divisions which have been explainedBabove is for convenience of exposition. While they are not watertightcompartments, ultimately and together they aid in validating anunderstanding of the statute. Each of the above five parts is nowinterpreted and explained below:

(i) The power to order a provisional attachment is entrustedCduring the pendency of proceedings under any one of sixspecified provisions: Sections 62, 63, 64, 67, 73 or 74. Inother words, it is when a proceeding under any of theseprovisions is pending that a provisional attachment can beordered;D

(ii) The power to order a provisional attachment has been vestedby the legislature in the Commissioner;

(iii) Before exercising the power, the Commissioner must be “ofthe opinion that for the purpose of protecting the interest ofthe government revenue, it is necessary so to do”;E

(iv) The order for attachment must be in writing;

(v) The provisional attachment which is contemplated is of anyproperty including a bank account belonging to the taxableperson; andF(vi)The manner in which a provisional attachment is levied mustbe specified in the rules made pursuant to the provisions ofthe statute.

42. Under sub-Section (2) of Section 83, a provisional attachmentceases to have effect upon the expiry of a period of one year of theGorder being passed under sub-Section (1). The power to levy a provisionalattachment has been entrusted to the Commissioner during the pendencyof proceedings under Sections 62, 63, 64, 67, 73 or as the case may be,Section 74. Section 62 contains provisions for assessment for non-filingof returns. Section 63 provides for assessment of unregistered persons.Section 64 contains provisions for summary assessment. Section 67H

elucidates provisions for inspection, search and seizure. Before we dwellon Section 74, it would be material to note the provisions of Section 70which are extracted below:

“70. Power to summon persons to give evidence and producedocuments. - (1) The proper officer under this Act shall havepowers to summon any person whose attendance he considersnecessary either to give evidence or to produce a document orany other thing in any inquiry in the same manner, as provided inthe case of a civil court under the provisions of the Code of CivilProcedure, 1908, (5 of 1908).

(2) Every such inquiry referred to in sub-section (1) shall bedeemed to be a “judicial proceedings” within the meaning of section193 and section 228 of the Indian Penal Code, 1860, (45 of 1860).”

43. A power is conferred by Section 70 upon the proper officer tosummon a person whose attendance is considered necessary to giveevidence or produce a document or any other things in any enquiry inthe manner which is provided in the case of a civil court under the CPC.

44. Section 74 is extracted below:

“74.Determination of tax not paid or short paid or erroneouslyrefunded or input tax credit wrongly availed or utilised byreason of fraud or any wilful mis-statement or suppressionof facts. –

(1) Where it appears to the proper officer that any tax has notbeen paid or short paid or erroneously refunded or whereinput tax credit has been wrongly availed or utilised by reasonof fraud, or any wilful mis-statement or suppression of factsto evade tax, he shall serve notice on the person chargeablewith tax which has not been so paid or which has been soshort paid or to whom the refund has erroneously been made,or who has wrongly availed or utilised input tax credit,requiring him to show cause as to why he should not paythe amount specified in the notice alongwith interest payablethereon under section 50 and a penalty equivalent to thetax specified in the notice.

(2) The proper officer shall issue the notice under sub-section(1) at least six months prior to the time limit specified insub-section (10) for issuance of order.

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A(3)Where a notice has been issued for any period undersub-section (1), the proper officer may serve a statement,containing the details of tax not paid or short paid orerroneously refunded or input tax credit wrongly availed orutilised for such periods other than those covered undersubsection (1), on the person chargeable with tax.B

(4) The service of statement under sub-section (3) shall bedeemed to be service of notice under sub-section (1) ofsection 73, subject to the condition that the grounds reliedupon in the said statement, except the ground of fraud, orany wilful mis-statement or suppression of facts to evadeCtax, for periods other than those covered under sub-section

(1) are the same as are mentioned in the earlier notice.

(5) The person chargeable with tax may, before service of noticeunder sub-section (1), pay the amount of tax alongwithinterest payable under section 50 and a penalty equivalentDto fifteen per cent of such tax on the basis of his ownascertainment of such tax or the tax as ascertained by theproper officer and inform the proper officer in writing ofsuch payment.

(6) The proper officer, on receipt of such information, shall notEserve any notice under sub-section (1), in respect of thetax so paid or any penalty payable under the provisions ofthis Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the amountpaid under sub-section (5) falls short of the amount actuallyFpayable, he shall proceed to issue the notice as providedfor in sub-section (1) in respect of such amount which fallsshort of the amount actually payable.

(8) Where any person chargeable with tax under sub-section(1) pays the said tax alongwith interest payable under sectionG50 and a penalty equivalent to twenty five per cent of suchtax within thirty days of issue of the notice, all proceedingsin respect of the said notice shall be deemed to be concluded.

(9) The proper officer shall, after considering the representation,if any, made by the person chargeable with tax, determine H

the amount of tax, interest and penalty due from such personand issue an order.

