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TMI Blog2020 (12) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... utilization of the accrued credit is a vested right. No vested right accrues before taking credit. - the vociferous submission of Mr. Dave, the learned counsel appearing for the writ applicants as regards the indefeasible right to avail the ITC vis-a-vis Rule 86A of the Rules should fail and hereby fails. Scope of powers under Rule 86A - Rule 86A talks about reason to believe which is necessary to be formed for the purpose of blocking the input tax credit in cases of inquiry or investigation into fraudulent transactions. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - there must be material, based on which alone the authority could form its opinion that it has become necessary to block the input tax credit pending an inquiry or investigation into the fraudulent transactions of fake/bogus invoices. The existence of relevant material is a pre-condition to the formation of the opinion. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a prima facie case for the respondents to exercise the power under Rule 86A of the Rules. Although, no specific order has been passed and communicated to the writ applicants in this regard, yet in the facts of the present case, it cannot be said that exercise of power under Rule 86A for the purpose of blocking the ITC is mala fide or without any application of mind. There are highly disputed questions of fact as regards the debit of the ITC from the electronic credit ledger. Indisputably, the investigation is in progress. A prima facie case could be said to have been made out against the writ applicants. However we may only say that the investigation cannot continue for an indefinite period of time. Almost more than a year has elapsed and, in such circumstances, the authorities concerned should arrive at some conclusion or the other. Even Rule 86A of the Rules prescribes one year time limit - the respondents are directed to complete the investigation within a period of four weeks from the date of the receipt of this order and take an appropriate decision whether any case has been made out for issue of show-cause notice under Section 74 of the Act or not. Application dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ch ITC of ₹ 84,34,547/- and also allow the Petitioner to take credit of ₹ 25 Lakhs in electronic credit ledger for paying GST/IGST on the goods manufactured and supplied by the Petitioner. (B) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order, quashing and setting aside DRC-03 Form dated 21.12.2019 (Annexure-'G') thereby ordering cancellation of debit entries of ₹ 25,00,000/- in the Petitioner's Electronic Credit Ledger maintained under the CGST Act; (C ) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to stay the blocking of ITC of ₹ 84,34,547/- by the Respondents and direct Respondent No.2 herein to allow the Petitioner to utilize such ITC of ₹ 84,34,547/- as well as ₹ 25 Lakhs for paying GST on supplied of the final products on the terms and conditions that may be deemed fit by this Hon'ble Court. (D) An ex-parte ad-interim relief in terms of Para-17(C) above may kindly be granted. (E) Any other further relief that may be deemed fit in the facts and circumstances of the case may also please be granted." 5.2 The writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he RTGS. 5.5 It appears from the materials on record that the Directorate General of Goods & Services Tax Intelligence, Jaipur Zonal Unit received information that some registered dealers have been supplying only the tax invoices to the various manufacturers of steel products located across the Country, and in the course of such inquiry against such registered dealers/supplies, it was revealed that the writ applicant herein had also received inputs from them involving the ITC to the tune of ₹ 2.40 Crore. In such circumstances, the Investigating Agency thought fit to initiate an inquiry against the writ applicant herein by drawing the Panchnama dated 4th April, 2019. It is the case of the Department that the inquiry, so far, prima facie reveals that the concerned suppliers of inputs, referred to above, had issued only the tax invoices without supplying any tax paid inputs and the transactions of these input suppliers/registered dealers are only on paper and, therefore, the ITC availed by all the buyers including the writ applicant herein on such tax invoices of these input suppliers is inadmissible. It further appears from the materials on record that in the course of the inq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ITC and the final products like the TMT Bars, Rounds etc. Mr. Dave pointed out that approximately 3,821 MTs of the inputs received from these suppliers has also been recorded in the statutory production register maintained by the firm and such final products were supplied to the customers on payment of the appropriate GST by the firm. It is argued by Mr. Dave that if transactions involving 3,821 MTs of inputs were only on paper, as alleged by the Department, then the firm could not have manufactured the final products cleared on payment of the GST. 8. Mr. Dave further argued that the GSTR-3B Returns of the firm regarding the availment of the ITC on all such input transactions and utilization thereof were assessed finally by the jurisdictional Bhavnagar GST Officers without any objection and the same signifies the actual receipt of the tax paid inputs and utilization thereof by the firm. In this context, Mr. Dave pointed out that even in the reply affidavits of the respondents, such facts are not disputed. 9. Mr. Dave would argue that the respondents have not been able to furnish an iota of material before this Court in the form of statements, if any, of the input suppliers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly basis all throughout the period of two years in question. 