The Supreme Court on Tuesday said the rule of law in a constitutional framework is fulfilled when law is substantively fair, procedurally fair and applied in a fair manner, as it held that the power to order a provisional attachment of property, including a bank account, of a taxable person, under the GST law is “draconian in nature”.
The top court emphasised that this power of attachment can’t be used as an “unguided discretion” by the authorities.
A bench of Justices D.Y. Chandrachud and M.R. Shah said: “The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled.”
The bench noted a provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallised.
“An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules,” said the bench.
In the 61-page judgement, the bench observed the formation of the opinion must be based on tangible material which indicates a live link to the necessity to order a provisional attachment to protect the interest of the government revenue.
“The commissioner must be alive to the fact that such provisions are not intended to make pre-emptive strikes on the property of the assessee, merely because property is available,” the bench said.
The top court allowed an appeal by Radha Krishna Industries, challenging the Himachal Pradesh High Court order of January 1, 2021.