Reportable IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION Civil Appeal No 1155 of 2021 (Arising out of SLP(C) No 1688 of 2021) M/s Radha Krishan Industries ....Appellant Versus State of Himachal Pradesh & Ors. .... Respondents JUDGMENT Dr Dhananjaya Y Chandrachud, J Factual Background B Submissions B.1 Maintainability of writ petition before High Court B.2 Challenge on merits: improper invocation of Section 83 C Legal Position C.1 Maintainability of writ petition before High Court C.2 Provisional Attachment C.3 Delegation of authority under CGST Act D Analysis Signature Not Verified Digitally signed by E Summary of findings Chetan Kumar Date: 2021.04.20 12:52:57 IST Reason: 1 PART A Factual Background 1 This appeal raises significant issues of public importance, engaging as it does, interface between citizens and their businesses with fiscal administration. Legislation enacted for levy of goods and services tax confers power on taxation authorities to impose provisional attachment on properties of assessee, including bank accounts. legislation in Himachal Pradesh, which comes up for interpretation in present case, has conferred power on Commissioner to order provisional attachment of property of assessee, subject to formation of opinion that such attachment is necessary in interest of protecting government revenue. What specifically, is ambit of this power? What are safeguards available to citizen? In interpreting law, court has to chart course which will ensure fair exercise of statutory powers. legitimate concerns of citizens over arbitrary exercises of power have to be protected while ensuring that legislative purpose in entrusting authority to order provisional attachment is fulfilled. rule of law in constitutional framework is fulfilled when law is substantively fair, procedurally fair and applied in fair manner. Each of these three components will need to be addressed in course of interpreting tax statute in present case. 2 This appeal arises from judgment and order dated 1 January 2021 of Division Bench of High Court of Himachal Pradesh. High Court dismissed writ petition instituted under Article 226 of Constitution challenging orders of provisional attachment on ground that alternate remedy is available. 2 PART The appellant challenged orders issued on 28 October 2020 by Joint Commissioner of State Taxes and Excise, Parwanoo1 provisionally attaching appellant s receivables from its customers. provisional attachment was ordered while invoking Section 83 of Himachal Pradesh Goods and Service Tax Act, 20172 and Rule 159 of Himachal Pradesh Goods and Service Tax Rules, 20173. While dismissing writ petition on grounds of maintainability High Court was of view that appellant had alternative and efficacious remedy of appeal under Section 107 of HPGST Act. 3 At issue in this case is whether orders of provisional attachment issued by third respondent against appellant on 28 October 2020 are in consonance with conditions stipulated in Section 83 of HPGST Act. answer to this will require court to embark on interpretative journey of unravelling substantive and procedural content of power. preliminary issue is whether High Court was right in concluding that provisional attachment could not be challenged in petition under Article 226. 4 facts in context of which this case arises are thus: appellant manufactures lead according to specific requirements of its clients, and has factory at village Meerpur Gurudwara, Kala-Amb in District of Sirmaur of Himachal Pradesh. appellant has been in same line of business since 2008. Upon introduction of Goods and Services tax4, appellant 1 third respondent 2 HPGST Act 3 HPGST Rules 4 GST 3 PART migrated to and was registered under GST - GSTIN No. O2AAKFR7402H2ZE - with effect from 1 July 2017. 5 On 3 October 2018, notice5 was issued to appellant under Section 74 of HPGST Act and Central Goods and Services Tax Act6 by third respondent requiring it to appear on 9 October 2018 and produce (i) invoices pertaining to inward and outward supplies for years 2017-18 and 2018-19; (ii) party-wise summary/ledger of inward supplies; (iii) proof of payment of GST with commodity-wise breakup; and (iv) copies of GSTR-1, GSTR-2 and GSTR-3 returns from July 2017 to July 2018. appellant appeared before third respondent and submitted original tax invoices pertaining to inward and outward supplies for 2017-18 and 2018-19 by letter dated 15 October 2018. 6 On 10 October 2018, detection case was registered against GM Powertech, Kala-Amb7, one of suppliers of appellant, under Section 74 of HPGST Act and CGST Act read with Section 20 of Integrated Goods and Services Tax Act, 20178. This was through search and seizure under Section 67 of HPGST Act and CGST Act. partners of GM Powertech were arrested on 3 December 2018 on ground of raising fraudulent claims of input tax credit9 from fake/fictitious firms in Delhi and Kanpur. 7 appellant received memo by e-mail dated 15 December 2018 from third respondent directing it to be present on 17 December 2018 for 5 respondents before this Court have stated that said document was in fact memo under Section 70 of HPGST Act and not show cause notice, and it was inadvertently mentioned that it was notice issued under Section 74 of HPGST Act. 6 CGST Act 7 GM Powertech 8 IGST Act 9 ITC 4 PART explaining allegedly illegal claim of ITC made during 2017-18 and 2018-19. By its letter dated 17 December 2018, appellant contended that it had validly claimed ITC as it fulfilled conditions under Section 16 and other provisions of HPGST Act and CGST Act. 8 On 9 January 2019, notice10 was issued to Fujikawa Power, Bagbania, BBN Baddi, one of customers of appellant, for provisionally attaching amount of Rs. 5 crores due to appellant, under Section 83 of HPGST Act. On 19 January 2019, third respondent passed 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 appellant. appellant responded by representation dated 29 January 2019, claiming inter alia, that order of attachment was without affording hearing. appellant also claimed that on 26 December 2018, they had noticed that ITC had been blocked without prior notice. On 30 January 2019, notice of attachment was withdrawn by third respondent. 9 According to respondents, after case of GM Powertech was investigated, tax evasion was detected. GM Powertech was found to have claimed and utilized ITC against invoices issued by fake fictitious firms without actual movement of goods GM Powertech had issued invoices to various recipients in Himachal Pradesh including appellant. On 4 July 2020, third respondent issued intimation to appellant under Section 74(5) of HPGST Act of tax ascertained as being payable11, advising it to pay tax, interest 10 SCN 11 Form GST DRC-01A 5 PART and penalty of Rs. 5.03 crores. appellant was given opportunity to file its submissions against ascertainment of amount by 4 August 2020. 10 tax liability of Rs 39.48 crores was confirmed against GM Powertech on conclusion of proceedings against it. GM Powertech was found to have no business establishment or property in Himachal Pradesh and case was considered to fall into category of serious tax fraud. 11 On 21 October 2020, Commissioner of State Taxes and Excise, Himachal Pradesh12 delegated his powers under Section 83 of HPGST Act to third respondent. In exercise of powers delegated by Commissioner, third respondent issued two orders of provisional attachment13 dated 28 October 2020 attaching receivables of appellant from its customers, Fujikawa Power and M/s Deepak International. attachment order issued to Fujikawa Power under Rule 159(1) of HPGST Rules noted that it owed about Rs. 4 crores to appellant. order states that appellant was found to be involved in ITC fraud amounting to Rs.5,03,82,554/- (Rs. 5.03 crores) during 2017-18 and 2018-19. order, in its relevant part, provides: In order to protect interests of revenue and in exercise of powers conferred/delegated by Commissioner of 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 Act, I, U.S. Rana, Joint Commissioner of State Taxes & Excise, South Enforcement Zone, Parwanoo, hereby provisionally attach payment to extent of Rs.5,03,82,554/- of M/s Radha Krishan Industries, Kala-Amb. Henceforth, no payment shall be allowed to be made from your company to M/s RadhaKrishan Industries without prior permission of this department / office. 12 second respondent/Commissioner 13 DRC-22 vide Memo No EXN-JCSTE/SEZParwanoo/2020-21/1171 and EXN-JCSTE/SEZ Parwanoo/2020- 21/1167 ( orders of provisional attachment ) 6 PART A similar order was issued to Deepak International, noting that payment of Rs. 2.91 crores was owed by it to appellant. 12 On 4 November 2020, appellant filed representation and objections against attachment and denied liability. By order dated 6 November 2020, third respondent rejected objections of appellant. third respondent stated that collectively payments only worth Rs. 4.92 crores from both of appellant s customers were attached. 13 On 27 November 2020, third respondent issued notice to show cause to appellant under Section 74(1) of HPGST Act for recovering ITC, interest and penalty. notice was issued on basis that appellant had claimed ITC on supplies received from GM Powertech and since inward supplies made by GM Powertech were found to be fake, appellant s claim of ITC was also in question. 14 orders of provisional attachment and order passed by Commissioner on 21 October 2020 delegating his powers under Section 83 of HPGST Act to third respondent, were challenged by appellant before High Court in writ petition14 under Article 226. 15 While dismissing writ petition, High Court held that it was undisputed that third respondent and Divisional Commissioner, who has been appointed as Commissioner (Appeals) under GST Act, are constituted under HPGST Act, and therefore, it is assumed that there is no illegal or irregular exercise of jurisdiction. High Court further observed that even if 14 Writ Petition No. 5648 of 2020 7 PART there is some defect in procedure followed during hearing of case, it does not follow that authority acted without jurisdiction, and though order may be irregular or defective, it cannot be nullity so long it has been passed by competent authority. 16 High Court held that writ is ordinarily not maintainable when there exists alternative remedy. exceptions to this rule are where statutory authority has not acted in accordance with provisions of legislation; or acted in defiance of fundamental principles of judicial procedure or where order has been passed in violation of principles of natural justice. High Court held that it would not entertain petition under Article 226 of Constitution, if efficacious remedy is available to aggrieved person or where statute under which action complained of has been taken contains mechanism for redressal of grievances. High Court held that when statutory forum of appeal exists, appeal should not be entertained ignoring statutory dispensation . 