The Supreme Court (SC) on Wednesday said the taxman cannot view all businesses as fraudulent, as it made sharp observations against the manner in which goods and services tax (GST) was implemented by tax authorities.
A bench, comprising justices DY Chandrachud and MR Shah, said: "The Parliament had intended the GST to be a citizen-friendly tax structure... the purpose of the Act is lost in the manner in which it is enforced in our country."
The observations were made during the hearing of a plea challenging powers of provisional attachment under the Himachal Pradesh GST Act, filed by Radha Krishna Industries, represented by senior advocate Puneet Bali and advocate Surjeet Bhadu. The bench noted that tax authorities cannot go on attaching assets and it cannot be a pre-emptive strike, as it termed provisional attachment draconian.
The company submitted before the bench that power of attachment under Section 83 is draconian.
According to this Section, during the pendency of tax proceedings, the department can attach any property (including bank accounts and accounts receivable), as provisional attachment. The tax officers use it as a measure to guarantee the satisfaction of a later judgement by the courts.
The bench observed that a balance has to be maintained between protecting the interests of revenue and protecting genuine businesses. "The country needs to come out of this tax culture that all businesses are fraudulent... even when Rs12 crore tax has been paid, just because some tax is still due, you cannot start attaching property," it said.
It emphasised that tax officers raise huge demands from businesses with no accountability. The bench said tax officers raise huge demands after assessment and cited that if Rs10,000 crore has been reduced to Rs1,000 crore by the appellate tribunal or the top court, it must reflect in the assessment of the tax officer.
The bench stressed that law needs to be structured and the tax authorities have to abide by the mandate of law. After the parties concluded their arguments, the bench reserved the verdict.
The Himachal Pradesh High Court in January this year dismissed the plea seeking quashing of the provisional attachment under Section 83.
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