The facts in the context of which this case arises are that the appellant manufactures lead according to the specific requirements of its clients, and has a factory at village Meerpur Gurudwara.

On 3 October 2018, a notice was issued to the appellant by the third respondent requiring it to appear on 9 October 2018 and produce (i) invoices pertaining to inward and outward supplies for the years 2017-18 and 2018-19; (ii) party-wise summary/ledger of inward supplies; (iii) proof of payment of GST with a commodity-wise breakup; and (iv) copies of GSTR-1, GSTR-2 and GSTR-3 returns from July 2017 to July 2018. The appellant appeared before the third respondent and submitted original tax invoices pertaining to inward and outward supplies for 2017-18 and 2018-19 by a letter dated 15 October 2018. On 10 October 2018, a ‘detection case’ was registered against GM Powertech, one of the suppliers of the appellant, under Section 74 of the HPGST Act and the CGST Act read with Section 20 of the Integrated Goods and Services Tax Act, 20178. This was through a search and seizure.The partners of GM Powertech were arrested on 3 December 2018 on the ground of raising fraudulent claims of input tax credit9 from fake/fictitious firms in Delhi and Kanpur.

The appellant received a memo by an e-mail dated 15 December 2018 from the third respondent directing it to be present on 17 December 2018 for explaining the allegedly illegal claim of ITC made during 2017-18 and 2018-19. By its letter dated 17 December 2018, the appellant contended that it had validly claimed ITC as it fulfilled the conditions under the GST Act.

On 9 January 2019, a notice10 was issued to Fujikawa Power, one of the customers of the appellant, for provisionally attaching an amount of Rs. 5 crores due to the appellant, the third respondent passed an 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 the appellant. The appellant responded by a representation dated 29 January 2019, claiming inter alia, that the order of attachment was without affording a hearing. The appellant also claimed that on 26 December 2018, they had noticed that the ITC had been blocked without prior notice. On 30 January 2019, the notice of attachment was withdrawn by the third respondent. On 21 October 2020, the Commissioner of State Taxes and Excise, Himachal Pradesh delegated his powers under the Act to the third respondent. The third respondent issued two orders of provisional attachment dated 28 October 2020 attaching the receivables of the appellant from its customers, Fujikawa Power and M/s Deepak International. The attachment order issued to Fujikawa Power under Rule 159(1) of the HPGST Rules noted that it owed about Rs. 4 crores to the appellant. The order states that the appellant was found to be involved in an ITC fraud amounting to Rs.5,03,82,554/- (Rs. 5.03 crores) during 2017-18 and 2018-19. A similar order was issued to Deepak International, noting that a payment of Rs. 2.91 crores was owed by it to the appellant.

On 27 November 2020, the third respondent issued a notice to show cause to the appellant under Section 74(1) of the HPGST Act for recovering the ITC, interest and penalty. The notice was issued on the basis that the appellant had claimed ITC on the supplies received from GM Powertech and since the inward supplies made by GM Powertech were found to be fake, the appellant’s claim of ITC was also in question.

The orders of provisional attachment and the order passed by the third respondent, were challenged by the appellant before the High Court in a writ petition14 under Article 226. The High Court held that a writ is ordinarily not maintainable when there exists an alternative remedy. The exceptions to this rule are where the statutory authority has not acted in accordance with the provisions of the legislation; or acted in defiance of the fundamental principles of judicial procedure or where an order has been passed in violation of the principles of natural justice. The High Court held that it would not entertain a petition under Article 226 of the Constitution, if an efficacious remedy is available to the aggrieved person or where the statute under which the action complained of has been taken contains a mechanism for redressal of grievances.

The impugned orders of provisional attachment are in violation of the State GST Act which provides that an opportunity of being heard is to be given against the provisional attachment as a mandatory requirement. No efficacious alternative remedy is available against the orders of provisional attachment passed under Section 83 of the HPGST Act. The jurisdiction to pass an order under Section 83 is conferred on the Commissioner of State Taxes. Although the power stands delegated to the third respondent, the order is still deemed to be passed by the Commissioner (second respondent). Under the GST Act, an appeal against the order of the Commissioner lies before the GST Appellate Tribunal which has not been constituted till date. Thus, the only remedy available to the appellant was by filing a writ petition.

The appellant further stated that the power of provisional attachment under Section 83 of the HPGST Act is a drastic power and must be exercised with extreme care and caution. The stated reason for provisional attachment – the initiation of proceedings and passing of an order under Section 74 against the appellant’s supplier, GM Powertech – is insufficient to invoke the powers of provisional attachment against the appellant. The third respondent has failed to show that there is a threat to the interests of the revenue on account of the appellant’s alleged involvement in the said ITC fraud of GM Powertech. Even if the revenue has to attach the properties of the assessee, immovable properties must be attached. Attachment of bank accounts and trading assets should be a last resort only as it paralyses the business of the assessee.

The respondent stated that the SLP should be dismissed as the appellant has an alternate and efficacious remedy of an appeal under Section 107 of the HPGST Act. Moreover, the SLP has been rendered infructuous due to the order dated 18 February 2021 under Section 74(9) of the HPGST Act and the consequent appeal filed by the appellant against this order before the appellate authority. The delegation of powers under Section 83 of the HPGST Act by the second respondent to the third respondent does not imply that there was an irregular or illegal exercise of jurisdiction by the second respondent. GM Powertech had no property or business establishment in Himachal Pradesh. In order to avoid a similar situation against the appellant and to protect the interests of revenue, the impugned orders of provisional attachment were passed.