Sk Enterprises vs. Union Of INDIA

Facts

The Petitioner, S.K. Enterprises, challenged a Provisional Bank Attachment Order dated May 5, 2026, issued by Respondent No. 2 under Section 83 of the CGST Act, 2017, and Rule 159(1) of the CGST Rules, 2017. This order provisionally attached the Petitioner's bank account with TJSB Sahakari Bank and any other accounts linked to its PAN. The justification provided in the order was 'to protect the interests of the Revenue'. The Petitioner argued that the order was issued without proper application of mind and adherence to the preconditions stipulated by the Supreme Court. The Respondents contended that the Petitioner had reversed availed Input Tax Credits (ITCs) and that an investigation was ongoing, necessitating the protection of revenue interests. The Petitioner's counsel undertook to cooperate with the ongoing investigation.

Held

The Court held that the impugned Provisional Bank Attachment Order dated May 5, 2026, was not a valid exercise of power under Section 83 of the CGST Act, 2017. The Court relied on the Supreme Court's judgment in Radha Krishan Industries Vs. State of Himachal Pradesh, emphasizing that the power under Section 83 is draconian and requires strict adherence to preconditions. These include the formation of an opinion by the Commissioner based on tangible material that attachment is necessary to protect revenue interests, and that the attachment must be proportionate. The Court found that the impugned order merely stated the need to protect revenue interests without providing any other consideration or tangible material to justify the attachment. The Court also cited the principle from Mohinder Singh Gill Vs. Chief Election Commissioner, that the validity of an order must be judged by the reasons stated therein and cannot be supplemented by fresh reasons in an affidavit. Since the impugned order failed to meet the preconditions laid down by the Supreme Court, the Court quashed and set aside the order. The Respondents were granted liberty to pass appropriate orders in accordance with law. The Petitioner's undertaking to cooperate with the investigation was noted.

Key Issues

1. Whether the Provisional Bank Attachment Order dated May 5, 2026, issued under Section 83 of the CGST Act, 2017, is a valid exercise of power, considering the preconditions laid down by the Supreme Court in Radha Krishan Industries Vs. State of Himachal Pradesh? Petitioner's Arguments: The Petitioner argued that the impugned order was not a valid exercise of power under Section 83 of the CGST Act, 2017. They relied on the Supreme Court's decision in Radha Krishan Industries Vs. State of Himachal Pradesh, which mandates strict observance of preconditions, including the formation of an opinion by the Commissioner based on tangible material that it is necessary to protect the interest of the government revenue, and that the attachment must be proportionate. The Petitioner contended that the impugned order merely stated the need to protect revenue interests without substantiating it with any tangible material or demonstrating adherence to these preconditions. Respondents' Arguments: The Respondents submitted that the Petitioner had reversed the availed ITCs and that an investigation was underway. They argued that the provisional attachment was necessary to protect the interests of the Revenue. They also pointed to the Petitioner's admission of reversing ITC and alleged fraudulent availing of ITC, as well as non-cooperation with the investigation. The Respondents' justification for the attachment was presented in their Affidavit-in-Reply.