17 Noting that appellant has alternative and efficacious remedy of appeal under Section 107 of HPGST Act, High Court refused to entertain writ petition. High Court held that it was fortified in this view by fact that writ petition filed by GM Powertech, has also not been entertained and that it has been relegated to avail of alternative remedy. 18 Subsequent to dismissal of writ petition by High Court, certain developments have taken place. On 12 January 2021, appellant sought to 8 PART B inspect files for GM Powertech and stated that no documents in this regard had been provided to it in context of proceedings initiated under Section 74. In response, third respondent allowed appellant to inspect contents of appellant s case file. According to respondent, appellant failed to exercise this option and did not reply to show cause notice dated 27 November 2020. Thereafter, on 18 February 2021, order under Section 74(9) of HPGST Act was passed by third respondent confirming tax demand of Rs. 8,30,27,218. This order under Section 74(9) has been assailed by appellant before appellate authority under Section 107. dismissal of petition challenging orders of provisional attachment is in question in present proceedings. B Submissions 19 Mr Puneet Bali, learned senior counsel appearing on behalf of appellant addressed following submissions: B.1 Maintainability of writ petition before High Court: (i) No efficacious alternative remedy is available against orders of provisional attachment passed under Section 83 of HPGST Act. jurisdiction to pass order under Section 83 is conferred on Commissioner of State Taxes. Although power stands delegated to third respondent, order is still deemed to be passed by Commissioner (second respondent). Under GST Act, appeal against order of Commissioner lies before GST Appellate 9 PART B Tribunal which has not been constituted till date. Thus, only remedy available to appellant was by filing writ petition; (ii) Reliance was placed on Whirlpool Corporation v Registrar of Trademarks, Mumbai15 to argue that alternative remedy is not bar to exercise of writ jurisdiction of High Court if writ petition is filed for enforcement of fundamental rights; where there has been violation of principles of natural justice; where order or proceedings are wholly without jurisdiction; or when vires of Act is challenged; (iii) third respondent had withdrawn earlier orders of provisional attachment issued in January 2019 after considering representation filed by appellant. impugned orders of provisional attachment were issued on 28 October 2020, on same set of facts and allegations. Thus, impugned orders of provisional attachment amount to review of earlier orders by same respondent, which is contrary to HPGST Act, as it does not provide for powers of review; (iv) impugned orders of provisional attachment are in violation of procedure established under sub-rule (5) of Rule 159 of HPGST Rules, which provides that opportunity of being heard is to be given against provisional attachment as mandatory requirement. In this case, appellant filed objections to orders of provisional attachment on 4 November 2020 and objections were rejected by third respondent 15 (1998) 8 SCC 1 10 PART B on 6 November 2020, without providing opportunity of being heard to appellant; (v) reliance placed by High Court on judgment in case of GM Powertech and others v State of H.P16 to state that similar petition was not entertained is misplaced. In that case, GM Powertech had challenged order of assessment in writ petition, while appellant has challenged orders of provisional attachment made prior to assessment. Additionally, case of GM Powertech did not fall within exceptions to rule of alternate remedy; (vi) High Courts should not have dismissed writ petition on grounds of maintainability if facts of case are not disputed by State as held in Rajasthan State Electricity Board v Union of India17; and (vii) Reliance was placed on Calcutta Discount Co. Ltd. v Income Tax Officer, Companies District I, Calcutta18 and Commissioner of Income Tax, Gujarat v M/s Raman and Co.19 to argue that High Court can exercise its powers under Article 226 of Constitution to issue order prohibiting tax officer from proceedings to assess liability, if conditions precedent to exercise of such jurisdiction have not been met. B.2 Challenge on merits: improper invocation of Section 83 (i) power of provisional attachment under Section 83 of HPGST Act is drastic power and must be exercised with extreme care and caution; 16 CWP No. 5462 of 2020 17 2008 (5) SCC 632 18 AIR 1961 SC 372 19 AIR 1968 SC 49 11 PART B (ii) power under Section 83 of HPGST Act cannot be exercised unless there is sufficient material on record to justify that assessee is about to dispose of whole or part of its property to thwart ultimate collection of tax; (iii) existence of relevant material is pre-condition to formation of opinion by Commissioner; (iv) third respondent failed to show any material on record to indicate that appellant is fly by night operator or is disposing off assets to defeat collection of tax; (v) stated reason for provisional attachment - initiation of proceedings and passing of order under Section 74 against appellant s supplier, GM Powertech - is insufficient to invoke powers of provisional attachment against appellant; (vi) third respondent has failed to show that there is threat to interests of revenue on account of appellant s alleged involvement in said ITC fraud of GM Powertech; (vii) appellant has paid output tax of Rs. 12,49,90,267.14 (Rs. 12.49 crores) for relevant period, which is more than ITC of Rs. 3.25 crores which appellant has allegedly taken fraudulently; (viii) Even if revenue has to attach properties of assessee, immovable properties must be attached. Attachment of bank accounts and trading assets should be last resort only as it paralyses business of assessee; 12 PART B (ix) pendency of proceedings under Sections 62, 63, 64, 67, 73 or 74, of HPGST Act, is pre-condition for invoking provisions of Section 83 of HPGST Act; (x) provisional attachment of appellant s assets was made on 28 October 2020, before proceedings were initiated against appellant under Section 74 of HPGST Act on 27 November 2020. Thus, provisional attachment was made without jurisdiction and in violation of Section 83; (xi) provisions of Section 83 of HPGST Act do not provide for making provisional attachment second time, once first attachment is withdrawn. Moreover, HPGST Act, does not provide third respondent power of review to review his earlier decision regarding provisional attachment; (xii) first provisional attachment against appellant was withdrawn completely with immediate effect in January 2019 and same had gained finality. Thus, impugned orders of provisional attachment for second time, are without authority of law and should be set aside; (xiii) Provisional attachment of 100% of alleged amount is not permissible as per law; (xiv) While Section 83 of HPGST Act does not provide for percentage of alleged amount to be attached, powers under this section must be guided by other provisions of Act; (xv) Under Section 74 of HPGST Act, once tax demand becomes payable, assessee can only challenge this demand in appeal after 13 PART B depositing 10% of disputed amount and remaining demand is stayed. In contrast, provisional attachment of 100% of alleged amount even before finalisation of tax demand is contrary to legislative intent; (xvi) third respondent has taken contradictory stand with respect to collection of tax from appellant. Even if it is admitted that transaction between appellant and GM Powertech was fake transaction without actual movement of goods, it follows that appellant cannot claim refund of ITC and nor would appellant be liable to pay tax on outward supplies. However, appellant has already paid Rs. 12.49 crores of tax on outward supplies; (xvii) third respondent has raised demand of Rs. 39 crores against GM Powertech for illegally availing ITC. Once tax demand has been confirmed against GM Powertech, refusal to grant ITC to appellant would amount to double collection of tax. 20 Opposing these submissions, Mr Akshay Amritanshu, learned counsel appearing on behalf of State of Himachal Pradesh, submitted that: (i) SLP should be dismissed as appellant has alternate and efficacious remedy of appeal under Section 107 of HPGST Act. Moreover, SLP has been rendered infructuous due to order dated 18 February 2021 under Section 74(9) of HPGST Act and consequent appeal filed by appellant against this order before appellate authority; 14 PART B (ii) In paragraph 4 of impugned judgment, it has been noted that appellant had admitted that it had alternative remedy by way of appeal under Section 107 of HPGST Act; (iii) delegation of powers under Section 83 of HPGST Act by second respondent to third respondent does not imply that there was irregular or illegal exercise of jurisdiction by second respondent; (iv) order under Section 74(9) against GM Powertech has not been challenged and has gained finality. Since it has been found that all purchases of GM Powertech were fraudulent, there could have been no outward sale to appellant. Thus, transaction between GM Powertech and appellant would also be fraudulent; (v) orders of provisional attachment were issued after proceedings against GM Powertech had concluded; (vi) GM Powertech had no property or business establishment in Himachal Pradesh. In order to avoid similar situation against appellant and to protect interests of revenue, impugned orders of provisional attachment were passed; (vii) proceedings of provisional attachment under Section 83 of HPGST Act had concluded after rejection of objections filed by appellant on 6 November 2020. appellant participated in these proceedings and did not challenge orders of provisional attachment. Thus, appellant is estopped from challenging initiation of proceedings under Section 83 of HPGST Act; 15 PART B (viii) impugned orders of provisional attachment were based on fresh set of allegations, after proceedings against GM Powertech had been concluded and it was found that GM Powertech had no business or properties in Himachal Pradesh; (ix) After appellant filed objections to orders of provisional attachment, it was in discretion of Commissioner whether or not to grant opportunity of hearing to appellant; (x) Merely because appellant has paid Rs. 12 crores of tax, does not imply that appellant did not engage in ITC fraud; (xi) There was no violation of principles of natural justice as order of provisional attachment does not require prior notice to be issued to assessee; (xii) necessary prerequisites for triggering Section 83 of HPGST Act were complied with; (xiii) appellant had not sought any prior stay on orders of provisional attachment and thus, it is not conceivable that business of appellant has become paralyzed due to these orders; (xiv) provisional attachment is not only for purpose of recovery, but is intended to safeguard interests of revenue while proceedings are pending; and (xv) legislature did not provide any quantum or percentage for purpose of provisional attachment under Section 83 of Act. Thus, comparison with other provisions of HPGST Act, including Section 107, is incorrect. 