13. Mr. Dave has a very serious grievance to redress while pointing out that all the input suppliers under cloud have been allowed to scott free of the GST Net by accepting their respective applications for de-registration. Mr. Dave pointed out that the GST Officers in charge of their divisions and Commissionerates allowed such applications and permitted deregistration. According to Mr. Dave, the orders for cancellation of registration passed by the jurisdictional GST Officers would indicate that no tax was found to be outstanding or payable from any of the concerned input suppliers. If the Department had a slightest of the doubt in this regard, then it would have initiated proceedings under Section 76(2) of the CGST Act against all such input suppliers. Mr. Dave further argued that when the registered input suppliers alleged to have issued the tax invoices without supplying the tax paid inputs to the writ applicants, were allowed to surrender their registrations without any liability, then no proceedings for the very same transactions against the recipients like the writ applicants would be justifiable nor permissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ application, it was not argued by the learned Assistant Solicitor General of India appearing on behalf of the respondents that the reasons have been recorded by the respondent No.4 in the form of notings in the file. Mr. Dave would submit that assuming for the moment that some reasons have been recorded in the form of notings in the file, such reasons, at no point of time, were communicated to his clients. It is only when his clients attempted to use the ITC lying in the credit ledger for discharging their GST liability, it was reported on the GST Network (GSTN) Portal that the credit of ₹ 84,34,547/- had been blocked. Mr. Dave would argue that his clients are seriously prejudiced by blocking of the ITC. 18. Mr. Dave further pointed out that Sub-Rule (3) of Rule 86A provides that the restriction on utilization of the credit shall cease to have effect after the expiry of period of one year from the date of imposing such restriction. The argument of Mr. Dave in this regard is that if the decision of blocking credit is not communicated to the person affected by it, then how would such affected person come to know that the restriction has ceased to have effect with efflux o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.1 herein and, in such statements, there is a clear cut admission of fraud. Mr. Vyas submitted that no sooner the investigation is over, then a show-cause notice shall be issued under Section 74 of the CGST Act, and along with the showcause notice, the materials relied upon, more particularly, the documentary evidence would also be made available to the writ applicant herein. Mr. Vyas argued that the formalities like recording the transactions in the statutory returns and forms, and payment through the RTGS against the goods in accordance with the invoice and payment for the transportation etc. was all just a show so as to give a color of genuineness to such transactions. Mr. Vyas argued that the amount of ₹ 25 Lakh was paid by the writ applicant of the Special Civil Application No.8841 of 2020 voluntarily by using the Login ID and password and, in such circumstances, such voluntary payment cannot be refunded at this stage. It is argued that the allegations of coercion or pressure are reckless and without any foundation for the same. 23. Mr. Vyas argued that the newly inserted Rule 86A (w.e.f. 26.12.2019) confers power upon the authority concerned to block the ITC if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s viz. Rajasthan, Jharkhand and Chhattisgarh which included various trading firms, recipients of such GST invoices and residences of suspected persons. During the course of search operations various records/documents in the form of purchase invoices, sale invoices, LRs of fake transportation firms, gadgets, mobile phones, blank signed cheque books, private records containing incriminating details have been seized under Panchnama proceedings from all over the places. Evidences recovered from all over the searched places conclusively established that all such transactions are only on papers and no physical movement of goods has taken place. By this way, recipients of invoices have availed ITC involved in such invoices merely on the strength of such invoices, without actual receipt of goods. Subsequently, cases were booked by this office against the trading firms, who have supplied invoices, recipients of such invoices who have availed ITC, merely on the strength of such invoices, without actually receipt of goods and other persons involved in facilitation of such ITC, wrongly and thereby defrauded the Government Exchequer of its legitimate dues. Statement of master mind behind crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that M/s S.S. Industries had supplied/cleared TMT Round Bars from their factory, totally valued at ₹ 91,64,364/ -, without issuing any invoice thereof and without payment of applicable GST thereon. By this way M/s S.S. Industries has evaded payment of GST amounting to ₹ 16.49 lakh. Partners of M/s S.S. Industries, Shri Sher Singh Shekhawat has categorically admitted this fact in his statement dated 20.05.2019. On being asked by this office, entire investigation was transferred to DGGI, JZU, Jaipur by the Bhavnagar CGST Commissionerate. With reference to para 5.2 of the petition, Section 16 of the CGST Act, 2017 specifies Eligibility and Conditions for taking Input Tax Credit. The same is reproduced here as under: Section 16. Eligibility and conditions for taking input tax credit- (1) Every Registered Person shall be entitled to take Input Tax Credit on any supply of goods or services or both to him which are used or intended to be used in the course of furtherance of his business and said amount will be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to file this petition