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(10) The proper officer shall issue the order under sub-section(9) within a period of five years from the due date forfurnishing of annual return for the financial year to whichthe tax not paid or short paid or input tax credit wronglyBavailed or utilised relates to or within five years from thedate of erroneous refund.

(11) Where any person served with an order issued undersub-section (9) pays the tax along with interest payablethereon under section 50 and a penalty equivalent to fiftyper cent of such tax within thirty days of communication ofthe order, all proceedings in respect of the said notice shallbe deemed to be concluded.

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(i) the expression “all proceedings in respect of the said notice”shall not include proceedings under section 132; and

(ii) where the notice under the same proceedings is issued tothe main person liable to pay tax and some other persons,and such proceedings against the main person have beenconcluded under section 73 or section 74, the proceedingsagainst all the persons liable to pay penalty under sections122, 125, 129 and 130 are deemed to be concluded.

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Explanation-2. - For the purpose of this Act, the expression“suppression” shall mean non-declaration of facts orinformation which a taxable person is required to declare inthe return, statement, report or any other documentfurnished under this Act or the rules made thereunder, orfailure to furnish any information on being asked for, inwriting, by the proper officer.”

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45. Sub- Section (1) of Section 74 empowers the proper officer toserve a notice on a person chargeable with tax where it appears that

(i) Any tax has not been paid;

(ii) Tax has been short paid;

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(iv) Input tax credit has been wrongly availed or utilized by reasonof fraud, willful statement or suppression of fact to evadetax.

46. Sub-Section (1) enables the proper officer to issue a notice toBshow cause for the recovery of tax, interest payable under Section 50and the penalty equivalent to the amount of tax specified in the notice.Sub-Sections (2), (3) and (4) lay down procedural provisions which areto be followed by the proper officer. Secondly, under sub-Section (5) ofSection 74, before the service of a notice under sub-Section (1), theCperson who is chargeable with tax may pay the tax together with interestand a penalty equivalent to fifteen per cent of the tax on the basis oftheir own ascertainment of the tax or as ascertained by the proper officerand inform the proper officer of the payment having been made uponreceipt of the information. Sub-Section (6) stipulates that the properofficer shall not serve any notice under sub-Section (1) in respect of theDtax so paid or any penalty payable under the provisions of the Act orthe Rules.

47. On the other hand, when the proper officer is of the opinionthat the amount which has been paid under sub-Section (5) falls short ofthe amount which is actually payable, a notice under sub-Section (1) isEto issue for the amount which falls short of what is actually payable.Sub-Section (8) contains a stipulation that where a person who ischargeable with tax under sub-Section (1) pays the tax together withinterest and a penalty of twenty-five per cent of the tax within thirtydays of the issuance of the notice, all proceedings in respect of theFnotice shall be deemed to be concluded. Under sub-Section (9), the properofficer after considering the representation of the person chargeable totax is authorized to determine the amount of tax, interest and penaltydue and to issue an order. A period of five years is stipulated bysub-Section (10) for the issuance of an order in sub-Section (9).Sub-Section (11) stipulates that upon service of an order underGsub-Section (9), all proceedings in respect of the notice shall be deemedto be concluded upon the person paying the tax with interest under Section50 and a penalty equivalent to 50 per cent of the tax within thirty days ofthe communication of an order. These provisions indicate howsub-Sections (5), (8) and (11) operate at different stages of the process.

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48. Now in this backdrop, it becomes necessary to emphasizethat before the Commissioner can levy a provisional attachment, theremust be a formation of “the opinion” and that it is necessary “so to do”for the purpose of protecting the interest of the government revenue.The power to levy a provisional attachment is draconian in nature. Bythe exercise of the power, a property belonging to the taxable personmay be attached, including a bank account. The attachment is provisionaland the statute has contemplated an attachment during the pendency ofthe proceedings under the stipulated statutory provisions noticed earlier.An attachment which is contemplated in Section 83 is, in other words, ata stage which is anterior to the finalization of an assessment or theraising of a demand. Conscious as the legislature was of the draconiannature of the power and the serious consequences which emanate fromthe attachment of any property including a bank account of the taxableperson, it conditioned the exercise of the power by employing specificstatutory language which conditions the exercise of the power. Thelanguage of the statute indicates first, the necessity of the formation ofopinion by the Commissioner; second, the formation of opinion beforeordering a provisional attachment; third the existence of opinion that it isnecessary so to do for the purpose of protecting the interest of thegovernment revenue; fourth, the issuance of an order in writing for theattachment of any property of the taxable person; and fifth, the observanceby the Commissioner of the provisions contained in the rules in regard tothe manner of attachment. Each of these components of the statute areintegral to a valid exercise of power. In other words, when the exerciseof the power is challenged, the validity of its exercise will depend on astrict and punctilious observance of the statutory pre-conditions by theCommissioner. While conditioning the exercise of the power on theformation of an opinion by the Commissioner that “for the purpose ofprotecting the interest of the government revenue, it is necessary so todo”, it is evident that the statute has not left the formation of opinion toan unguided subjective discretion of the Commissioner. The formationof the opinion must bear a proximate and live nexus to the purpose ofprotecting the interest of the government revenue.

