2021 (6) TMI 639 - HC - GST

Service of SCN - while attaching the bank locker, no SCN served on the petitioner to offer his explanation - HELD THAT - Scrutiny of the documents revealed that the petitioner created 70 different fictitious/shell firms in Andhra Pradesh and Telangana for taking GST registrations. The modus operandi of the petitioner was that he opened fictitious firms only on paper to issue fake GST invoices showing supply of iron and steel goods, chemicals, battery scrap, led etc. This fictitious firms generally operated in three levels - there will be no money, bank transactions at the first and second levels. However, bank accounts are opened with Lakshmi Vilas Bank in the name of firms operating at third level showing receipt of sale consideration through banking channels from different business firms/companies in whose name fake GST invoices are issued for passing on ITC. In this process, the petitioner has issued fake GST invoices with a total turnover of ₹ 397,28,11,944/- without supply of goods to different business firms/companies by passing on a total fraudulent input tax credit of ₹ 61,30,33,274/- in respect of 21 firms, out of more than 70 firms created by him and thus caused huge loss to the Government exchequer. The investigation is stated to be pending. Without expressing any opinion on merits of petitioner s case, it is considered apt to direct the petitioner to approach Special Judge for Economic Offences-cum-IV Additional Metropolitan Sessions Judge, Visakhapatnam for appropriate relief - petition disposed off.

Summary

Issues Involved:
Challenging provisional attachment of bank locker and accounts under CGST Act, violation of fundamental rights, principles of natural justice, legality of proceedings, infringement of rights, merits of the writ petitions.

Analysis:
1. Challenging Provisional Attachment: The petitioner filed two writ petitions challenging the provisional attachment of the bank locker and accounts under the Central Goods and Services Tax Act, 2017. The petitioner argued that the proceedings were illegal, arbitrary, and contrary to the provisions of the Act, violating fundamental rights under the Constitution of India and principles of natural justice. The respondent department justified the attachment as part of an investigation into fake Input Tax Credit (ITC) invoices issued by the petitioner and accomplices without actual supply of goods, leading to a loss to the government exchequer.

2. Allegations and Investigation: The respondent department alleged that the petitioner was involved in creating fake invoices through fictitious/shell firms to claim ITC fraudulently. The investigation revealed that around 90 firms were operated by the petitioner for this purpose, and searches conducted in various locations exposed the fraudulent activities. The petitioner was accused of defrauding the government's tax revenue by issuing fake GST invoices without actual supply of goods, leading to a significant loss. The investigation was ongoing, and the petitioner's involvement in creating fictitious firms and issuing fake invoices was a key point of contention.

3. Legal Arguments: The main contention in the writ petitions was the alleged violation of principles of natural justice due to the lack of a show cause notice before attaching the bank locker and freezing the accounts. The petitioner claimed innocence and argued that no opportunity was given to explain the situation. On the other hand, the respondents vehemently opposed the writ petitions, highlighting the petitioner's involvement in creating shell companies and issuing fake invoices, which they argued was detrimental to the government's revenue.

4. Court's Decision: After considering the submissions from both parties, the Court found merit in the respondent's arguments regarding the ongoing investigation and the seriousness of the allegations against the petitioner. The Court decided not to intervene at that stage and directed the petitioner to approach the Special Judge for Economic Offences for appropriate relief. The Court refrained from expressing an opinion on the merits of the petitioner's case but emphasized the need to follow the legal process and seek relief through the appropriate judicial forum.

5. Disposition: The Court disposed of the writ petitions, granting the petitioner liberty to seek relief from the Special Judge for Economic Offences. The Court closed any pending interlocutory applications and emphasized the importance of following the legal procedures for seeking redressal in such matters. No costs were awarded in this disposition.