under Article 226 of the Constitution. With reference to para 8 to 8.2 of the petition, investigation of the case is underway. Copies of all the relied upon documents, including statements, will be provided along with the show cause notice, which will be issued on completion of the investigation, within the time frame and as per the provisions of the CGST Act, 2017 and Rules made thereunder. This is clearly an afterthought of the petitioner. The contention of the petitioner is not true. Shri Sher Singh Shekhwat, Partner in the petitioner firm had voluntarily deposited an amount of ₹ 25,00,000/-, vide debit entry no. DC2407190355399 dated 23.07.2019 on being convinced with the evidences available with this office and subsequently being confronted with the same he not only deposited an amount of ₹ 25,00,000/- but also assured to pay remaining amount of such ITC, totally amounting to ₹ 4,95,69,048/ -. Further, such payments have been deposited voluntarily by the Petitioner. More so, payment in GST is system based and entirely under the control of Taxpayer. There is no intervention of the Department. There has been no threat or coercion, what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2019, 23.07.2019 and 20.01.2020. Further, the amount has been deposited voluntarily, there is no requirement for issuance of acknowledgement in DRC-04 and/or DRC-05 forms by any proper officer. DRC-04 and DRC-05 are issued under Rule 142(2) and 142(3), respectively which basically deals with `Notice and order for demand of amount payable under the CGST Act, 2017, which is not the issue in the present case. 5.11 Rule 142 of the Central Goods and Services Tax (CGST) Rules, 2017 relating to "Notice and Order for Demand of Amounts Payable under the Act", provides as under:" ; ; (2) Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of subsection (5) of section 73 or, as the case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or where any person makes payment of tax, interest, penalty or any other amount due in accordance with the provisions of the Act, whether on his own ascertainment or, as communicated by the proper officer under sub-rule (1A), he shall inform the proper officer of such payment in FORM GST DRC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling the ITC, the respondents could have blocked/debited the input tax credit (ITC) in the electronic credit ledger of the writ applicants by virtue of the power under Rule 86A of the CGST Rules which came into force vide the Notification No.75/2019-CT dated 26th December, 2019. 29. Before adverting to the rival submissions canvassed on either side, we may first look into the provisions of Rule 86A of the Rules. Section 86A reads thus; "Notification No. 75/2019-Central Tax New Delhi, the 26th December, 2019 G.S.R. 954(E).- In exercise of the powers conferred by section 164 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following rules further to amend the Central Goods and Services Tax Rules, 2017, namely:- 1. (1) These rules may be called the Central Goods and Services Tax (Ninth Amendment) Rules, 2019. (2) Save as otherwise provided, they shall come into force on the date of their publication in the Official Gazette. 2. In the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the said rules), with effect from the 1st January, 2020, in rule 36, in sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to Rule 86A above, we may now look into Section 16 of the CGST Act. The same reads thus; "Section 16 - Eligibility and conditions for taking input tax credit (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services-- (i) where the goods are delivered by the supplier to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under subsection (1) of said section for the month of March, 2019." 31. Analysis of the Rule 86A:- A. Supplier found non-existent or not conducting business at its registered place- It has been availed on the basis of the documents prescribed under Rule 36 i.e. tax invoice, debit note etc issued by a registered supplier who has been found non-existent or not to be conducting any business from any place for which registration has been obtained. B. Non receipt of goods or services or both: It has been availed on the basis of the documents prescribed under Rule 36 i.e. tax invoice, debit note etc without receipt of goods or services or both. C. Tax not paid into the Government treasury: It has been availed on the basis of documents prescribed against which no tax has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng observation/conclusion of the Supreme Court, as contained in Paras-4 and 5 respectively; "4.......As pointed out by us that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme, is affected and, in particular, it loses sight of the fact that provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the earlier scheme necessarily the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said rule would result in affecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r when making payment of excise duty on the excisable product. There is no provisions in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been vaildly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no correlation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 19. It is, therefore, that in the case of Eicher Motors Ltd. v. Union of India, this Court said that a credit under the Modvat Scheme was "as good as tax paid." 37. With the above principles, it is the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als or the inputs would continue until the facility available thereto gets worked out or until those goods existed. In that background, this Court held that by Section 37 of the Act, the authorities concerned cannot make a Rule which could take away the said right on goods manufactured prior to the date specified in the concerned Rule. In the facts of Eicher's case (supra) it is seen that by introduction of