49. By utilizing the expression “it is necessary so to do” thelegislature has evinced an intent that an attachment is authorized notmerely because it is expedient to do so (or profitable or practicable forthe revenue to do so) but because it is necessary to do so in order to AB

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Aprotect interest of the government revenue. Necessity postulates thatthe interest of the revenue can be protected only by a provisionalattachment without which the interest of the revenue would standdefeated. Necessity in other words postulates a more stringentrequirement than a mere expediency. A provisional attachment underSection 83 is contemplated during the pendency of certain proceedings,Bmeaning thereby that a final demand or liability is yet to be crystallized.An anticipatory attachment of this nature must strictly conform to therequirements, both substantive and procedural, embodied in the statuteand the rules. The exercise of unguided discretion cannot be permissiblebecause it will leave citizens and their legitimate business activities toCthe peril of arbitrary power. Each of these ingredients must be strictlyapplied before a provisional attachment on the property of an assessescan be levied. The Commissioner must be alive to the fact that suchprovisions are not intended to authorize Commissioners to makepreemptive strikes on the property of the assessee, merely becauseproperty is available for being attached. There must be a valid formationDof the opinion that a provisional attachment is necessary for the purposeof protecting the interest of the government revenue.

50. These expressions in regard to both the purpose and necessityof provisional attachment implicate the doctrine of proportionality.Proportionality mandates the existence of a proximate or live link betweenEthe need for the attachment and the purpose which it is intended tosecure. It also postulates the maintenance of a proportion between thenature and extent of the attachment and the purpose which is sought tobe served by ordering it. Moreover, the words embodied in sub-Section(1) of Section 83, as interpreted above, would leave no manner of doubtFthat while ordering a provisional attachment the Commissioner must inthe formation of the opinion act on the basis of tangible material on thebasis of which the formation of opinion is based in regard to the existenceof the statutory requirement. While dealing with a similar provisioncontained in Section 45[36] of the Gujarat Value Added Tax Act 2003 , oneof us (Hon’ble Mr Justice MR Shah) speaking for a Division Bench ofG

36 Section 45 (1) provides as follows:

“45. Provisional attachment. - (1) Where during the tendency of any proceedings ofassessment or reassessment of turnover escaping assessment, the Commissioner is ofthe opinion that for the purpose of protecting the interest of the Government revenue,it is necessary so to do, he may by order in writing attach provisionally any propertyHbelonging to the dealer in such manner as may be prescribed.”

the Gujarat High Court in Vishwanath Realtor v State of Gujarat[37]observed:

“8.3. Section 45 of the VAT Act confers powers upon theCommissioner to pass the order of provisional attachment of anyproperty belonging to the dealer during the pendency of anyproceedings of assessment or reassessment of turnover escapingassessment. However, the order of provisional attachment canbe passed by the Commissioner when the Commissioner is of theopinion that for the purpose of protecting the interest of theGovernment Revenue, it is necessary so to do. Therefore, beforepassing the order of provisional attachment, there must be anopinion formed by the Commissioner that for the purpose ofprotecting the interest of the Government Revenue during thependency of any proceedings of assessment or reassessment, itis necessary to attach provisionally any property belonging to thedealer. However, such satisfaction must be on some tangiblematerial on objective facts with the Commissioner. In agiven case, on the basis of the past conduct of the dealerand on the basis of some reliable information that the dealeris likely to defeat the claim of the Revenue in case anyorder is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or saleand/or dispose of the properties and in case after theconclusion of the assessment/reassessment proceedings,if there is any tax liability, the Revenue may not be in aposition to recover the amount thereafter, in such a caseonly, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers underSection 45 of the VAT Act.”

(emphasis supplied)

51. We adopt the test of the existence of “tangible material”. Inthis context, reference may be made to the decision of this Court in theCommissioner of Income Tax v Kelvinator of India Limited[38].Mr Justice SH Kapadia (as the learned Chief Justice then was) whileconsidering the expression “reason to believe” in Section 147 of theIncome Tax Act 1961 that income chargeable to tax has escaped 37 Special Civil No. 7210 of 2015, decided on 29 April 2015

38 (2010) 2 SCC 723

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Aassessment inter alia by the omission or failure of the assessee to disclosefully and truly all material facts necessary for the assessment of thatyear, held that the power to reopen an assessment must be conditionedon the existence of “tangible material” and that “reasons must have alive link with the formation of the belief”. This principle was followedsubsequently in a two judge Bench decision in Income Tax Officer,BWard No. 162 (2) v Techspan India Private Limited[39]. Whileadverting to these decisions we have noticed that Section 83 of theHPGST Act uses the expression “opinion” as distinguished from “reasonsto believe”. However for the reasons that we have indicated earlier weare clearly of the view that the formation of the opinion must be basedCon tangible material which indicates a live link to the necessity to order aprovisional attachment to protect the interest of the government revenue.52. Rule 159 prescribes modalities for effecting a provisionalattachment of property. Rule 159 provides thus :

“159. Publication of information in respect of persons inDcertain cases. - (1) If the Commissioner, or any other officerauthorised by him in this behalf, is of the opinion that it is necessaryor expedient in the public interest to publish the name of any personand any other particulars relating to any proceedings or prosecutionunder this Act in respect of such person, it may cause to beEpublished such name and particulars in such manner as it thinksfit.