16 PART C C Legal Position 21 following issues arise in present case: (i) Whether writ petition challenging orders of provisional attachment was maintainable under Article 226 of Constitution before High Court; and (ii) If answer to (i) is in affirmative, whether orders of provisional attachment constitute valid exercise of power. 22 appellant has advanced submissions on and adverted to merits of proceedings initiated under Section 74 of HPGST Act. order dated 18 February 2021 under Section 74 (9) of HPGST Act is not in challenge before this Court. appeal against order is pending before appellate authority under Section 107 of HPGST Act. We will not adjudicate upon merits of order under section 74(9). This judgment is confined to two issues formulated above. 23 We shall now review position of law on questions before us. C.1 Maintainability of writ petition before High Court 24 High Court has dealt with maintainability of petition under Article 226 of Constitution. Relying on decision of this Court in Assistant Commissioner (CT) LTU, Kakinada and others v Glaxo Smith Kline Consumer Health Care Limited20, High Court noted that although it can entertain petition under Article 226 of Constitution, it must not do so when 20 AIR 2020 SC 2819 17 PART C aggrieved person has effective alternate remedy available in law. However, certain exceptions to this rule of alternate remedy include where, statutory authority has not acted in accordance with provisions of law or acted in defiance of fundamental principles of judicial procedure; or has resorted to invoke provisions, which are repealed; or where order has been passed in violation of principles of natural justice. Applying this formulation, High Court noted that appellant has alternate remedy available under GST Act and thus, petition was not maintainable. 25 In this background, it becomes necessary for this Court, to dwell on rule of alternate remedy and its judicial exposition. In Whirlpool Corporation v Registrar of Trademarks, Mumbai21, two judge Bench of this Court after reviewing case law on this point, noted: 14. power to issue prerogative writs under Article 226 of Constitution is plenary in nature and is not limited by any other provision of Constitution. This power can be exercised by High Court not only for issuing writs in nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for enforcement of any of Fundamental Rights contained in Part III of Constitution but also for any other purpose . 15. Under Article 226 of Constitution, High Court, having regard to facts of case, has discretion to entertain or not to entertain writ petition. But High Court has imposed upon itself certain restrictions one of which is that if effective and efficacious remedy is available, High Court would not normally exercise its jurisdiction. But alternative remedy has been consistently held by this Court not to operate as bar in at least three contingencies, namely, where writ petition has been filed for enforcement of any of Fundamental Rights or where there has been violation of principle of natural justice or where order or proceedings are wholly without jurisdiction or vires of Act is challenged. There is plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on 21 (1998) 8 SCC 1 ( Whirlpool ) 18 PART C some old decisions of evolutionary era of constitutional law as they still hold field. (emphasis supplied) 26 Following dictum of this Court in Whirlpool (supra), in Harbanslal Sahnia v Indian Oil Corpn. Ltd.22, this court noted that 7. So far as view taken by High Court that remedy by way of recourse to arbitration clause was available to appellants and therefore writ petition filed by appellants was liable to be dismissed is concerned, suffice it to observe that rule of exclusion of writ jurisdiction by availability of alternative remedy is rule of discretion and not one of compulsion. In appropriate case, in spite of availability of alternative remedy, High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where writ petition seeks enforcement of any of fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where orders or proceedings are wholly without jurisdiction or vires of Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] .) present case attracts applicability of first two contingencies. Moreover, as noted, appellants' dealership, which is their bread and butter, came to be terminated for irrelevant and non-existent cause. In such circumstances, we feel that appellants should have been allowed relief by High Court itself instead of driving them to need of initiating arbitration proceedings. (emphasis supplied) 27 principles of law which emerge are that : (i) power under Article 226 of Constitution to issue writs can be exercised not only for enforcement of fundamental rights, but for any other purpose as well; (ii) High Court has discretion not to entertain writ petition. One of restrictions placed on power of High Court is where effective alternate remedy is available to aggrieved person; 22 (2003) 2 SCC 107 19 PART C (iii) Exceptions to rule of alternate remedy arise where (a) writ petition has been filed for enforcement of fundamental right protected by Part III of Constitution; (b) there has been violation of principles of natural justice; (c) order or proceedings are wholly without jurisdiction; or (d) vires of legislation is challenged; (iv) alternate remedy by itself does not divest High Court of its powers under Article 226 of Constitution in appropriate case though ordinarily, writ petition should not be entertained when efficacious alternate remedy is provided by law; (v) When right is created by statute, which itself prescribes remedy or procedure for enforcing right or liability, resort must be had to that particular statutory remedy before invoking discretionary remedy under Article 226 of Constitution. This rule of exhaustion of statutory remedies is rule of policy, convenience and discretion; and (vi) In cases where there are disputed questions of fact, High Court may decide to decline jurisdiction in writ petition. However, if High Court is objectively of view that nature of controversy requires exercise of its writ jurisdiction, such view would not readily be interfered with. 20 PART C 28 These principles have been consistently upheld by this Court in Seth Chand Ratan v Pandit Durga Prasad23, Babubhai Muljibhai Patel v Nandlal Khodidas Barot24 and Rajasthan SEB v. Union of India,25 among other decisions. C.2 Provisional Attachment 29 At this stage, we will advert to relevant precedents outlining contours of power of provisional attachment and specifically, in context of provisions worded similarly to Section 83 of HPGST Act. 30 decision of this Court in Raman Tech Process Engg Co and Anr v Solanki Traders26 was concerned with power of civil court under Order 38 Rule 5 of CPC to order attachment before judgment. In that case, proceedings had been instituted by respondent, for recovery of moneys due for supply of material to appellant. plaintiff moved application under Order 38 Rule 5, for direction to defendants to furnish security for suit claim and if they failed to do so, for attachment before judgment. This Court described power of attachment before judgment in following terms: 5. power under Order 38, Rule 5 Civil Procedure Code is drastic and extraordinary power. Such power should not be exercised mechanically or merely for asking. It should be used sparingly and strictly in accordance with Rule. purpose of Order 38, Rule 5 not to convert unsecured debt into secured debt. Any attempt by plaintiff to utilize provisions of Order 38 Rule 5 as leverage for coercing defendant to settle suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realized by unscrupulous plaintiffs, by obtaining orders of 23 (2003) 5 SCC 399 24 (1974) 2 SCC 706 25 (2008) 5 SCC 632 26 2008(1) R.C.R.(Civil) 195 21 PART C attachment before judgment and forcing defendants for out of court settlements, under threat of attachment. 6. defendant is not debarred from dealing with his property merely because suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not ground for granting attachment before judgment. plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy court that defendant is about to remove or dispose of whole or part of his property, with intention of obstructing or delaying execution of any decree that may be passed against him, before power is exercised under Order 38, Rule 5 CPC. Courts should also keep in view principles relating to grant of attachment before judgment [internal citation omitted]. 