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M/s Radha Krishan Industries v. State of Himachal Pradesh & Ors.

Civil Appeal · 2021 INSC 266Decided 20 Apr 2021
Civil Appeal No. 1155 of 2021
Dr. Justice D.Y. Chandrachud · Justice M.R. Shah

Background

A lead-manufacturing company in Himachal Pradesh had its receivables from customers provisionally attached by the Joint Commissioner of State Taxes under Section 83 of the HPGST Act, after a separate company (from which the appellant had purchased goods) was found to have fraudulently passed on input tax credit. The company challenged the attachment in the High Court under Article 226 of the Constitution, but the High Court dismissed the petition as not maintainable, holding that the company had an alternative remedy of a statutory appeal. The company then approached the Supreme Court.

Decision Breakdown

The Supreme Court held that a writ petition was maintainable despite the existence of an alternate statutory remedy, because a breach of the fundamental/mandatory procedural safeguards and a complete absence of jurisdiction can justify direct High Court intervention. On merits, the Court found the attachment order disclosed no tangible material showing the Commissioner had actually formed the required "opinion" that attachment was necessary to protect government revenue: the power under Section 83 is "draconian" and must be construed strictly and exercised only on tangible material, with mandatory safeguards including the right to object and a hearing before the taxpayer's property is attached. Since proceedings against the appellant itself had already concluded with a final order under Section 74, and no valid opinion had ever been formed, the attachment was held illegal and ultra vires, and the Court set it aside, allowing the appeal.

Lesson Learnt

Government powers to freeze a citizen's or business's bank accounts/receivables before any final tax demand are not automatic: they must be backed by real evidence and a reasoned opinion of necessity, with the affected person given a chance to object and be heard; courts will step in directly even if a technical "alternative remedy" exists where such safeguards are ignored.

Official source (sci.gov.in)View Judgment (PDF)

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