(2) No publication under this section shall be made in relation toany penalty imposed under this Act until the time for presentingan appeal to the Appellate Authority under section 107 has expiredFwithout an appeal having been presented or the appeal, ifpresented, has been disposed of.

Explanation. - In the case of firm, company or other associationof persons, the names of the partners of the firm, directors,managing agents, secretaries and treasurers or managers of theGcompany, or the members of the association, as the case may be,may also be published if, in the opinion of the Commissioner, orany other officer authorised by him in this behalf, circumstancesof the case justify it.”

53. Under sub-Rule (1) of Rule 159, an attachment of property bythe Commissioner under Section 83 is effected by passing an ordermentioning the details of the property which is attached. The form inwhich the order is to be made is prescribed in form GST DRC-22. Thisform is extracted below:

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A54. Under sub-Rule (5) of Rule 159, the person whose property isattached is allowed seven days’ time to file an objection that the propertyattached “was or is not liable to attachment”. Sub-Rule (5) stipulatesthat the Commissioner may “after affording an opportunity of being heardto the person filing the objection” release the property by an order inform GSTDRC-23. Similarly, under sub-Rule (6) upon being satisfiedBthat the property was or is no longer liable to be attached, theCommissioner is empowered to release the property by issuing an orderinForm GST DRC- 23 for the releasing of the property under attachment.The Form is extracted below :

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55. A significant aspect of Rule 159(5) is that upon the levy of aHprovisional attachment, the person whose property is attached is empowered to file an objection within seven days on the ground that theproperty was or is not liable to attachment. In using the expression “wasor is no longer liable for attachment”, the delegate of the legislature hascomprehended two alternative situations. The first, evidenced by theuse of the words “was” indicates that the property was on the date ofthe attachment in the past not liable to be attached. That is the reasonfor the use of the past tense “was”. The expression “is not liable toattachment indicates a situation in praesenti. Even if the property, arguably,was validly attached in the past, the person whose property has beenattached may demonstrate to the Commissioner that it is not liable to beattached in the present.

56. The second significant aspect of sub-Rule (5) is the mandatoryrequirement of furnishing an opportunity of being heard to the personwhose property is attached. This is inconsonance with the principles ofnatural justice and ensures that a fair procedure is observed. Sub-Rule(5) provides for a post- provisional attachment right of:

(i) Submitting an objection to the attachment;

(ii) An opportunity of being heard.

Sub- Rule (5) contains clear language to the effect that a personwhose property is attached is entitled to two procedural entitlements:first, the right to submit an objection on the ground that the property wasnot or is not liable to be attached; and second, an opportunity of beingheard to the person filing an objection. This is a clear indicator that inaddition the filing of an objection, the person whose property is attachedis entitled to an opportunity of being heard. It is not open to theCommissioner, as has been stated in the present case, to hold the viewthat the only safeguard under sub-Rule 5 is to submit an objection withoutan opportunity of a personal hearing. Such a construction would be plainlycontrary to sub-Rule 5 which contemplates both the submission of anobjection to the attachment and an opportunity of being heard. Theopportunity of being heard can be availed of as a matter of right by theperson whose property is attached. Both the right to submit an objectionand to be afforded an opportunity of being heard are valuable safeguards.The consequence of a provisional attachment is serious. It displaces theperson whose property is attached from dealing with the property. Wherea bank account is attached, it prevents the person from operating theaccount. A business entity whose bank account is attached is seriouslyprejudiced by the inability to utilize the proceeds of the account for the A

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Apurpose of business. The dual procedural safeguards inserted in sub-Rule 5 of Rule 159 demand strict compliance.

