2023 (6) TMI 684 - HC - GST

Provisional attachment of property - Input tax credit - it is alleged that the petitioner has not paid/short paid/erroneously refunded input tax credit by perpetrating fraud on the Government, that too by suppression and brazen manipulation - Section 83 of the CGST Act - HELD THAT - Rule 159(5) of the CGST Rules specifically provides a person whose property has been provisionally attached under Section 83 of the CGST Act, to move the Commissioner for lifting of the attachment - It is without exhausting the above statutory remedy that the petitioner has filed the writ petition invoking the plenary powers of this Court under Article 226 of the Constitution of India. It is well-settled that the writ jurisdiction of this Court is only to be exercised in extra-ordinary circumstances, especially when there is an alternative and efficacious statutory remedy. The principles have been well enunciated by the Hon'ble Supreme Court in M/s. Radha Krishan Industries v. State of Himachal Pradesh and others 2021 (4) TMI 837 - SUPREME COURT . The contention that the first respondent is not empowered and competent to pass Ext.P6 orders does not hold good in view of the express delegation of powers by Ext.R1(a) read with Sections 3 and 5 of the CGST Act - Even going by the decision relied on by the learned counsel for the petitioner, it is evident that the Bombay High Court in PRAFUL NANJI SATRA VERSUS STATE OF MAHARASHTRA, COMMISSIONER OF STATE TAX, JOINT COMMISSIONER OF STATE TAX (INVESTIGATION A) 2021 (4) TMI 85 - BOMBAY HIGH COURT has rendered the decision for the reason that there was nothing on record to disclose any authorisation by the Commissioner to the Joint Commissioner to pass the provisional attachment. In the instant case, the matter stands on a different footing because of the investment of power on the first respondent. Thus, there are no doubt that the first respondent is empowered to pass orders in the nature of Ext.P6 under Section 83 of the CGST Act. The writ petition is meritless and is only liable to be dismissed. The writ petition is dismissed.

Summary

Issues involved:
The issues involved in this case are the arbitrary attachment of properties and bank accounts of a partnership firm by the first respondent under Section 83 of the CGST Act, the alleged fraudulent activities of the petitioner leading to the issuance of show cause notices under Section 74 of the KGST Act, and the challenge to the legality of Ext.P6 orders passed by the first respondent.

Arbitrary Attachment of Properties and Bank Accounts:
The petitioner, a partnership firm engaged in the trade of scrap goods, challenged the Ext.P6 orders issued by the first respondent under Section 83 of the CGST Act, attaching the immovable properties and bank accounts of the petitioner. The petitioner contended that the action of the respondents in passing these orders was arbitrary, unjustifiable, and violated the petitioner's fundamental right to carry on business. The petitioner argued that the orders were passed without proper application of mind and in violation of settled provisions of law. The first respondent, in response, defended the attachment by stating that it was done to protect the government revenue and was not motivated by mala fides. The first respondent contended that the petitioner had committed severe fraud by availing input tax credit to non-existent suppliers, resulting in a potential liability running into crores of rupees. The court, after considering the pleadings and materials on record, upheld the validity of the Ext.P6 orders, finding that the first respondent was empowered to pass such orders under Section 83 of the CGST Act.

Fraudulent Activities and Show Cause Notices:
The second respondent had issued show cause notices (Exts.P1 and P2) under Section 74(1) of the KGST Act to the petitioner, alleging that the petitioner had purchased goods from 'non-existing' units and issued 'fake invoices' to avail fraudulent input tax credit. The petitioner had submitted replies to these notices. The first respondent argued that the investigation revealed that the petitioner had availed input tax credit to the tune of Rs.32 crore using forged documents and conducting business even after the cancellation of registration. The first respondent contended that the petitioner had engaged in fraudulent activities by evading taxes, leading to the issuance of the show cause notices and subsequent attachment of properties and bank accounts under Section 83 of the CGST Act. The court found that the investigation was ongoing, and prima facie evidence suggested fraudulent activities by the petitioner, justifying the actions taken by the respondents.

Legality of Ext.P6 Orders:
The petitioner challenged the legality of the Ext.P6 orders passed by the first respondent under Section 83 of the CGST Act. The petitioner argued that the first respondent did not have the authority to issue such orders and that only the Commissioner was empowered to do so. The petitioner contended that the provisions of the Act limited the powers of the first respondent in this regard. However, the court held that the first respondent was empowered to pass orders under Section 83 of the CGST Act, as delegated by the relevant notification and provisions of the Act. The court distinguished the case cited by the petitioner's counsel and found that the first respondent had the necessary authority to issue the Ext.P6 orders. Consequently, the writ petition challenging the legality of the orders was dismissed, with the petitioner advised to pursue statutory remedies if desired.