31 body of precedent has emerged in High Courts on exercise of power under Section 83 of CGST Act (akin to State GST Act27). shared learning which emerges from these decisions of High Court needs recognition. In Valerius Industries v Union of India28, Gujarat High Court laid down principles for construction of Section 83 of SGST/CGST Act. High Court noted that provisional attachment on basis of subjective satisfaction, absent any cogent or credible material, constitutes malice in law. It further outlined principles for exercise of power: 52. [ ] order of provisional attachment before assessment order is made, may be justified if assessing authority or any other authority empowered in law is of opinion that it is necessary to protect interest of revenue. However, subjective satisfaction should be based on some credible materials or information It is not any and every material, howsoever vague and indefinite or distant, remote or far-fetching, which would warrant formation of belief. (1) power conferred upon authority under Section 83 of Act for provisional attachment could be termed as very 27 SGST Act 28 2019 (30) GSTL 15 (Gujarat) 22 PART C drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. (3) power of provisional attachment under Section 83 of Act should be exercised by authority only if there is reasonable apprehension that assessee may default ultimate collection of demand that is likely to be raised on completion of assessment. It should, therefore, be exercised with extreme care and caution. (4) power under Section 83 of Act for provisional attachment should be exercised only if there is sufficient material on record to justify satisfaction that assessee is about to dispose of wholly or any part of his/her property with view to thwarting ultimate collection of demand and in order to achieve said objective, attachment should be of properties and to that extent, it is required to achieve this objective. (5) power under Section 83 of Act should neither be used as tool to harass assessee nor should it be used in manner which may have irreversible detrimental effect on business of assessee. (6) attachment of bank account and trading assets should be resorted to only as last resort or measure. provisional attachment under Section 83 of Act should not be equated with attachment in course of recovery proceedings. (7) authority before exercising power under Section 83 of Act for provisional attachment should take into consideration two things: (i) whether it is revenue neutral situation. (ii) statement of output liability or input credit . Having regard to amount paid by reversing input tax credit if interest of revenue is sufficiently secured, then authority may not be justified in invoking its power under Section 83 of Act for purpose of provisional attachment. (emphasis supplied) 32 In same vein, in Jai Ambey Filament Pvt Ltd v Union of India29, Gujarat High Court reiterated that subjective satisfaction as to need for 29 2021 (44) GSTL 41 (Gujarat) 23 PART C provisional attachment must be based on credible information that attachment is necessary. This opinion cannot be formed based on imaginary grounds, wishful thinking, howsoever laudable that may be. High Court further held, that on his opinion being challenged, competent officer must be able to show material on basis of which belief is formed. 33 In Patran Steel Rolling Mill v Assistant Commissioner of State Tax Unit 230, Gujarat High Court cited two instances in which provisional attachment would be apposite, these being where assessee is fly by night operator and if assessee will not be able to pay its dues after assessment. 34 Similar to decisions of Gujarat High Court, other High Courts have recognized restrictive nature of power of provisional attachment under Section 83 of SGST Act and need for it to be based on adequate substantive material. High Courts have also underscored extraordinary nature of this power, necessitating due caution in its exercise.31 35 Delhi High Court, in Proex Fashion Private Limited v Government of India32 outlined following statutorily stipulated conditions for invocation of Section 83 of SGST Act: i) Order should be passed by Commissioner; ii) Proceeding under Section 62 or 63 or 64 or 67 or 73 or 74 should be pending; 30 2019 (20) GSTL 732 (Gujarat) 31 Bindal 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 and Rural 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 2020 32 WP(C) 11245 of 2020 dated 6 January 2021 24 PART C iii) Commissioner must form opinion; iv) Order should be passed to protect interest of revenue; v) It must be necessary to attach property. 36 In UFV India Global Education v Union of India33, Punjab and Haryana High Court held that pendency of proceedings under sections mentioned in Section 83 viz. Sections 62 or 63 or 64 or 67 or 73 or 74 is sine qua non for order of provisional attachment to be issued under Section 83. 37 Another case which is relevant for our purposes is decision of Bombay High Court in Kaish Impex Private Limited v Union of India34. In this case, taxation authorities were enquiring into fraudulent claiming of ITC on basis of fictitious transactions by export firm in Delhi, against whom proceedings under Section 67 of CGST Act had been initiated. On tracing money trail, petitioner was summoned under Section 70 of CGST Act and his bank accounts were provisionally attached under Section 83 of CGST Act. On dealing with question of whether bank accounts of petitioner could be attached, when there were no pending proceedings against him and proceedings were pending against another taxable entity, High Court held that proceedings referred to under Section 83 of Act must be pending against taxable entity whose property is being attached. High Court noted that: 18. [ ] Section 83 though uses phrase pendency of any proceedings , proceedings are referable to section 62, 63, 64, 67, 73 and 74 of Act and none other. bank 33 2020 (43) GSTL 472 34 (2020) 6 AIR Bom R 122 25 PART C account of taxable person can be attached against whom proceedings under sections mentioned above are initiated. Section 83 does not provide for automatic extension to any other taxable person from inquiry specifically launched against taxable person under these provisions. Section 83 read with section 159(2), and form GST DRC-22 show that proceeding has to be initiated against specific taxable person, opinion has to be formed that to protect interest of Revenue order of provisional attachment is necessary. format of order, i.e. form GST DRC-22 also specifies particulars of registered taxable person and which proceedings have been launched against aforesaid taxable person indicating nexus between proceedings to be initiated against taxable person and provisional attachment of bank account of such taxable person. (emphasis supplied) C.3 Delegation of authority under CGST Act 38 learned counsel for respondent State, during course of his submissions, has also sought to justify delegation of powers by Commissioner to Joint Commissioner by way of impugned notification dated 21 October 2020 for purpose of attachment of properties under Section 83 of HPGST Act. In this regard, reliance was placed on Nathanlal Maganlal Chauhan v State of Gujarat,35 where Gujarat High Court was considering validity of notification by which Commissioner of State Tax had delegated all functions under SGST Act to Special Commissioner and Additional Commissioners of State Tax. In rejecting challenge to this notification, High Court held that: 39. As pointed out by Supreme Court in case of Sahni Silk Mills [internal citation omitted], courts should normally be 35 2020 SCC Online Guj 1811 26 PART D rigorous while requiring power to be exercised by persons or bodies authorized by statutes. As noted above, it is essential that delegated power should be exercised by authority upon whom it is conferred and by no one else. At same time, in present administrative setup, extreme judicial aversion to delegation should not be carried to extreme. There is only one Commissioner of State Tax in State of Gujarat, and having regard to enormous functions and duties to be discharged under new tax regime, he has been empowered to delegate his powers to Special Commissioner of State Tax and Additional Commissioners of State Tax. 40. We take notice of fact that delegation has been authorized expressly under Section 5(3) of Act. We would have definitely interfered if Special Commissioner or Additional Commissioners would have further delegated power to officers subordinate to them. Such is not case over here. 41. In impugned notification it has been stated that functions delegated shall be under overall supervision of Commissioner. When Commissioner stated that his functions were delegated subject to his overall supervision, it did not mean or should not be construed as if he reserved to himself right to intervene to impose his own decision upon his delegate. words in last part of impugned notification would mean that Commissioner could control exercise administratively as to kinds of cases in which delegate could take action. In other words, administrative side of delegate's duties were to be subject of control and revision but not essential power to decide, whether to take action or not in particular case. Once powers are delegated for purpose of Section 69 of Act, subjective satisfaction, or rather, reasonable belief should be that of delegated authority. (emphasis supplied) D Analysis 39 essence of present case lies in how power to order provisional attachment under Section 83 of HPGST Act is construed. Before interpreting it, provision is extracted below for convenience of reference: 27 PART D 83. Provisional attachment to protect revenue in certain cases. - (1) Where during pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, Commissioner is of opinion that for purpose of protecting interest of Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to taxable person in such manner as may be prescribed. (2) Every such provisional attachment shall cease to have effect after expiry of period of one year from date of order made under sub-section (1). 40 marginal note to Section 83 provides some indication of Parliamentary intent. Section 83 provides for provisional attachment to protect revenue in certain cases . first point to note is that attachment is provisional provisional in sense that it is in aid of something else. second point to note is that purpose is to protect revenue. third point is expression in certain cases which shows that in order to effect provisional attachment, conditions which have been spelt out in statute must be fulfilled. Marginal notes, it is well-settled, do not control statutory provision but provide some guidance in regard to content. Put differently, marginal note indicates drift of provision. With these prefatory comments, judgment must turn to essential task of statutory construction. language of statute has to be interpreted bearing in mind that it is taxing statute which comes up for interpretation. provision must be construed on its plain terms. Equally, in interpreting statute, we must have regard to purpose underlying provision. interpretation which effectuates purpose must be preferred particularly when it is supported by plain meaning of words used. 28 PART D 41 Sub-Section (1) of Section 83 can be bifurcated into several parts. first part provides insight on when in point of time or at which stage power can be exercised. second part specifies authority to whom power to order provisional attachment is entrusted. third part defines conditions which must be fulfilled to validate power or ordering provisional attachment. fourth part indicates manner in which attachment is to be leveled. final and fifth part defines nature of property which can be attached. Each of these special divisions which have been explained above is for convenience of exposition. While they are not watertight compartments, ultimately and together they aid in validating understanding of statute. Each of above five parts is now interpreted and explained below: (i) power to order provisional attachment is entrusted during pendency of proceedings under any one of six specified provisions: Sections 62, 63, 64, 67, 73 or 74. In other words, it is when proceeding under any of these provisions is pending that provisional attachment can be ordered; (ii) power to order provisional attachment has been vested by legislature in Commissioner; (iii) Before exercising power, Commissioner must be of opinion that for purpose of protecting interest of government revenue, it is necessary so to do ; (iv) order for attachment must be in writing; (v) provisional attachment which is contemplated is of any property including bank account belonging to taxable person; and 29 PART D (vi) manner in which provisional attachment is levied must be specified in rules made pursuant to provisions of statute. 