The Commissioner who hears the objections must pass a reasonedorder either accepting or rejecting the objections. To allow theCommissioner to get by without passing a reasoned order will make hisBdecision subjective and defeat the purpose of subjecting it to judicialscrutiny. The Commissioner must deal with the objections and pass areasoned order indicating whether, and if not, why the objections are notbeing accepted. Sub- Rule 6 of Rule 159 allows for the release of aproperty which either was or is no longer liable for attachment. Theform in which such an order has to be passed, namely form GST DRC-C23, states that “now there is no such proceeding pending against thedefaulting person which warrants attachment” of the account or as thecase may be, the property. Sub-Rules 5 and 6 do not expresslycontemplate a situation in which the person whose property is attachedcan object on the ground that the attachment is in excess of the amountDlikely to be due for which proceedings have been launched under theAct. Nor does it provide for a specific opportunity to the taxable personto offer any alternative form of security in lieu of the attachment. Suchan opportunity must be read in to the provision to allow for a fair workingin practice. Whether any alternative security that is furnished by thetaxable person should be accepted and if so, its sufficiency, is a matterEfor the Commissioner to determine. Undoubtedly, the taxable personmay not have a right to demand that only a particular form of securitymust be accepted. The Commissioner has to decide whether the formof security offered would secure the interest of the revenue. Where thetaxable person sets up the plea that the extent of the attachment isFexcessive or where the taxable person offers an alternative form ofsecurity, these are also matters which ought to be determined by theCommissioner in the exercise of powers under Rule 159(5). The scopeof objection can also extend to the nature of the property which is beingprovisionally attached.

GNow, it is in this backdrop that we proceed to a determination ofwhether the petition under Article 226 was maintainable and if it was,whether Commissioner exercised the powers under Section 83 read withRule 159 in accordance with law.

57. The material facts for making this determination need to beHrecapitulated. On 3 October 2018, a memo was issued under Section 70

(incorrectly referring to the provisions of Section 74) by the JointCommissioner of State Taxes and Excise directing the appellant to appearon 9 October 2018 along with specific documents pertaining to the years2017-18 and 2018-19. The notice stated that in the event that the appellantfailed to appear, the Commissioner would be constrained to issue a noticeto show cause under Section 74(1). On 9 October 2018, two partners ofthe appellant attended the hearing. On 10 October 2018, a ‘detectioncase’ under Section 74 of the HPGST Act and CGST Act read withSection 20 of the IGST Act was initiated against a supplier of theappellant, GM Powertech by a search and seizure operation conductedunder Section 67. On 15 October 2018, the partners of the appellantattended the case hearing and provided certain documents which wererequired by the department. The partners of GM Powertech werearrested under the provisions of Sections 69 and 132 of the HPGST Acton 3 December 2018, on the allegation that they had made fraudulentclaims of ITC from fake/fictitious firms of Delhi and Kanpur. On 15December 2018, the representatives of the appellant were directed toremain present on 17 December 2018 for explaining the allegedly illegalclaim of ITC for 2017-18 and 2018-19. A representative of the appellantattended the enquiry on 17 December 2018. On 9 January 2019, anorder of provisional attachment was issued under Section 83 by the JointCommissioner of State Taxes and Excise by which a payment of Rs 5crores due to the appellant from M/s Fujikawa Power was attached onthe ground that the appellant had availed of ITC of Rs 3.25 crores againstthe purchase of goods valued at about Rs 21 crores from GM Powertechfor 2017-18 and 2018-19 and a case of GST fraud had been institutedagainst the alleged supplier. On 19 January 2019, Form GST DRC-22was issued to Fujikawa Power regarding the attachment of Rs 5 crores.On 29 January 2019, the appellant made a representation under Rule159(5) for unblocking the credit and releasing the amount which wasprovisionally attached. On 30 January 2019, the order of provisionalattachment was withdrawn completely with immediate effect. On 9 April2019 and 5 July 2019 a representative of the appellant attended the casehearing. On 4 July 2020, an intimation was furnished to the appellant ofthe tax ascertained as payable under Section 74(5). According to theintimation, the appellant received among other items, lead ingots fromGM Powertech during FY 2017-18 and 2018-19 and investigation hadrevealed that ITC had been fraudulently availed of by the supplier on thebasis of the invoices of fake firms. The appellant had also availed of A

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AITC due to inward supplies from GM Powertech. On 3 and 5 August2020, the appellant filed its submissions under Rule 142(2) (a) againstthe proposed liability. On 6 October 2020, an order was passed underSection 74(9) against GM Powertech confirming a demand of Rs 39.48crores for 2017-18 and 2018-19. The proceedings concluded that GMPowertech hadB

(i) No business establishment or property in Himachal Pradesh;and

(ii) No security or surety.

58. On 21 October 2020, the Commissioner of State Taxes andCExcise, Himachal Pradesh delegated, in pursuance of the provisions ofSection 5(3) the powers vested under Section 83(1) inter alia to theJoint Commissioner of State Taxes and Excise. On 28 October 2020, afresh order was issued under Section 83 stating that proceedings wereinitiated against the appellant under Section 74 since it was found to beDinvolved in an ITC fraud of Rs 5.03 crores during 2017-18 and 2018-19.Since a GST fraud case had been initiated against GM Powertech onwhom a demand had been raised, the ITC claimed by the appellantagainst supplies effected by GM Powertech was held to be inadmissibleresulting in a provisional attachment of the payments due to the appellantto the extent of Rs 5,03,82,554/-. A similar order was issued on 28 OctoberE2020 under Section 83 to M/s Deepak International Limited. The appellantsubmitted a detailed representation under Rule 159(5) to the JointCommissioner. The representation was rejected on 6 November 2020without affording an opportunity of being heard. Thereafter, on 27November 2020, a notice to show cause was issued to the appellantFunder Section 74(1) recording that the appellant had shown inward suppliesof lead ingots from GM Powertech and had claimed and utilized ITC onthat basis. However, all suppliers from whom GM Powertech had showninward supplies of goods were found to be fictitious, fake and non-existent.The GST registration of GM Powertech had been cancelled and by anorder under Section 74(9), an additional demand of Rs 39.48 crores wasGconfirmed. The appellant was called upon to show cause as to whyinterest, tax and penalty should not be imposed.The appellant institutedwrit proceedings before the Himachal Pradesh High Court inter aliafor

