2022 (6) TMI 93 - HC - GST

Provisional attachment - blocking of Input Tax Credit (ITC) - Revenue sought extension of time period for investigation which this Court has allowed of eight weeks - HELD THAT - It is noticed that this was in the back drop that the hearing in relation to the provisional attachment had already been completed on 27/08/2021 in wake of pending investigation, the order was not being passed and this Court had needed to issue the directions - As not disputed, the personal presence of opponent was not procured because of his moving to the Apex Court for anticipatory bail and his having been protected for a particular period. Thereafter till his date of arrest, though it was feasible for the officers to get his presence secured, as the State has today not pressed the prayer made in para-11.1, this Court is not desirous to go into this aspect any further. Now, no longer that grievance continuous in wake of order of the Coordinate Bench dated 04/05/2022. Moreover, as fairly admitted, this is a pre SCN stage in post search period and hence, unlimited period also would not be warranted. The State has volunteered that this inquiry/investigation should be over in three months period but to be on safer side, we would grant four months period to the State to complete the present exercise, so that it may not have to once again approach for extension. Application disposed off.

Summary

Issues Involved:
1. Quashing of Provisional Attachment Orders
2. Quashing of Communication/Order dated 27/07/2021
3. Quashing of Order Blocking Input Tax Credit
4. Quashing of Order of Prohibition in FORM GST INS-03
5. Cooperation with Investigation and Extension of Investigation Period

Issue-wise Detailed Analysis:

1. Quashing of Provisional Attachment Orders:
The petitioner company sought a writ to quash and set aside Provisional Attachment Orders (Annexures A-E) issued by the respondent authority. The court, however, chose not to delve into the merits of the matter at this stage. Instead, it directed the respondent authority to deliver the order of the hearing within 10 days and allowed the company to utilize finished goods for fulfilling contractual obligations with Sri Lanka and the United Kingdom. The company was also permitted to fulfill contracts with public sector entities using the finished goods in its possession.

2. Quashing of Communication/Order dated 27/07/2021:
The petitioner requested the quashing of the communication/order dated 27/07/2021, which prevented the company from receiving its debts from buyers. The court directed that any amount received from the supply of finished goods should be deposited in the company's current account at Bank of Baroda to ensure proper tracking by the Revenue Authority. The court did not pass any order regarding the operation of the current account or the credit of ITC worth Rs. 3 Crores, leaving it to be considered by the concerned authority during adjudication.

3. Quashing of Order Blocking Input Tax Credit:
The petitioner sought to quash the order blocking Input Tax Credit (ITC) of Rs. 3,10,07,409/-. The court did not issue any immediate order regarding the ITC, indicating that this matter should be considered by the respondent authority during adjudication. The company was required to provide details of every transaction to the Revenue Authority, with all transactions monitored by the Deputy Commissioner of State Tax Department, Bhavnagar.

4. Quashing of Order of Prohibition in FORM GST INS-03:
The petitioner sought to quash the order of prohibition in FORM GST INS-03, which restricted the company from dealing with its goods without prior permission. The court allowed the company to dispatch finished goods to its buyers and directed the company to cooperate with the investigation. The court emphasized the need for the company to provide transaction details to the Revenue Authority and to have its transactions monitored by the Deputy Commissioner.

5. Cooperation with Investigation and Extension of Investigation Period:
The State alleged non-cooperation from the petitioner, who was corresponding through letters and not appearing in person. The court noted that the petitioner had approached the Supreme Court for anticipatory bail and was in judicial custody after his arrest. The State sought an extension of the investigation period, which the court granted, allowing an additional four months for the investigation to be completed. The court emphasized the need for the petitioner to cooperate with the investigation and directed the director of the petitioner company to present himself before the Assistant Commissioner as required.

Conclusion:
The court directed the respondent authority to complete the investigation within four months, emphasizing the need for the petitioner to cooperate fully. The court allowed the company to utilize its finished goods for fulfilling contractual obligations and required the company to provide transaction details to the Revenue Authority. The court did not immediately address the issues related to the ITC and the operation of the current account, leaving these matters to be considered during adjudication.