42 Under sub-Section (2) of Section 83, provisional attachment ceases to have effect upon expiry of period of one year of order being passed under sub-Section (1). power to levy provisional attachment has been entrusted to Commissioner during pendency of proceedings under Sections 62, 63, 64, 67, 73 or as case may be, Section 74. Section 62 contains provisions for assessment for non-filing of returns. Section 63 provides for assessment of unregistered persons. Section 64 contains provisions for summary assessment. Section 67 elucidates provisions for inspection, search and seizure. Before we dwell on Section 74, it would be material to note provisions of Section 70 which are extracted below: 70. Power to summon persons to give evidence and produce documents. - (1) proper officer under this Act shall have powers to summon any person whose attendance he considers necessary either to give evidence or to produce document or any other thing in any inquiry in same manner, as provided in case of civil court under provisions of Code of Civil Procedure, 1908, (5 of 1908). (2) Every such inquiry referred to in sub-section (1) shall be deemed to be "judicial proceedings" within meaning of section 193 and section 228 of Indian Penal Code, 1860, (45 of 1860). 43 power is conferred by Section 70 upon proper officer to summon person whose attendance is considered necessary to give evidence or produce document or any other things in any enquiry in manner which is provided in case of civil court under CPC. 30 PART D 44 Section 74 is extracted below: 74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful mis-statement or suppression of facts. (1) Where it appears to proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful mis-statement or suppression of facts to evade tax, he shall serve notice on person chargeable with tax which has not been so paid or which has been so short paid or to whom 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 pay amount specified in notice alongwith interest payable thereon under section 50 and penalty equivalent to tax specified in notice. (2) proper officer shall issue notice under sub-section (1) at least six months prior to time limit specified in sub- section (10) for issuance of order. (3) Where notice has been issued for any period under sub- section (1), proper officer may serve statement, containing details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1), on person chargeable with tax. (4) service of statement under sub-section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to condition that grounds relied upon in said statement, except ground of fraud, or any wilful mis-statement or suppression of facts to evade tax, for periods other than those covered under sub-section (1) are same as are mentioned in earlier notice. (5) person chargeable with tax may, before service of notice under sub-section (1), pay amount of tax alongwith interest payable under section 50 and penalty equivalent to fifteen per cent of such tax on basis of his own ascertainment of such tax or tax as ascertained by proper officer and inform proper officer in writing of such payment. (6) proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of tax so paid or any penalty payable under provisions of this Act or rules made thereunder. (7) Where proper officer is of opinion that amount paid under sub-section (5) falls short of amount actually payable, he shall proceed to issue notice as provided for 31 PART D in sub-section (1) in respect of such amount which falls short of amount actually payable. (8) Where any person chargeable with tax under sub-section (1) pays said tax alongwith interest payable under section 50 and penalty equivalent to twenty five per cent of such tax within thirty days of issue of notice, all proceedings in respect of said notice shall be deemed to be concluded. (9) proper officer shall, after considering representation, if any, made by person chargeable with tax, determine amount of tax, interest and penalty due from such person and issue order. (10) proper officer shall issue order under sub-section (9) within period of five years from due date for furnishing of annual return for financial year to which tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from date of erroneous refund. (11) Where any person served with order issued under sub- section (9) pays tax along with interest payable thereon under section 50 and penalty equivalent to fifty per cent of such tax within thirty days of communication of order, all proceedings in respect of said notice shall be deemed to be concluded. Explanation-1. - For purposes of section 73 and this section,- (i) expression "all proceedings in respect of said notice" shall not include proceedings under section 132; and (ii) where notice under same proceedings is issued to main person liable to pay tax and some other persons, and such proceedings against main person have been concluded under section 73 or section 74, proceedings against all persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded. Explanation-2. - For purpose of this Act, expression "suppression" shall mean non-declaration of facts or information which taxable person is required to declare in return, statement, report or any other document furnished under this Act or rules made thereunder, or failure to furnish any information on being asked for, in writing, by proper officer. 45 Sub- Section (1) of Section 74 empowers proper officer to serve notice on person chargeable with tax where it appears that 32 PART D (i) Any tax has not been paid; (ii) Tax has been short paid; (iii) Tax has been erroneously refunded; or (iv) Input tax credit has been wrongly availed or utilized by reason of fraud, willful statement or suppression of fact to evade tax. 46 Sub-Section (1) enables proper officer to issue notice to show cause for recovery of tax, interest payable under Section 50 and penalty equivalent to amount of tax specified in notice. Sub-Sections (2), (3) and (4) lay down procedural provisions which are to be followed by proper officer. Secondly, under sub-Section (5) of Section 74, before service of notice under sub-Section (1), person who is chargeable with tax may pay tax together with interest and penalty equivalent to fifteen per cent of tax on basis of their own ascertainment of tax or as ascertained by proper officer and inform proper officer of payment having been made upon receipt of information. Sub-Section (6) stipulates that proper officer shall not serve any notice under sub-Section (1) in respect of tax so paid or any penalty payable under provisions of Act or Rules. 47 On other hand, when proper officer is of opinion that amount which has been paid under sub-Section (5) falls short of amount which is actually payable, notice under sub-Section (1) is to issue for amount which falls short of what is actually payable. Sub-Section (8) contains stipulation that where person who is chargeable with tax under sub-Section (1) pays tax together with interest and penalty of twenty-five per cent of tax 33 PART D within thirty days of issuance of notice, all proceedings in respect of notice shall be deemed to be concluded. Under sub-Section (9), proper officer after considering representation of person chargeable to tax is authorized to determine amount of tax, interest and penalty due and to issue order. period of five years is stipulated by sub-Section (10) for issuance of order in sub-Section (9). Sub-Section (11) stipulates that upon service of order under sub-Section (9), all proceedings in respect of notice shall be deemed to be concluded upon person paying tax with interest under Section 50 and penalty equivalent to 50 per cent of tax within thirty days of communication of order. These provisions indicate how sub-Sections (5), (8) and (11) operate at different stages of process. 48 Now in this backdrop, it becomes necessary to emphasize that before Commissioner can levy provisional attachment, there must be formation of opinion and that it is necessary so to do for purpose of protecting interest of government revenue. power to levy provisional attachment is draconian in nature. By exercise of power, property belonging to taxable person may be attached, including bank account. attachment is provisional and statute has contemplated attachment during pendency of proceedings under stipulated statutory provisions noticed earlier. attachment which is contemplated in Section 83 is, in other words, at stage which is anterior to finalization of assessment or raising of demand. Conscious as legislature was of draconian nature of power and serious consequences which emanate from attachment of any property including bank account of taxable person, it conditioned exercise of 34 PART D power by employing specific statutory language which conditions exercise of power. language of statute indicates first, necessity of formation of opinion by Commissioner; second, formation of opinion before ordering provisional attachment; third existence of opinion that it is necessary so to do for purpose of protecting interest of government revenue; fourth, issuance of order in writing for attachment of any property of taxable person; and fifth, observance by Commissioner of provisions contained in rules in regard to manner of attachment. Each of these components of statute are integral to valid exercise of power. In other words, when exercise of power is challenged, validity of its exercise will depend on strict and punctilious observance of statutory pre- conditions by Commissioner. While conditioning exercise of power on formation of opinion by Commissioner that "for purpose of protecting interest of government revenue, it is necessary so to do", it is evident that statute has not left formation of opinion to unguided subjective discretion of Commissioner. formation of opinion must bear proximate and live nexus to purpose of protecting interest of government revenue. 