Every person is entitled to submit objection against the attachment of property and shall be given opportunity for being heard

Every person is entitled to submit objection against the attachment of property and shall be given opportunity for being heard M/s Radha Krishan Industries V/S State of Himachal Pradesh & Ors.(Supreme Court of India); Civil Appeal No 1155 of 2021 (Arising out of SLP(C) No 1688 of 2021); 20.04.2021

Issue

Appeal arising before the Supreme Court for the issue of public importance. This appeal arises from a judgment and order dated 1 January 2021 of a Division Bench of the High Court of Himachal Pradesh. Whether the orders of provisional attachment issued by the respondent against the appellant on 28 October 2020 are in consonance with the conditions stipulated in Section 83 of the Himachal Pradesh Goods and Services Act (HPGST Act). The preliminary issue is whether the High Court was right in concluding that the provisional attachment could not be challenged in a petition under Article 226.

Facts

• The appellant manufactures lead according to the specific requirements of its clients, and has a factory at village Meerpur Gurudwara, Kala-Amb in the District of Sirmaur of Himachal Pradesh. The appellant has been in the same line of business since 2008.
• Upon the introduction of the Goods and Services tax, the appellant migrated to and was registered under GST - GSTIN No. O2AAKFR7402H2ZE - with effect from 1 July 2017.
• On 3 October 2018, a notice was issued to the appellant under Section 74 of the HPGST Act and the Central Goods and Services Tax Act by the third respondent requiring it to appear on 9 October 2018 and produce (i) invoices pertaining to inward and outward supplies for the years 2017-18 and 2018-19; (ii) party-wise summary/ledger of inward supplies; (iii) proof of payment of GST with a commodity-wise breakup; and (iv) copies of GSTR-1, GSTR-2 and GSTR-3 returns from July 2017 to July 2018.
• The appellant appeared before the respondent and submitted original tax invoices pertaining to inward and outward supplies for 2017-18 and 2018-19 by a letter dated 15 October 2018.
• On 10 October 2018, a ‘detection case’ was registered against GM Powertech, Kala-Amb, one of the suppliers of the appellant, under Section 74 of the HPGST Act and the CGST Act read with Section 20 of the Integrated Goods and Services Tax Act, 2017. This was through a search and seizure under Section 67 of the HPGST Act and CGST Act.
• The partners of GM Powertech were arrested on 3 December 2018 on the ground of raising fraudulent claims of input tax credit from fake/fictitious firms in Delhi and Kanpur.
• The appellant received a memo by an e-mail dated 15 December 2018 from the respondent directing it to be present on 17 December 2018 for explaining the allegedly illegal claim of ITC made during 2017-18 and 2018-19. By its letter dated 17 December 2018, the appellant contended that it had validly claimed ITC as it fulfilled the conditions under Section 16 and other provisions of the HPGST Act and the CGST Act.
• On 9 January 2019, a notice was issued to Fujikawa Power, Bagbania, BBN Baddi, one of the customers of the appellant, for provisionally attaching an amount of Rs. 5 crores due to the appellant, under Section 83 of the HPGST Act.
• On 19 January 2019, the respondent passed an order of provisional attachment in respect of receivables worth Rs. 5 crores due from Fujikawa Power. This order inadvertently referred to Sarika Industries instead of the appellant. The appellant responded by a representation dated 29 January 2019, claiming inter alia, that the order of attachment was without affording a hearing.
• On 26 December 2018, they had noticed that the ITC had been blocked without prior notice. On 30 January 2019, the notice of attachment was withdrawn by the respondent.
• On 21 October 2020, the Commissioner of State Taxes and Excise, Himachal Pradesh12 delegated his powers under Section 83 of the HPGST Act to the respondent. In exercise of the powers delegated by the Commissioner, the respondent issued two orders of provisional attachment dated 28 October 2020 attaching the receivables of the appellant from its customers, Fujikawa Power and M/s Deepak International. The attachment order issued to Fujikawa Power under Rule 159(1) of the HPGST Rules noted that it owed about Rs. 4 crores to the appellant. The order states that the appellant was found to be involved in an ITC fraud amounting to Rs.5,03,82,554/- (Rs. 5.03 crores) during 2017-18 and 2018-19.
• On 4 November 2020, the appellant filed a representation and objections against the attachment and denied liability. By an order dated 6 November 2020, the respondent rejected the objections of the appellant. The respondent stated that collectively payments “only” worth Rs. 4.92 crores from both of the appellant’s customers were attached.
• On 27 November 2020, the respondent issued a show cause notice to the appellant under Section 74(1) of the HPGST Act for recovering the ITC, interest and penalty. The notice was issued on the basis that the appellant had claimed ITC on the supplies received from GM Powertech and since the inward supplies made by GM Powertech were found to be fake, the appellant’s claim of ITC was also in question.
• The order passed by the Commissioner on 21 October 2020 delegating his powers under Section 83 of the HPGST Act to the respondent, were challenged by the appellant before the High Court in a writ petition14 under Article 226.
• High court dismissed the writ petition by stating that there is no illegal or irregular exercise of jurisdiction.

Findings

Maintainability of writ petition before the High Court: (i) The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well; (ii) The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available 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 a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged; (iv) An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law; (v) When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion; and (vi) In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with. Delegation of authority under CGST Act: (i) The power to order a provisional attachment is entrusted during the pendency of proceedings under any one of six specified provisions: Sections 62, 63, 64, 67, 73 or 74. In other words, it is when a proceeding under any of these provisions is pending that a provisional attachment can be ordered; (ii) The power to order a provisional attachment has been vested by the legislature in the Commissioner; (iii) Before exercising the power, the Commissioner must be “of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do”; (iv) The order for attachment must be in writing; (v) The provisional attachment which is contemplated is of any property including a bank account belonging to the taxable person; and (vi) The manner in which a provisional attachment is levied must be specified in the rules made pursuant to the provisions of the statute.

Judgement

Supreme Court held that the High Court has erred in dismissing the writ petition on the ground that it was not maintainable. In the facts of the present case, there was a clear non-application of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachment illegal. Under the provisions of Rule 159(5), the person whose property is attached is entitled to dual procedural safeguards:

(a) An entitlement to submit objections on the ground that the property was or is not liable to attachment; and

(b) An opportunity of being heard;

There has been a breach of the mandatory requirement of Rule 159(5) and the Commissioner was clearly misconceived in law in coming into conclusion that he had a discretion on whether or not to grant an opportunity of being heard.