rule 57f(4a) to the rules, a credit which was lying unutilized on 16.3.1995 with the manufacturer was held to have lapsed. Therefore, that was a case wherein by introduction of the Rule a credit which was in the account of the manufacturer was held not to be available on the coming into force of that Rule, by that the right to credit itself was taken away, whereas in the instant case by the introduction of the second proviso to Rule 57G, the credit in the account of a manufacturer was not taken away but only the manner and the time within which the said credit was to be taken or utilized alone was stipulated. It is to be noted at this juncture that the substantive right has not been taken away by the introduction of the proviso to the Rule in question but a procedural restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who have already taken the credit before coming into force of the Rule in question. It operates prospectively in regard to those manufacturers who seek to take credit after the coming into force of this Rule. Therefore, in or (sic, our) opinion, the Tribunal was justified in holding that the Rule in question only restricts a right of a manufacturer to take the credit beyond the stipulated period of six months under the Rule. Therefore, this appeal will have to fail." 39. Though in the aforesaid case, the validity of the Rule had not been challenged, it is clear that the Supreme Court upheld the decision arrived at by the Tribunal holding that the rule in question only restricts a right of a manufacturer to take the credit beyond the period of six months under the Rule and consequently dismissed the appeal. It is also clear from the above decision that even after the introduction of the Rule, the substantive right has not been taken away, but a procedural restriction alone was introduced. This was permissible in law (vide para 7 of their order). 40. Thus, what is discernible from the above is that the Supreme Court categorically considered the aspect of availing the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the second limb of Mr. Dave's submission. According to Mr. Dave, the power conferred upon the Revenue under Rule 86A is to be exercised with due care and caution, and that too, based on cogent materials and not on mere suspicion. 43. Rule 86A talks about "reason to believe" which is necessary to be formed for the purpose of blocking the input tax credit in cases of inquiry or investigation into fraudulent transactions. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion. But, at the same time, there must be material, based on which alone the authority could form its opinion that it has become necessary to block the input tax credit pending an inquiry or investigation into the fraudulent transactions of fake/bogus invoices. The existence of relevant material is a pre-condition to the formation of the opinion. 44. The use of the word "may" indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that it had become necessary to order blocking of the input tax credit pending the inquiry. (See Bhikhubhai Vithlabhai Patel & Ors. vs. State of Gujarat, AIR 2008 SCC 1771) 46. In J. Jayalalitha vs. U.O.I., [AIR 1999 SC 1912], the Supreme Court while construing the expression "as may be necessary" employed in Section 3 (1) of the Prevention of Corruption Act, 1988 which conferred the discretion upon the State Government to appoint as many Special Judges as may be necessary for such area or areas or for such case or group of cases to try the offences punishable under the Act, observed : "The legislature had to leave it to the discretion of the Government as it would be in a better position to know the requirement. Further, the discretion conferred upon the Government is not absolute. It is in "The nature of a statutory obligation or duty. It is the requirement which would necessitate exercise of power by the Government. When a necessity would arise and of what type being uncertain the legislature could not have laid down any other guideline except the guidance of "necessity". It is really for that reason that the legislature while conferring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they exist or can the Government say the same thing where the circumstances relevant to the clause do not exist? The legislature no doubt has used the expression "circumstances suggesting". But that expression means that the circumstances need not be such as would conclusively establish an intent to defraud or a fraudulent or illegal purpose. The proof of such an intent or purpose is still to be adduced through an investigation. But the expression "circumstances suggesting" cannot support the construction that even the existence of circumstances is a matter of subjective opinion. That expression points out that there must exist circumstances from which the Authority forms an opinion that they are suggestive of the crucial matters set out in the three subclauses. It is hard to contemplate that the legislature could have left to the subjective process both the formation of opinion and also the existence of circumstances on which it is to be founded. It is also not reasonable to say that the clause permitted the Authority to say that it has formed the opinion on circumstances which in its opinion exist and which in its opinion suggest an intent to defraud or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully or truly all material facts. It is not any or every material, howsoever vague and indefinite or distant which would warrant the formation of the belief relating to the escapement of the income of the assessee from assessment. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 50. In Bhikhubhai Vithalabhai Patel (supra), the Supreme Court observed in paras 32 and 33 as under: "32. We are of the view that the construction placed on the expression "reason to believe" will equally be applicable to the expression "is of opinion" employed in the proviso to Section 17 (1) (a) (ii) of the Act. The expression "is of opinion", that substantial modifications in the draft development plan and regulations, "ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical if they were not imposed." 