49 By utilizing expression "it is necessary so to do" legislature has evinced intent that attachment is authorized not merely because it is expedient to do so (or profitable or practicable for revenue to do so) but because it is necessary to do so in order to protect interest of government revenue. Necessity postulates that interest of revenue can be protected only by provisional attachment without which interest of revenue would 35 PART D stand defeated. Necessity in other words postulates more stringent requirement than mere expediency. provisional attachment under Section 83 is contemplated during pendency of certain proceedings, meaning thereby that final demand or liability is yet to be crystallized. anticipatory attachment of this nature must strictly conform to requirements, both substantive and procedural, embodied in statute and rules. exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to peril of arbitrary power. Each of these ingredients must be strictly applied before provisional attachment on property of assesses can be levied. Commissioner must be alive to fact that such provisions are not intended to authorize Commissioners to make preemptive strikes on property of assessee, merely because property is available for being attached. There must be valid formation of opinion that provisional attachment is necessary for purpose of protecting interest of government revenue. 50 These expressions in regard to both purpose and necessity of provisional attachment implicate doctrine of proportionality. Proportionality mandates existence of proximate or live link between need for attachment and purpose which it is intended to secure. It also postulates maintenance of proportion between nature and extent of attachment and purpose which is sought to be served by ordering it. Moreover, words embodied in sub-Section (1) of Section 83, as interpreted above, would leave no manner of doubt that while ordering provisional attachment Commissioner must in formation of opinion act on basis of tangible material on 36 PART D basis of which formation of opinion is based in regard to existence of statutory requirement. While dealing with similar provision contained in Section 4536 of Gujarat Value Added Tax Act 2003 , one of us (Hon ble Mr Justice MR Shah) speaking for Division Bench of Gujarat High Court in Vishwanath Realtor v State of Gujarat37 observed: 8.3. Section 45 of VAT Act confers powers upon Commissioner to pass order of provisional attachment of any property belonging to dealer during pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, order of provisional attachment can be passed by Commissioner when Commissioner is of opinion that for purpose of protecting interest of Government Revenue, it is necessary so to do. Therefore, before passing order of provisional attachment, there must be opinion formed by Commissioner that for purpose of protecting interest of Government Revenue during pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally any property belonging to dealer. However, such satisfaction must be on some tangible material on objective facts with Commissioner. In given case, on basis of past conduct of dealer and on basis of some reliable information that dealer is likely to defeat claim of Revenue in case any order is passed against dealer under VAT Act and/or dealer is likely to sale his properties and/or sale and/or dispose of properties and in case after conclusion of assessment/reassessment proceedings, if there is any tax liability, Revenue may not be in position to recover amount thereafter, in such case only, however, on formation of subjective satisfaction/opinion, Commissioner may exercise powers under Section 45 of VAT Act. (emphasis supplied) 36 Section 45 (1) provides as follows: 45. Provisional attachment. - (1) Where during tendency of any proceedings of assessment or reassessment of turnover escaping assessment, Commissioner is of opinion that for purpose of protecting interest of Government revenue, it is necessary so to do, he may by order in writing attach provisionally any property belonging to dealer in such manner as may be prescribed. 37 Special Civil No. 7210 of 2015, decided on 29 April 2015 37 PART D 51 We adopt test of existence of tangible material . In this context, reference may be made to decision of this Court in Commissioner of Income Tax v Kelvinator of India Limited38. Mr Justice SH Kapadia (as learned Chief Justice then was) while considering expression "reason to believe" in Section 147 of Income Tax Act 1961 that income chargeable to tax has escaped assessment inter alia by omission or failure of assessee to disclose fully and truly all material facts necessary for assessment of that year, held that power to reopen assessment must be conditioned on existence of tangible material and that reasons must have live link with formation of belief . This principle was followed subsequently in two judge Bench decision in Income Tax Officer, Ward No. 162 (2) v Techspan India Private Limited39. While adverting to these decisions we have noticed that Section 83 of HPGST Act uses expression opinion as distinguished from reasons to believe . However for reasons that we have indicated earlier we are clearly of view that formation of opinion must be based on tangible material which indicates live link to necessity to order provisional attachment to protect interest of government revenue. 52 Rule 159 prescribes modalities for effecting provisional attachment of property. Rule 159 provides thus : 159. Publication of information in respect of persons in certain cases. - (1) If Commissioner, or any other officer authorised by him in this behalf, is of opinion that it is necessary or expedient in public interest to publish name of any person and any other particulars relating to any 38 (2010) 2 SCC 723 39 (2018) 6 SCC 685 38 PART D proceedings or prosecution under this Act in respect of such person, it may cause to be published such name and particulars in such manner as it thinks fit. (2) No publication under this section shall be made in relation to any penalty imposed under this Act until time for presenting appeal to Appellate Authority under section 107 has expired without appeal having been presented or appeal, if presented, has been disposed of. Explanation. - In case of firm, company or other association of persons, names of partners of firm, directors, managing agents, secretaries and treasurers or managers of company, or members of association, as case may be, may also be published if, in opinion of Commissioner, or any other officer authorised by him in this behalf, circumstances of case justify it. 53 Under sub-Rule (1) of Rule 159, attachment of property by Commissioner under Section 83 is effected by passing order mentioning details of property which is attached. form in which order is to be made is prescribed in form GST DRC-22. This form is extracted below: 39 PART D 54 Under sub-Rule (5) of Rule 159, person whose property is attached is allowed seven days time to file objection that property attached was or is not liable to attachment . Sub-Rule (5) stipulates that Commissioner may after affording opportunity of being heard to person filing objection release property by order in form GSTDRC-23. Similarly, under sub-Rule 40 PART D (6) upon being satisfied that property was or is no longer liable to be attached, Commissioner is empowered to release property by issuing order in Form GST DRC- 23 for releasing of property under attachment. Form is extracted below : 55 significant aspect of Rule 159(5) is that upon levy of provisional attachment, person whose property is attached is empowered to file objection within seven days on ground that property was or is not liable to attachment. In using expression was or is no longer liable for attachment , 41 PART D delegate of legislature has comprehended two alternative situations. first, evidenced by use of words was indicates that property was on date of attachment in past not liable to be attached. That is reason for use of past tense was . expression is not liable to attachment indicates situation in praesenti. Even if property, arguably, was validly attached in past, person whose property has been attached may demonstrate to Commissioner that it is not liable to be attached in present. 56 second significant aspect of sub-Rule (5) is mandatory requirement of furnishing opportunity of being heard to person whose property is attached. This is in consonance with principles of natural justice and ensures that fair procedure is observed. Sub-Rule (5) provides for post- provisional attachment right of: (i) Submitting objection to attachment; (ii) opportunity of being heard. Sub - Rule (5) contains clear language to effect that person whose property is attached is entitled to two procedural entitlements: first, right to submit objection on ground that property was not or is not liable to be attached; and second, opportunity of being heard to person filing objection. This is clear indicator that in addition filing of objection, person whose property is attached is entitled to opportunity of being heard. It is not open to Commissioner, as has been stated in present case, to hold view that only safeguard under sub-Rule 5 is to submit objection without 42 PART D opportunity of personal hearing. Such construction would be plainly contrary to sub-Rule 5 which contemplates both submission of objection to attachment and opportunity of being heard. opportunity of being heard can be availed of as matter of right by person whose property is attached. Both right to submit objection and to be afforded opportunity of being heard are valuable safeguards. consequence of provisional attachment is serious. It displaces person whose property is attached from dealing with property. Where bank account is attached, it prevents person from operating account. business entity whose bank account is attached is seriously prejudiced by inability to utilize proceeds of account for purpose of business. dual procedural safeguards inserted in sub-Rule 5 of Rule 159 demand strict compliance. Commissioner who hears objections must pass reasoned order either accepting or rejecting objections. To allow Commissioner to get by without passing reasoned order will make his decision subjective and defeat purpose of subjecting it to judicial scrutiny. Commissioner must deal with objections and pass reasoned order indicating whether, and if not, why objections are not being accepted. Sub- Rule 6 of Rule 159 allows for release of property which either was or is no longer liable for attachment. form in which such order has to be passed, namely form GST DRC-23, states that now there is no such proceeding pending against defaulting person which warrants attachment of account or as