GST should be citizen-friendly: Supreme Court

The Supreme Court has slammed the tax authorities for resorting to "draconian" provisional attachment under the Goods and Services Tax regime, saying taxmen cannot see all businesses as fraudulent.

“Parliament had intended the GST to be citizen-friendly tax structure…..the purpose of the Act is lost in the manner in which it is enforced in our country," a bench of Justices D Y Chandrachud and M R Shah said.

The court made the oral observations during the hearing of a plea filed by Radha Krishna Industries challenging powers of provisional attachment under the Himachal Pradesh GST Act.

The petitioner was represented by senior advocate Puneet Bali and advocate Surjeet Bhadu.

Reserving the judgement, the bench noted that tax authorities cannot go on attaching as a pre-emptive strike.

The company submitted before the bench that power of attachment under Section 83 was draconian.

According to this provision, during the pendency of tax proceedings, the department can attach any property (including bank accounts and accounts receivable), as a provisional attachment. The tax officers used 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 protection of genuine businesses.

“The country needs to come out of this tax culture that all businesses are fraudulent….even when 12 crore tax has been paid, just because some tax is still due, you cannot start attaching property," the bench said.

The court stressed that tax officers raised huge demands from businesses with no accountability.

The law needs to be structured and the tax authorities have to abide by the mandate of law, it said.

The Himachal Pradesh High Court in January this year, dismissed the plea seeking quashing of the Section allowing provisional attachment.