M/s Radha Krishan Industries vs. State of Himachal Pradesh (Supreme Court, 2021) – Provisional Attachment under Section 83 Requires Valid Opinion

⚖️M/s Radha Krishan Industries vs. State of Himachal Pradesh (Supreme Court, 2021): M/s Radha Krishan Industries vs. State of Himachal Pradesh (Supreme Court, 2021) – Provisional Attachment under Section 83 Requires Valid Opinion

M/s Radha Krishan Industries

M/s Radha Krishan Industries, engaged in manufacturing operations in Himachal Pradesh, became embroiled in GST proceedings after one of its suppliers was accused of issuing bogus invoices.

• In 2018, a detection case was registered against the supplier, and soon after, the assessee received a notice to explain alleged wrongful availment of ITC during FY 2017-18 and 2018-19.
• The assessee appeared before the authorities and asserted that its ITC claims were valid and supported by documentation.
• Nearly 18 months later, the Joint Commissioner of State Taxes and Excise provisionally attached the assessee’s receivables from customers under Section 83 of the CGST Act, alleging ITC fraud.
• The assessee filed a writ petition before the Himachal Pradesh High Court, contending that the provisional attachment was illegal and passed without granting an opportunity of being heard.
• However, the High Court dismissed the writ petition, holding that an alternate remedy of appeal under Section 107 was available.

Aggrieved, the assessee approached the Supreme Court of India.

❓ Points of Dispute

1. Whether the provisional attachment orders issued under Section 83 of the CGST Act satisfied the statutory conditions for validity?
2. Whether the High Court was correct in dismissing the writ petition on the ground that an alternative remedy was available?

📑 Submissions by the Assessee

• No Alternative Remedy Available:
  • Provisional attachment orders under Section 83 are passed in the name of the Commissioner.
  • Appeals against such orders ordinarily lie before the GST Appellate Tribunal, which had not been constituted.
  • Hence, a writ petition under Article 226 was the only efficacious remedy.
• Violation of Rule 159(5):
  • Rule 159(5) mandates that objections filed against attachment must be considered and a hearing must be given.
  • The assessee submitted objections, but these were dismissed without affording any hearing, rendering the process unlawful.
• Draconian Nature of Section 83:
  • Since provisional attachment is a drastic measure, it must be exercised strictly in accordance with the statute and only upon the formation of a valid, reasoned opinion by the Commissioner.

📑 Submissions by the Revenue

• Safeguarding Revenue Interests:
  • The power under Section 83 is intended not merely for recovery but also to protect government revenue during pending proceedings.
  • Immediate attachment was justified to prevent dissipation of assets by the assessee.
• No Requirement of Prior Notice:
  • Provisional attachment does not require prior notice or pre-decisional hearing since it is an interim measure meant to safeguard revenue interests.

⚖️ Legal Principles and Scope of Decision

The Supreme Court clarified and laid down the legal framework governing provisional attachment under Section 83:

1. Maintainability of Writ Petition
   • The High Court erred in dismissing the writ petition.
   • Since the GST Appellate Tribunal was not operational, the writ petition under Article 226 was maintainable.
2. Formation of Valid Opinion
   • The Commissioner must form an opinion based on tangible material before ordering attachment.
   • The opinion must reflect that without attachment, government revenue cannot be protected.
   • Mere suspicion of fraud is not sufficient.
3. Procedural Safeguards under Rule 159(5)
   • Taxpayers are entitled to two safeguards:
     i. Right to file objections against the attachment.
     ii. Right to a personal hearing.
   • The Commissioner’s failure to provide a hearing was a breach of mandatory requirements.
4. Draconian Nature of Power
   • Section 83 confers a draconian power impacting the property and business operations of taxpayers.
   • Therefore, it must be used sparingly and strictly within statutory boundaries.
5. Reasoned Order Requirement
   • The Commissioner is duty-bound to pass a reasoned, speaking order addressing the objections and communicate it to the taxpayer.
   • The belief that a hearing is discretionary was held to be misconceived in law.

🏛️ Court’s Conclusion

• The Supreme Court set aside the High Court’s dismissal and held that the writ petition was maintainable.
• It emphasized that provisional attachment under Section 83 can only be exercised after:
  • Formation of a valid opinion based on credible material, and
  • Compliance with Rule 159(5), including granting an opportunity of being heard.
• The Court described Section 83 as a draconian provision, requiring strict adherence to safeguards to prevent misuse.

✅ Practical Impact on Businesses

• Checks Against Arbitrary Action: GST authorities cannot invoke Section 83 mechanically; they must demonstrate necessity with material evidence.
• Right to be Heard: Taxpayers are entitled to a mandatory hearing before continuation of attachment.
• Judicial Relief Available: Even if no appellate tribunal exists, writ petitions under Article 226 remain a valid route.
• Balancing Revenue and Business Interests: The judgment strikes a balance—protecting government revenue but preventing harassment of genuine businesses.

🔑 Key Takeaways

1. Writ petitions are maintainable against provisional attachment in the absence of an appellate tribunal.
2. Commissioner’s opinion must be based on tangible material, not mere suspicion.
3. Rule 159(5 safeguards are mandatory—objections must be heard and reasoned orders passed.
4. Section 83 power is exceptional and draconian, to be used sparingly.
5. This case strengthens taxpayer protection against arbitrary attachments under GST.

📢 Why This Case Matters

The Radha Krishan Industries judgment is a landmark Supreme Court ruling on provisional attachment under GST. It establishes that taxpayer rights cannot be curtailed by arbitrary use of draconian powers, and procedural safeguards under Rule 159 must be strictly enforced. For businesses, this ruling provides a strong judicial shield against indiscriminate freezing of assets by tax authorities.

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