case may be, property. Sub- Rules 5 and 6 do not expressly contemplate situation in which person 43 PART D whose property is attached can object on ground that attachment is in excess of amount likely to be due for which proceedings have been launched under Act. Nor does it provide for specific opportunity to taxable person to offer any alternative form of security in lieu of attachment. Such opportunity must be read in to provision to allow for fair working in practice. Whether any alternative security that is furnished by taxable person should be accepted and if so, its sufficiency, is matter for Commissioner to determine. Undoubtedly, taxable person may not have right to demand that only particular form of security must be accepted. Commissioner has to decide whether form of security offered would secure interest of revenue. Where taxable person sets up plea that extent of attachment is excessive or where taxable person offers alternative form of security, these are also matters which ought to be determined by Commissioner in exercise of powers under Rule 159(5). scope of objection can also extend to nature of property which is being provisionally attached. Now, it is in this backdrop that we proceed to determination of whether petition under Article 226 was maintainable and if it was, whether Commissioner exercised powers under Section 83 read with Rule 159 in accordance with law. 57 material facts for making this determination need to be recapitulated. On 3 October 2018, memo was issued under Section 70 (incorrectly referring to provisions of Section 74) by Joint Commissioner of State Taxes and Excise directing appellant to appear on 9 October 2018 along with specific 44 PART D documents pertaining to years 2017-18 and 2018-19. notice stated that in event that appellant failed to appear, Commissioner would be constrained to issue notice to show cause under Section 74(1). On 9 October 2018, two partners of appellant attended hearing. On 10 October 2018, detection case under Section 74 of HPGST Act and CGST Act read with Section 20 of IGST Act was initiated against supplier of appellant, GM Power Tech by search and seizure operation conducted under Section 67. On 15 October 2018, partners of appellant attended case hearing and provided certain documents which were required by department. partners of GM Powertech were arrested under provisions of Sections 69 and 132 of HPGST Act on 3 December 2018, on allegation that they had made fraudulent claims of ITC from fake/fictitious firms of Delhi and Kanpur. On 15 December 2018, representatives of appellant were directed to remain present on 17 December 2018 for explaining allegedly illegal claim of ITC for 2017-18 and 2018-19. representative of appellant attended enquiry on 17 December 2018. On 9 January 2019, order of provisional attachment was issued under Section 83 by Joint Commissioner of State Taxes and Excise by which payment of Rs 5 crores due to appellant from M/s Fujikawa Power was attached on ground that appellant had availed of ITC of Rs 3.25 crores against purchase of goods valued at about Rs 21 crores from GM Powertech for 2017-18 and 2018-19 and case of GST fraud had been instituted against alleged supplier. On 19 January 2019, Form GST DRC-22 was issued to Fujikawa Power regarding attachment of Rs 5 crores. On 29 January 2019, appellant made representation under Rule 159(5) for 45 PART D unblocking credit and releasing amount which was provisionally attached. On 30 January 2019, order of provisional attachment was withdrawn completely with immediate effect. On 9 April 2019 and 5 July 2019 representative of appellant attended case hearing. On 4 July 2020, intimation was furnished to appellant of tax ascertained as payable under Section 74(5). According to intimation, appellant received among other items, lead ingots from GM Powertech during FY 2017-18 and 2018-19 and investigation had revealed that ITC had been fraudulently availed of by supplier on basis of invoices of fake firms. appellant had also availed of ITC due to inward supplies from GM Powertech. On 3 and 5 August 2020, appellant filed its submissions under Rule 142(2) (a) against proposed liability. On 6 October 2020, order was passed under Section 74(9) against GM Powertech confirming demand of Rs 39.48 crores for 2017-18 and 2018- 19. proceedings concluded that GM Powertech had (i) No business establishment or property in Himachal Pradesh; and (ii) No security or surety. 58 On 21 October 2020, Commissioner of State Taxes and Excise, Himachal Pradesh delegated, in pursuance of provisions of Section 5(3) powers vested under Section 83(1) inter alia to Joint Commissioner of State Taxes and Excise. On 28 October 2020, fresh order was issued under Section 83 stating that proceedings were initiated against appellant under Section 74 since it was found to be involved in ITC fraud of Rs 5.03 crores during 2017- 18 and 2018-19. Since GST fraud case had been initiated against GM 46 PART D Powertech on whom demand had been raised, ITC claimed by appellant against supplies effected by GM Powertech was held to be inadmissible resulting in provisional attachment of payments due to appellant to extent of Rs 5,03,82,554/-. similar order was issued on 28 October 2020 under Section 83 to M/s Deepak International Limited. appellant submitted detailed representation under Rule 159 (5) to Joint Commissioner. representation was rejected on 6 November 2020 without affording opportunity of being heard. Thereafter, on 27 November 2020, notice to show cause was issued to appellant under Section 74(1) recording that appellant had shown inward supplies of lead ingots from GM Powertech and had claimed and utilized ITC on that basis. However, all suppliers from whom GM Powertech had shown inward supplies of goods were found to be fictitious, fake and non-existent. GST registration of GM Powertech had been cancelled and by order under Section 74(9), additional demand of Rs 39.48 crores was confirmed. appellant was called upon to show cause as to why interest, tax and penalty should not be imposed. appellant instituted writ proceedings before Himachal Pradesh High Court inter alia for (i) Challenging delegation by Commissioner on 21 October 2020; (ii) proceedings initiated under Section 83; and (iii) Revocation of provisional attachment. writ petition was dismissed by High Court on ground that appellant had alternative remedy available in law. 47 PART D 59 sole ground which has weighed with High Court in holding that writ proceedings were not maintainable is that writ petitioner has not only (an) efficacious remedy, rather alternative remedy under GST Act . In addition, High Court has observed that writ petition filed by GM Powertech against whom similar allegations have been leveled had been dismissed by relegating it to pursuit of alternative remedy. learned senior counsel appearing on behalf of appellant submitted that GM Powertech had been relegated to pursuit of alternative remedy since order of assessment had been passed against it. However, insofar as appellant is concerned, writ proceedings were instituted to challenge levy of provisional attachment under Section 83 and there is no alternative remedy provided under Act for challenging order under Section 83. 60 Section 107 of HPGST Act 2017 is incorporated in Chapter XVIII which deals with appeals and revisions. Section 107(1) provides as follows: 107. Appeals to Appellate Authority. (1) Any person aggrieved by any decision or order passed under this Act or Central Goods and Services Tax Act, 2017 (No.12 of 2017) by adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from date on which said decision or order is communicated to such person. 61 Sub-Section (1) of Section 107 makes it abundantly clear that appeal to Appellate Authority is available against decision or order passed under HPGST Act or CGST Act by "adjudicating authority". Sub-Section (2) similarly provides that: (2) Commissioner may, on his own motion, or upon request from Commissioner of central tax, call for and examine 48 PART D record of any proceeding in which adjudicating authority has passed any decision or order under this Act or Central Goods and Services Tax Act, 2017 (No.12 of 2017) for purpose of satisfying himself as to legality or propriety of said decision or order and may, by order, direct any officer subordinate to him to apply to Appellate Authority within six months from date of communication of said decision or order for determination of such points arising out of said decision or order as may be specified by Commissioner in his order. Sub-Section (2) confers revisional power on Commissioner in regard to legality or propriety of decision or order passed by adjudicating authority. expression adjudicating authority is defined by Section 2(4) in following terms: (4) adjudicating authority means any authority, appointed or authorized to pass any order or decision under this Act, but does not include Commissioner, Revisional Authority, Authority for Advance Ruling, Appellate Authority for Advance Ruling, Appellate Authority and Appellate Tribunal; 62 From above definition, it is evident that expression adjudicating authority does not include among other authorities, Commissioner. In present case, narration of facts indicates that on 21 October 2020, Commissioner had in exercise of his powers under Section 5(3) made delegation inter alia to Joint Commissioner of State Taxes and Excise in respect of powers vested under Section 83(1). Joint Commissioner, in other words, was exercising powers which are vested in Commissioner under Section 83(1) to order provisional attachment in pursuance of delegation exercised on 21 October 2020. This being position, clearly order passed by Joint Commissioner as delegate of Commissioner was not subject to appeal under Section 107(1) and only remedy that was 49 PART D available was in form of invocation of writ jurisdiction under Article 226 of Constitution. High Court was, therefore, clearly in error in declining to entertain writ proceedings. 63 entire procedure which has been followed by Joint Commissioner in present case is contrary to provisions contained in Section 83 read with Rule 159. Joint Commissioner (acting on behalf of Commissioner) has proceeded on understanding that opportunity of being heard to person whose property is provisionally attached is matter of discretion, discretion of being that of Commissioner. In counter affidavit which has been filed by Commissioner it has been stated that: 17. It is submitted that petitioner duly participated in proceedings initialed u/Sec. 83 of HPGST Act 2017 and also filed its objections. Once petitioner filed its objections and same were rejected on 06.11.2020 then petitioner could not have turned back and challenged initiation of proceedings u/Sec. 83 or HPGST Act, 2017, only because proceedings did not end up favoring of Petitioner. 