The bench of Justice Chandrachud and M. R. Shah were dealing with contours of the power of provisional attachment of property, including bank accounts, to protect revenue, under the Himachal Pradesh GST Act, 2017 has made some remarkable observation about the mode of working of the department.
Section 83 of the said Act provides that where during the pendency of any proceedings under the Act, the Commissioner is of the 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 property, including bank account, belonging to the taxable person.
The court observed as under :
1. The Parliament had intended the GST to be a citizen-friendly tax structure. The purpose of the Act is lost by the manner in which tax law is enforced in our country”.
2. The earlier view was that the ‘opinion’ should be a subjective opinion. Now, the position is that there should be some tangible material to form the opinion.
3. Although ‘order in writing’ does not mean that the order should be like a judgement, but it must show an application of mind…
4. A balance has to be maintained between protecting the interests of revenue and protecting genuine business”, the bench had opined at the outset.
5. The country needs to come out of this tax culture that ‘businesses are all fraudulent!’ Even where 12 crore tax has been paid, just because some tax is still due, you can’t start attaching property! If there is any alienation of assets or the assessee is winding up or going into liquidation, it is understandable…but just because you have the account numbers, you can’t start attaching and even block the receivables!”, remarked Justice Chandrachud.
6. The judge spoke of introducing a mechanism of assessment of the tax officers with a view to inculcate accountability- “Tax officers raise huge demands after assessment – of 10,000 crores! If this is reduced to 1000 crores by the Appellate Tribunal or the Supreme Court, it must go into the assessment of the tax officer! There is no accountability at all”, rejected Justice Chandrachud.
7. The problem is in the fine print. In order to make the GST Act workable, the message must percolate to the actual authorities- Why the legislation has made certain provisions, what is the purpose behind them?… For example, the Act provides for ling of an appeal from any order on a deposit of that tax, interest, and penalty which is undisputed, plus 10% of the balance”, continued the judge.
8. Justice Chandrachud also criticised the exercise of the power of provisional attachment as a “pre-emptive strike”-
9. “The law is that when it is necessary to protect the interest of revenue, because there is a likelihood that revenue will not be able to enforce the assessment order, there may be an order for provisional attachment. You cannot just go on attaching only because there is to be an assessment order! It cannot be a pre-emptive strike!”.
10. The country needs to come out of this tax culture that ‘businesses are all fraudulent!’ Even where 12 crore tax has been paid, just because some tax is still due, you can’t start attaching property