33. The Court is entitled to examine whether there has been any material available with the State Government and the reasons recorded, if any, in the formation of opinion and whether they have any rational connection with or relevant bearing on the formation of the opinion. The Court is entitled particularly, in the event, when the formation of the opinion is challenged to determine whether the formation of opinion is arbitrary, capricious or whimsical. It is always open to the court to examine the question whether reasons for formation of opinion have rational connection or relevant bearing to the formation of such opinion and are not extraneous to the purposes of the statute." 51. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of blocking the ITC in exercise of power under Rule 86A of the Rules, then such action would definitely amount to malice in law. Malice, in its legal sense, means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probable cause. Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration to the relevant aspects of the matter, we may only say that it cannot be said that the inquiry or investigation initiated as regards the fake/bogus invoices for the purpose of ITC is malafide or based on absolutely no materials. From what has been stated in the reply affidavit filed on behalf of the respondents, it could be said that prima facie, there is something which the Revenue has noticed and, therefore, are looking into the same before taking any final call as regards the claim of the writ applicants to avail the ITC. Even, otherwise, Rule 86A provides that on expiry of the period of one year, the restriction shall cease to have effect from the date of imposition of such restriction. 54. The only question now remains to be looked into is whether Rule 86A of the Rules contemplate any passing of a specific order with an obligation to communicate the same to the affected person so that such person can take recourse to any legal remedy available to him. 55. We intend to examine the aforesaid question posed by us bearing in mind the principles explained by the Supreme Court in Pannalal Binjraj vs. Union of India, (1957) S.C.R 233. 56. The principles laid down by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Revenue. Section 83 of the Act reads thus; "83. Provisional attachment to protect revenue in certain cases:- (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed. (2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1)." 58. It is pertinent to note that Section 83 can be invoked during the pendency of any proceedings under Section 62 or Section 64 or Section 67 or Section 73 or Section 74 of the Act. Section 83 provides for order in writing. In other words, if the Commissioner is of the opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary to attach provisionally any property including bank account, he may, by order in writing, do so. Even Section 83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. In this connection, the Law Ministry has advised that suitable guidelines should be issued to implement Section 11DDA of the Act. The following guidelines are, therefore, issued to maintain uniformity in its implementation by field formations : (i) The proceedings for provisional attachment can be initiated only after issue of Show Cause Notice (SCN) under Section 11A or 11D of the Act. " 60.2 In respect of Section 73C of the Finance Act,1994:- "Circular No. 103/6/2008-S.T., dated 1-7-2008; F.No. 137/120/2006-CX.4 Subject : Instructions regarding provisional attachment of property under section 73C of Finance Act, 1994 - Regarding Section 73C of the Finance Act, 1994 (hereinafter referred to as the Act) provides for provisional attachment of property for the purposes of protecting the interests of revenue during the pendency of any proceedings under section 73 or section 73A of the Act. 2. In this connection the following guidelines are issued to maintain uniformity in its implementation by field formations. (i) The proceedings for provisional attachment can be initiated only after issue of Show Cause Notice under section 73 or section 73A of the Act." 60.3 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of property under section 83
It is to inform that M/s ---------- (name) having principal place of business at ------- (address) bearing registration number as -------- (GSTIN/ID), PAN --- is a registered taxable person under the < X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government needs to apply its mind for the purpose of laying down some guidelines or procedure for the purpose of invoking Rule 86A of the Rules. In the absence of the same, Rule 86A could be misused and may have an irreversible and detrimental effect on the business of the person concerned. In this regard, the Government needs to act promptly. Special Civil Application No.8163 of 2020 66. We shall now look into the connected writ application, i.e., the Special Civil Application No.8163 of 2020. In this writ application, the writ applicant has prayed for the following reliefs; "(A) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order, quashing and setting aside DRC-03 Forms dated 09.04.2019 (Annexure-"F") thereby ordering cancellation of debit entries of ₹ 7,02,10,842/- and ₹ 62,89,158/- in the Petitioner's Electronic Ledger maintained under the CGST Act; (B) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order, thereby directing Respondent No.2 to allow the Petitioner to take credit of input Tax Credit aggregating to ₹ 7,65,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this date. He further pointed out that more than one year has elapsed but no proceedings for issuance of show-cause notice under Section 74 of the Act nor for determination of any unpaid tax or wrongly availed ITC has been initiated against his client. 