(i) Challenging the delegation by the Commissioner on 21 OctoberH2020;

(ii) The proceedings initiated under Section 83; and

(iii) Revocation of the provisional attachment.

The writ petition was dismissed by the High Court on the groundthat the appellant had an alternative remedy available in law.

59. The sole ground which has weighed with the High Court inholding that the writ proceedings were not maintainable is that “the writpetitioner has not only (an) efficacious remedy, rather alternative remedyunder the GST Act”. In addition, the High Court has observed that thewrit petition filed by GM Powertech against whom similar allegationshave been leveled had been dismissed by relegating it to the pursuit ofan alternative remedy. The learned senior counsel appearing on behalfof the appellant submitted that GM Powertech had been relegated to thepursuit of an alternative remedy since an order of assessment had beenpassed against it. However, insofar as the appellant is concerned, thewrit proceedings were instituted to challenge the levy of a provisionalattachment under Section 83 and there is no alternative remedy providedunder the Act for challenging an order under Section 83.

60. Section 107 of the HPGST Act 2017 is incorporated in ChapterXVIII which deals with appeals and revisions. Section 107(1) providesas follows:

“107. Appeals to Appellate Authority.—(1) Any person aggrievedby any decision or order passed under this Act or the CentralGoods and Services Tax Act, 2017 (No.12 of 2017) by anadjudicating authority may appeal to such Appellate Authority asmay be prescribed within three months from the date on whichthe said decision or order is communicated to such person.”

61. Sub-Section (1) of Section 107 makes it abundantly clear thatan appeal to the Appellate Authority is available against a decision ororder passed under the HPGST Act or CGST Act by an “adjudicatingauthority”. Sub-Section (2) similarly provides that:

(2) The Commissioner may, on his own motion, or upon requestfrom the Commissioner of central tax, call for and examine therecord of any proceeding in which an adjudicating authority haspassed any decision or order under this Act or the Central Goodsand Services Tax Act, 2017 (No.12 of 2017) for the purpose ofsatisfying himself as to the legality or propriety of the said decision A

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Aor order and may, by order, direct any officer subordinate to himto apply to the Appellate Authority within six months from thedate of communication of the said decision or order for thedetermination of such points arising out of the said decision ororder as may be specified by the Commissioner in his order.

BSub-Section (2) confers a revisional power on the Commissionerin regard to the legality or propriety of a decision or order passed by anadjudicating authority. The expression ‘adjudicating authority’ is definedby Section 2(4) in the following terms:

C“(4) “adjudicating authority” means any authority, appointed orauthorized to pass any order or decision under this Act, but doesnot include the Commissioner, Revisional Authority, the Authorityfor Advance Ruling, the Appellate Authority for Advance Ruling,the Appellate Authority and the Appellate Tribunal;”

D62. From the above definition, it is evident that the expression‘adjudicating authority’ does not include among other authorities, theCommissioner. In the present case, the narration of facts indicates thaton 21 October 2020, the Commissioner had in exercise of his powersunder Section 5(3) made a delegation inter alia to the Joint Commissionerof State Taxes and Excise in respect of the powers vested under SectionE83(1). The Joint Commissioner, in other words, was exercising the powerswhich are vested in the Commissioner under Section 83(1) to order aprovisional attachment in pursuance of the delegation exercised on21 October 2020. This being the position, clearly the order passed by theJoint Commissioner as a delegate of the Commissioner was not subjectFto an appeal under Section 107(1) and the only remedy that was availablewas in the form of the invocation of the writ jurisdiction under Article226 of the Constitution. The High Court was, therefore, clearly in errorin declining to entertain the writ proceedings.

63. The entire procedure which has been followed by the JointGCommissioner in the present case is contrary to the provisions containedin Section 83 read with Rule 159. The Joint Commissioner (acting onbehalf of the Commissioner) has proceeded on an understanding that anopportunity of being heard to the person whose property is provisionallyattached is a matter of discretion, the discretion of being that of theH

Commissioner. In the counter affidavit which has been filed by theCommissioner it has been stated that:

“17. It is submitted that the petitioner duly participated in theproceedings initialed u/Sec. 83 of the HPGST Act 2017 and alsofiled its objections. Once the petitioner filed its objections and thesame were rejected on 06.11.2020 then the petitioner could nothave turned back and challenged the initiation of proceedings u/Sec. 83 or the HPGST Act, 2017, only because the proceedingsdid not end up favoring of the Petitioner.