18. It is reiterated that fresh order of attachment passed on 28.10.2020 was not based on same set or allegations. 19. It is further submitted that once Petitioner had filed objections, then any opportunity of hearing was discretion of Ld. Commissioner. 64 This understanding of Commissioner is in teeth of and clearly contrary to provisions of Rule 159(5). Rule 159(5), as explained earlier contemplates two safeguards to person whose property is attached. Firstly, it permits such person to submit objections to order of attachment on ground that property was or is not liable for attachment. Secondly, Rule 50 PART D 159(5) posits opportunity of being heard. Both requirements are cumulative. Commissioner's understanding that opportunity of being heard was at discretion of Commissioner is therefore flawed and contrary to provisions of Rule 159(5). There has, hence, been fundamental breach of principles of natural justice. 65 On 28 October 2020, following order was recorded in file noting by Joint Commissioner purporting to justify levy of provisional attachment : 51 PART D 52 PART D 53 PART D 66 Ex facie, above order passed by Joint Commissioner does not indicate any basis for formation of opinion that levy of provisional attachment was necessary to protect interest of government revenue. order in file noting refers to fact that case of GM Powertech had been decided under Section 74 resulting in additional demand of Rs. 39 crores on account of fraudulent claim of ITC for FY 2017-18 and 2018-19. GM Powertech is alleged to have passed on ITC to various Registered Tax Persons40 situated in Himachal Pradesh by issuing invoices inter alia to appellant during 2018-19 for which case under Section 74 had been initiated. order records 40 RTP 54 PART D that appellant had claimed ITC of Rs 3.25 crores on strength of invoices issued by GM Powertech. order merely records that submissions which were urged by appellant on 5 August 2020 are not sustainable . In view of facts involved in case , Joint Commissioner concluded that it is necessary at this stage to safeguard government revenue and since appellant had sold goods to Fujikawa payment due to it was being attached provisionally. order of Joint Commissioner contains absolutely no basis for formation of opinion that provisional attachment was necessary to safeguard interest of revenue. No tangible material has been disclosed. record clearly reveals breach of mandatory pre- conditions for valid exercise of powers under Section 83 of HPGST Act. 67 order of provisional attachment under Section 83(1) is to be issued during pendency of any proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74 . In present case, notice to show cause under Section 74(1) of HPGST Act was issued to appellant on 27 November 2020. After High Court dismissed writ petition, this Court was moved under Article 136 of Constitution. Notice was issued in Special Leave Petition on 4 February 2021 returnable on 19 February 2021. day before case was listed, on 18 February 2021, ex parte order was passed by Joint Commissioner under Section 74 (9) of HPGST Act confirming demand of Rs 8,30,27,218 in notice to show cause. 68 It is evident from facts noted above that order of provisional attachment was passed before proceedings against appellant were 55 PART D initiated under Section 74 of HPGST Act. Section 83 of Act requires that there must be pendency of proceedings under relevant provisions mentioned above against taxable person whose property is sought to be attached. We are unable to accept contention of respondent that merely because proceedings were pending/concluded against another taxable entity, that is GM Powertech, powers of Sections 83 could also be attracted against appellant. This interpretation would be expansion of draconian power such as that contained in Section 83, which must necessarily be interpreted restrictively. Given that there were no pending proceedings against appellant, mere fact that proceedings under Section 74 had concluded against GM Powertech, would not satisfy requirements of Section 83. Thus, order of provisional attachment was ultra vires Section 83 of Act. 69 On 1 March 2021, appellant has filed appeal under Section 107 together with deposit of Rs 32,15,488 representing ten per cent of tax due. Section 107(6) contains following stipulation: (6) No appeal shall be filed under sub-section (1), unless appellant has paid (a) in full, such part of amount of tax, interest, fine, fee and penalty arising from impugned order, as is admitted by him; and (b) sum equal to ten per cent of remaining amount of tax in dispute arising from said order, in relation to which appeal has been filed. Sub-Section (7) stipulates that : (7) Where appellant has paid amount under sub-section (6), recovery proceedings for balance amount shall be deemed to be stayed. 56 PART D 70 Clause (a) of sub-Section (6) provides that no appeal shall be filed without payment in full, of such part of amount of tax, interest, fine, fee and penalty arising from impugned order as is admitted. In addition, under clause (b), ten per cent of remaining amount of tax in dispute arising from order has to be paid in relation to which appeal has been filed. Upon payment of amount under sub-Section (6) recovery proceedings for balance are deemed to be stayed. Thus, in any event, order of provisional attachment must cease to subsist. appellant, having filed appeal under Section 107, is required to comply with provisions of sub-Section (6) of Section 107 while recovery of balance is deemed to be stayed under provisions of sub- Section (7). As observed hereinabove and under Section 83, order of provisional attachment may be passed during pendency of any proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74. Therefore, once final order of assessment is passed under Section 74 order of provisional attachment must cease to subsist. Therefore, after final order under Section 74 of HPGST Act was passed on 18 February, 2021, order of provisional attachment must come to end. 71 Moreover, order of provisional attachment was issued by Joint Commissioner which was withdrawn on 30 January 2019, after considering representations made by petitioner. On very ground, without any material change in circumstances. Another order of provisional attachment came to be issued by another Joint Commissioner. Therefore, it was contention of petitioner before High Court that subsequent order of provisional 57 PART E attachment is in substance and effect order reviewing earlier order withdrawing order of provisional attachment which was not permissible and therefore subsequent order of provisional attachment is without jurisdiction. High Court has not considered this aspect. Both earlier and subsequent orders of provisional attachment are on same grounds. Therefore, unless there was change in circumstances, it was not open for Joint Commissioner to pass another order of provisional attachment, after earlier order of provisional attachment was withdrawn after considering representations made by petitioner. This is additional ground to set aside subsequent order of provisional attachment. E Summary of findings 72 For above reasons, we hold and conclude that (i) Joint Commissioner while ordering provisional attachment under section 83 was acting as delegate of Commissioner in pursuance of delegation effected under Section 5(3) and appeal against order of provisional attachment was not available under Section 107 (1); (ii) writ petition before High Court under Article 226 of Constitution challenging order of provisional attachment was maintainable; (iii) High Court has erred in dismissing writ petition on ground that it was not maintainable; 58 PART E (iv) power to order provisional attachment of property of taxable person including bank account is draconian in nature and conditions which are prescribed by statute for valid exercise of power must be strictly fulfilled; (v) exercise of power for ordering provisional attachment must be preceded by formation of opinion by Commissioner that it is necessary so to do for purpose of protecting interest of government revenue. Before ordering provisional attachment Commissioner must form opinion on basis of tangible material that assessee is likely to defeat demand, if any, and that therefore, it is necessary so to do for purpose of protecting interest of government revenue. (vi) expression necessary so to do for protecting government revenue implicates that interests of government revenue cannot be protected without ordering provisional attachment; (vii) formation of opinion by Commissioner under Section 83(1) must be based on tangible material bearing on necessity of ordering provisional attachment for purpose of protecting interest of government revenue; 59 PART E (viii) In facts of present case, there was clear non-application of mind by Joint Commissioner to provisions of Section 83, rendering provisional attachment illegal; (ix) Under provisions of Rule 159(5), person whose property is attached is entitled to dual procedural safeguards: (a) entitlement to submit objections on ground that property was or is not liable to attachment; and (b) opportunity of being heard; There has been breach of mandatory requirement of Rule 159(5) and Commissioner was clearly misconceived in law in coming into conclusion that he had discretion on whether or not to grant opportunity of being heard; (x) Commissioner is duty bound to deal with objections to attachment by passing reasoned order which must be communicated to taxable person whose property is attached; (xi) final order having been passed under Section 74(9), proceedings under Section 74 are no longer pending as result of which provisional attachment must come to end; and (xii) appellant having filed appeal against order under section 74(9), provisions of sub-Sections 6 and 7 of Section 107 will come into operation in regard to payment of tax and stay on recovery of 60 PART E balance as stipulated in those provisions, pending disposal of appeal. 73 For above reasons, we allow appeal and set aside impugned judgment and order of High Court dated 1 January 2021. 74 writ petition filed by appellant under Article 226 of Constitution shall stand allowed by setting aside orders of provisional attachment dated 28 October 2020. 75 There shall be no order as to costs. Pending application(s), if any, stand disposed of. ... ... ....... ........J. [Dr Dhananjaya Y Chandrachud] .. .. .... ........ . ........J. [M R Shah] New Delhi; April 20, 2021 61 Radha Krishan Industries v. State of Himachal Pradesh & Or