68. According to Mr. Dave, in the three decisions relied upon by him, i.e, in the case of Century Metal Recycling Pvt. Ltd. (supra), Chitra Builders Pvt. Ltd. (supra) and National Organic Chemical Industries Ltd. (supra), the view taken by different High Courts is that if any amount is deposited voluntarily, the Revenue cannot retain such amount without the determination of liabilities because retention of such amount would be in violation of Article 265 of the Constitution of India. He would submit that the Bombay High Court, in National Organic Chemical Industries Ltd. (supra), had an occasion to consider a similar case and the central excise authorities were directed to pay back the amount collected from the assessee towards excise duty liability in the absence of any determination of any liability by following the procedure of issuing show-cause notice and passing adjudication order for determining any duty liability. He would s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns various records/documents in the form of purchase invoices, sale invoices, LRs of fake transportation firms, gadgets, mobile phones, blank signed cheque books, private records containing incriminating details have been seized under Panchnama proceedings from all over the places. Evidences prescribed from all over the searched places conclusively established that all such transactions are only on papers and no physical movement of goods has taken place. By this way, recipients of invoices have availed ITC involved in such invoices merely on the strength of such invoices, without actual receipt of goods. Subsequently, cases were booked by this office against the trading firms, who have supplied invoices, recipients of such invoices who have availed ITC, merely on the strength of such invoices, without actually receipt of goods and other persons involved in facilitation of such ITC, wrongly and thereby defrauded the Government Exchequer of its legitimate dues. 5.1 Statement of master mind behind creation of all such firms have been recorded, wherein he admitted his wrongdoings of providing invoices, without actual supply of goods to the recipients of such GST invoices. He also ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r company had voluntarily deposited an amount of ₹ 7,65,00,000/-, vide debit entry no.DI2404190041877 & DI2404190042105 both dated 09.04.2019 on being convinced with the evidences available with this office and subsequently being confronted with the same he not only deposited an amount of ₹ 7,65,00,000/- but also assured to pay remaining amount of such ITC, totally amounting to ₹ 15,25,12,636/-. Further, such payments have been deposited voluntarily by the Petitioner. More so, payment in GST is system based and entirely under the control of Taxpayer. There is no intervention of the Department. There has been no threat or coercion, whatsoever. At this juncture, after expiry of more than a year, raising this issue is nothing but clearly an afterthought. 5.9 With reference to Para 8.3 of the petition, contentions of the petitioner are misleading. The amount paid by them is not reversal of ITC but payment against wrongly availed ITC by them on the strength of invoices supplied by the aforementioned six firms. Since they have already utilised the ITC involved (though ineligible) and availed on the strength of such invoices, as per available alternate they had opted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case may be, tax, interest and penalty under sub-section (8) of section 74 within thirty days of the service of a notice under sub-rule (1), or where the person concerned makes payment of the amount referred to in sub-section (1) of section 129 within fourteen days of detention or seizure of the goods and conveyance, he shall intimate the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice. In this case, petitioner has deposited a partial amount of ₹ 7,65,00,000/-, voluntarily, against the wrongly availed ITC totally amounting to ₹ 15,25,12,636/-. 5.12 With reference to Para 9 and 10 of the petition, apart from what has already been stated in foregoing paras it is humbly submitted that investigation of the case is going on and outcome of the same would be known from the Show Cause Notice (SCN). Before issuance of the SCN, petitioner should not make any assumption or presumption in respect of the same. Hon'ble Court is hence requested to direct petitioner to wait till issuance of a SCN in the case. So far as cancellation of registration is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties and statement tendered before the Gazetted officer of such authorities has legal acceptance. These statements have not been retracted so far, even after passing of more than one year and suddenly under this petition, raising such questions is nothing but a well thought/calculated attempt by the petitioner to derail the ongoing investigation being conducted in respect of availing ITC, wrongly and fraudulently, without actual receipt of goods, merely on the strength of invoices issued by various firms. This part of the case (availing fraudulent ITC} is still under investigation to unearth more such instances where legitimate due of the Government has been denied, through such fraudulent practice." 71. None of the aforenoted averments made in the reply affidavit have been refuted or denied by filing any rejoinder. 72. Having considered the stance of both the sides, we have reached to the conclusion that there are highly disputed questions of fact as regards the debit of the ITC from the electronic credit ledger. Indisputably, the investigation is in progress. A prima facie case could be said to have been made out against the writ applicants. However we may only say that the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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