18. It is reiterated that the fresh order of attachment passed on28.10.2020 was not based on the same set or allegations.

19. It is further submitted that once the Petitioner had filedobjections, then any opportunity of hearing was the discretion ofthe Ld. Commissioner.”

64. This understanding of the Commissioner is in the teeth of andclearly contrary to the provisions of Rule 159(5). Rule 159(5), as explainedearlier contemplates two safeguards to the person whose property isattached. Firstly, it permits such a person to submit objections to theorder of attachment on the ground that the property was or is not liablefor attachment. Secondly, Rule 159(5) posits an opportunity of beingheard. Both requirements are cumulative. The Commissioner’sunderstanding that an opportunity of being heard was at the discretion ofthe Commissioner is therefore flawed and contrary to the provisions ofRule 159(5). There has, hence, been a fundamental breach of theprinciples of natural justice.

65. On 28 October 2020, the following order was recorded in thefile noting by the Joint Commissioner purporting to justify the levy of aprovisional attachment :

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66. Ex facie, the above order passed by the Joint Commissionerdoes not indicate any basis for the formation of the opinion that the levyof a provisional attachment was necessary to protect the interest of thegovernment revenue. The order in the file noting refers to the fact thatFthe case of GM Powertech had been decided under Section 74 resultingin an additional demand of Rs. 39 crores on account of a fraudulentclaim of ITC for FY 2017-18 and 2018-19. GM Powertech is alleged tohave passed on the ITC to various Registered Tax Persons[40] situated inHimachal Pradesh by issuing invoices inter alia to the appellant during2018-19 for which a case under Section 74 had been initiated. The orderGrecords that the appellant had claimed ITC of Rs 3.25 crores on thestrength of the invoices issued by GM Powertech. The order merelyrecords that the submissions which were urged by the appellant on 5August 2020 “are not sustainable”. “In view of the facts involved in the H40 “RTP’’

case”, the Joint Commissioner concluded that it is necessary at this stageto safeguard the government revenue and since the appellant had soldgoods to Fujikawa the payment due to it was being attached provisionally.The order of the Joint Commissioner contains absolutely no basis for theformation of the opinion that a provisional attachment was necessary tosafeguard the interest of the revenue. No tangible material has beendisclosed. The record clearly reveals a breach of the mandatory pre-conditions for the valid exercise of powers under Section 83 of the HPGSTAct.

67. The order of provisional attachment under Section 83(1) is tobe issued “during the pendency of any proceedings under Section 62 orSection 63 or Section 64 or Section 67 or Section 73 or Section 74”. Inthe present case, the notice to show cause under Section 74(1) of theHPGST Act was issued to the appellant on 27 November 2020. Afterthe High Court dismissed the writ petition, this Court was moved underArticle 136 of the Constitution. Notice was issued in the Special LeavePetition on 4 February 2021 returnable on 19 February 2021. A daybefore the case was listed, on 18 February 2021, an ex parte order waspassed by the Joint Commissioner under Section 74 (9) of the HPGSTAct confirming the demand of Rs 8,30,27,218 in the notice to show cause.

68. It is evident from the facts noted above that the order ofprovisional attachment was passed before the proceedings against theappellant were initiated under Section 74 of the HPGST Act. Section 83of the Act requires that there must be pendency of proceedings underthe relevant provisions mentioned above against the taxable person whoseproperty is sought to be attached. We are unable to accept the contentionof the respondent that merely because proceedings were pending/concluded against another taxable entity, that is GM Powertech, thepowers of Sections 83 could also be attracted against the appellant. Thisinterpretation would be an expansion of a draconian power such as thatcontained in Section 83, which must necessarily be interpretedrestrictively. Given that there were no pending proceedings against theappellant, the mere fact that proceedings under Section 74 had concludedagainst GM Powertech, would not satisfy the requirements of Section83. Thus, the order of provisional attachment was ultra vires Section 83of the Act.

69. On 1 March 2021, the appellant has filed an appeal underSection 107 together with a deposit of Rs 32,15,488 representing ten percent of the tax due. Section 107(6) contains the following stipulation:

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A“(6) No appeal shall be filed under sub-section (1), unless theappellant has paid—

(a) in full, such part of the amount of tax, interest, fine, fee andpenalty arising from the impugned order, as is admitted by him;and B(b) a sum equal to ten per cent of the remaining amount of tax indispute arising from the said order, in relation to which the appealhas been filed.”

Sub-Section (7) stipulates that :

C“(7) Where the appellant has paid the amount under sub-section(6), the recovery proceedings for the balance amount shall bedeemed to be stayed.”

70. Clause (a) of sub-Section (6) provides that no appeal shall befiled without the payment in full, of such part of the amount of tax,Dinterest, fine, fee and penalty arising from the impugned order as isadmitted. In addition, under clause (b), ten per cent of the remainingamount of tax in dispute arising from the order has to be paid in relationto which the appeal has been filed. Upon the payment of the amountunder sub-Section (6) the recovery proceedings for the balance aredeemed to be stayed. Thus, in any event, the order of provisionalEattachment must cease to subsist. The appellant, having filed an appealunder Section 107, is required to comply with the provisions of sub-Section (6) of Section 107 while the recovery of the balance is deemedto be stayed under the provisions of sub-Section (7). As observedhereinabove and under Section 83, the order of provisional attachmentFmay be passed during the pendency of any proceedings under Section62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74.Therefore, once the final order of assessment is passed under Section74 the order of provisional attachment must cease to subsist. Therefore,after the final order under Section 74 of the HPGST Act was passed on18 February, 2021, the order of provisional attachment must come to anGend.

71. Moreover, an order of provisional attachment was issued bythe Joint Commissioner which was withdrawn on 30 January 2019, afterconsidering the representations made by the petitioner. On the veryground, without any material change in circumstances. Another orderHof provisional attachment came to be issued by another Joint Commissioner. Therefore, it was the contention of the petitioner beforethe High Court that the subsequent order of provisional attachment is insubstance and effect an order reviewing the earlier order withdrawingthe order of provisional attachment which was not permissible andtherefore the subsequent order of provisional attachment is withoutjurisdiction. The High Court has not considered this aspect. Both theearlier and the subsequent orders of provisional attachment are on thesame grounds. Therefore, unless there was a change in the circumstances,it was not open for the Joint Commissioner to pass another order ofprovisional attachment, after the earlier order of provisional attachmentwas withdrawn after considering the representations made by thepetitioner. This is an additional ground to set aside the subsequent orderof provisional attachment.

E Summary of findings

72. For the above reasons, we hold and conclude that

(i) The Joint Commissioner while ordering a provisionalattachment under section 83 was acting as a delegate ofthe Commissioner in pursuance of the delegation effectedunder Section 5(3) and an appeal against the order ofprovisional attachment was not available under Section 107(1);

(ii) The writ petition before the High Court under Article 226of the Constitution challenging the order of provisionalattachment was maintainable;

(iii) The High Court has erred in dismissing the writ petition onthe ground that it was not maintainable;

(iv) The power to order a provisional attachment of the propertyof the taxable person including a bank account is draconianin nature and the conditions which are prescribed by thestatute for a valid exercise of the power must be strictlyfulfilled;

(v) The exercise of the power for ordering a provisionalattachment must be preceded by the formation of an opinionby the Commissioner that it is necessary so to do for thepurpose of protecting the interest of the governmentrevenue. Before ordering a provisional attachment the A

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ACommissioner must form an opinion on the basis of tangiblematerial that the assessee is likely to defeat the demand, ifany, and that therefore, it is necessary so to do for thepurpose of protecting the interest of the governmentrevenue.

B(vi)The expression “necessary so to do for protecting thegovernment revenue” implicates that the interests of thegovernment revenue cannot be protected without orderinga provisional attachment;

(vii) The formation of an opinion by the Commissioner underCSection 83(1) must be based on tangible material bearingon the necessity of ordering a provisional attachment forthe purpose of protecting the interest of the governmentrevenue;

(viii) In the facts of the present case, there was a clearDnon-application of mind by the Joint Commissioner to theprovisions of Section 83, rendering the provisionalattachment illegal;

(ix) Under the provisions of Rule 159(5), the person whoseproperty is attached is entitled to dual procedural safeguards:

E(a) An entitlement to submit objections on the ground thatthe property was or is not liable to attachment; and (b) An opportunity of being heard; There has been a breach of the mandatory requirement ofRule 159(5) and the Commissioner was clearlyFmisconceived in law in coming into conclusion that he hada discretion on whether or not to grant an opportunity ofbeing heard;

(x) The Commissioner is duty bound to deal with the objectionsto the attachment by passing a reasoned order which mustGbe communicated to the taxable person whose property isattached;

(xi) A final order having been passed under Section 74(9), theproceedings under Section 74 are no longer pending as aresult of which the provisional attachment must come to anHend; and

(xii) The appellant having filed an appeal against the order undersection 74(9), the provisions of sub-Sections 6 and 7 ofSection 107 will come into operation in regard to the paymentof the tax and stay on the recovery of the balance asstipulated in those provisions, pending the disposal of theappeal.

73. For the above reasons, we allow the appeal and set aside theimpugned judgment and order of the High Court dated 1 January 2021.

74. The writ petition filed by the appellant under Article 226 of theConstitution shall stand allowed by setting aside the orders of provisionalattachment dated 28 October 2020.

75. There shall be no order as to costs. Pending application(s), ifany, stand disposed of.

Nidhi Jain

Appeal allowed.

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