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TMI Blog2023 (6) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... . So, moment authorization is reflecting, such measure can be undertaken against special economic zone or unit. Section 6 of the GGST Act in this context is also relevant to the issue which deals with authorization of the officer of Central Tax as proper officer in certain circumstances - A close perusal of provisions of Section 6 indicates that respondent authorities are empowered to carry out proceedings in SEZ. Their jurisdiction is unquestionable as Central Government has already authorized those officers by virtue of notification dated 5.8.2016. Sub-section (2) of Section 6 of GGST Act indicates that where any proper officer issues an order under this Act, he is also issuing an order under CGST Act as authorized by Act or under intimation to jurisdictional officer of Central Government and as such it appears that respondents are empowered to carry out search proceedings in SEZ. Therefore, it cannot said that they were acting without the authority of law or jurisdiction. Further, by virtue of circular dated 5.7.2017, functions of proper officers under CGST Act are also defined. Hence, once Central Government has notified the functions of proper officers, said functions shall al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose costs upon the petitioners to have adopted such course of action. Petition dismissed with costs. - HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI And HONOURABLE MR. JUSTICE J. C. DOSHI MR SAURABH N SOPARKAR, SENIOR ADVOCATE WITH MR ABHISHEKKUMAR C MALVI(9941) FOR THE PETITIONER(S) NO. 1,2,3 MR MAULIK VAKHARIYA(6628) FOR THE PETITIONER(S) NO. 1,2,3 MS. MANISHA LAVKUKAR SHAH, GOVERNMENT PLEADER WITH MR CHINTAN DAVE, AGP FOR RESPONDENT STATE AUTHORITY MR DEVANG VYAS, ASG FOR THE RESPONDENT(S) NO. 1 NOTICE SERVED BY DS FOR THE RESPONDENT(S) NO. 1,3,4,5,6 JUDGMENT ( PER : HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI ) 1. By way of these petitions, respective petitioners have assailed basically the action of respondent Nos.4, 5 and 6 who initiated proceedings under Section 67 read with Section 70(1) of GGST Act, 2017 and CGST Act, 2017 and sought consequential reliefs. Since common question of law and facts have arisen, learned advocates have requested to deal with petitions conjointly, as a result of this, Special Civil Application No.5978 of 2023 is treated as a lead matter since the issues are identical. 2. In Special Civil Application No.5978 of 2023, petitioner has submitted that petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as petitioner s unit is concerned, same is Zero Rated Supply and as such a tax neutral / revenue neutral and petitioner is filing nil IGST returns and only declares value of imports and Exports from its SEZ unit at SURSEZ. Petitioner also additionally obtained a Legal Entity Identifier India Limited Certificate and this LEI provides security for international transactions, shortcuts KYC processes and boosts transparency throughout the global financial system. LEI is also a valuable tool for validating identity and gives the petitioner an instant credibility boost. Petitioner contended that this LEI is a sort of a legal identity to transact globally and same is granted only to credible and fully KYC and PMLA compliant entities. 4. It is the case of petitioner that some ostensible oral communication from an officer of Enforcement Directorate, petitioner company was subjected to search and seizure operation and premises of the petitioner company were sealed vide a sealing memo dated 3.3.2023 by respondent No.4 at around 3.00 p.m. Sealing memo according to petitioner does not reflect any due process followed by respondent No.4 and same is carried out without arriving at any sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandamus or any other appropriate writ, order or direction in the nature of mandamus, quashing and setting aside the proceedings Initiated by Respondent no. 4.0. Assistant Commissioner of State Tax (4), Surat, Respondent No.5/1.0. Assistant Commissioner of State Tax (1), Ahmedabad and 6 l.e. Assistant Commissioner of State Tax, Mumbai against the Petitioners u/s.67 read with section 70(1) of the GGST Act, 2017 and CGST Act 2017 along with the consequential proceeding. and/or Orders passed therein, as the said proceedings are absolutely illegal, unlawful, contrary the provisions of the Act, abuse of process of law, against the facts and evidence on record with consequential relief; B. Pending the admission, hearing and final disposal of this petition, this Hon'ble Court may be pleased to stay the impugned proceedings initiated by Respondent no. 4 i.e. Assistant Commissioner of State Tax (4), Surat, Respondent No.5 i.e. Assistant Commissioner of State Tax (1), Ahmedabad and 6 i.e. Assistant Commissioner of State Tax, Mumbai against the Petitioners and be further pleased to direct Respondent no. 4 i.e. Assistant Commissioner of State Tax (4), Surat, Respondent No.5 i.e. Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is a distinct foreign territory and as such, are tax neutral/ revenue neutral area and hence outside the ambit of provision of CGST Act, 2017 or SGST Act, 2017, particularly from Chapter-IX, X, XII, XIII, XIV, XV, XVI and XIX of CGST Act and accordingly, action initiated by respondent Nos.4, 5 and 6 is beyond jurisdiction, hence relief deserves to be granted. The main substantial issue which has been raised by learned senior counsel is that by virtue of provisions contained in SEZ Act, State authorities are not empowered to initiate any action since every SEZ unit is tax neutral zone. According to Mr. Soparkar, supplies to the petitioners SURSEZ Unit are considered as Zero Rated Supply under the provisions of IGST Act, 2017 and as such they are not subjected to provisions relating to levy, collection, evasion or otherwise of GST in the unit. It has been submitted that in both cases, whether it is an input supply to SEZ unit or is an outward supply by SEZ unit, SEZ unit does not suffer any tax incidence on supply either way. Insofar as incidence of GST Laws are concerned, petitioner s unit will be governed under Integrated Goods and Services Tax (IGST) as it is not to be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page-51 and then indicated that by virtue of sub-section (1) of Section 21 of SEZ Act, 2005, Central Government notifies offences contained in the Sections which are mentioned in a tabular form in respect of Customs Act, 1961, Central Excise Act, 1944 and Finance Act, 1994 and by virtue of sub-section (2) of Section 21 and second proviso to Section 22 of SEZ Act, 2005, Central Government has authorised Additional Director Genera, Directorate of Revenue Intelligence for offences under Customs Act and Additional Director General, Directorate General of Central Excise Intelligence for offences under Central Excise Act, 1944 and Finance Act, 1994 to be an enforcement officer in respect of any notified offence or offences committed or likely to be committed in a Special Economic Zone and by referring to these notifications, which are at page 52 and 53 of petition compilation, a contention is reiterated that action of respondent Nos.4, 5 and 6 is beyond the scope of their authority, as such same is not sustainable in the eye of law. 9. Yet another submission is made that there are guidelines also issued for investigating/ visiting or to inspect or search or seizure SEZ and said guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt authorities. Apart from that, circular dated 5.7.2017 has also been pointed out to indicate that functions of proper officers which are defined under CGST Act and has submitted that Section 6(2) of GGST Act is with regard to cross- empowerment and once Central Govt has notified functions of proper officers by virtue of circular dated 5.7.2017, same will also be applicable for officers under GGST Act and there is no reason for petitioners to contend that action initiated is beyond the scope of authority. In fact, according learned Government Pleader Mrs. Shah, petitioners have conveniently loss sight of the fact that provisions contained under Section 1 of the Integrated Goods and Services Tax Act, 2017, i.e. IGST Act, said provision indicates that IGST Act is applicable to whole of India and Section 7 of IGST Act determines inter-state supply. Subsection (5) of Section 7 of the Act indicates that supply of goods or services or both to or by the SEZ unit shall be treated to be a supply of goods or services or both in the course of inter-state trade or both and as such, petitioners are under erroneous belief that once business of petitioners is carried out through SEZ, respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not sustainable, even facts on hand are revealing certain shocking figures of the irregularities which have taken place at the behest of petitioners and for that purpose, paragraph 7 of the affidavit-in-reply is specifically brought to the notice of the Court as to in what manner, petitioners have tried to indulge in activity and just by contending hyper-technicality tried to shield such activity which is impermissible and as such apart from the point of jurisdiction which is otherwise not available to the petitioners, facts are of such nature, which require the petitioners rather to desist from invoking extraordinary equitable jurisdiction of this Court, hence contended that petition being merit-less deserves to be dismissed with costs. 13. In rejoinder, learned senior advocate Mr. Soparkar has reiterated his submissions and then denied the stand of respondent authorities and has objected to the words which are used in affidavit that transaction is bogus and fictitious and petitioner is engaged in any wrong doing. These words which are used are stoutly objected by learned counsel for petitioners and it has been submitted that if authorities have no jurisdiction, they cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re namely Sagar Diamond limited, RHC Global Exports limited and Sagar Empire Jewels Private Limited. Detailed analysis of all the purchases of the group of companies revealed that, they have shown voluminous inward supply (purchases) transactions from entities most of which are fictitious. 7.2. It appears that prima facie of the Quantum of bogus transactions and Input tax credit involved: Table: 1 Bogus purchases shown by Group companies Sr. No. Company Suspected Bogus Purchase (Rs.) Suspected Bogus ITC (Rs.) 1 (SAGAR DIAMONDS LIMITED) 27AAWCS0068B1Z8 3534,64,12,369/- 9,14,05,377/- 2 (RHCGLOBAL EXPORTS PRIVATE LIMITED ) 27AAJCR3808D1ZG 736,63,03,058/- 1,86,66,818/- 3 (SAGAREMPIRE JEWELS PRIVATE LIMITED) 27ABFCS6904A1ZK 447,73,51,023/- 6,61,67,749/- Total 4716,98,05,667/- 17,62,39,943/- Table: 2 Details of business verticals of the group companies (Petitioners) Sr. No. Company DTA Unit SEZ Unit 1 SAGAR DIAMONDS LIMITED 27AAWCS0068B1 Z8 903, Embassy Chamber, MUMBAI, NARIMAN POINT, 400021 24AAWCS0068B 1ZEPLOT NO 266- B, SEZ DIAMOND PARK, SACHIN, SURAT, Surat, Gujarat, 394230 2 RHCGLOBAL EXPORTS PRIVATE LIMITED 27AAJCR3808D1 ZG604, THE EMBASSY CENTER PREMISES CHS LTD, MUMBAI, NARIMAN P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f input tax credit passed on by these bogus firms. 7.3.3. Bogus purchases from Gujarat based fictitious firms shown by the petitioners and confirmed to be bogus (non-existent)by Spot Verifications conducted u/s 25: Sr. No Company Suspected Bogus Purchase Suspected Bogus ITC Availed 1 (SAGAR DIAMONDS LIMITED) 27AAWCS006 8B1Z8 5,42,38,97,991 1,67,85,606 2 (RHCGLOBAL EXPORTS PRIVATE LIMITED ) 27AAJCR3808 D1ZG 5,23,68,12,636 1,30,59,383, 3 (SAGAREMPI RE JEWELS PRIVATE LIMITED) 27ABFCS6904 A1ZK 2,08,72,36,704 3,08,45,863 Total 12,74,7947,331 6,06,90,852 7.3.3. It appears that prima facie during various search proceedings and consequent investigation have pointed towards the possibility that present petitioners namely Sagar Diamond limited, RHC Global Exports limited, Sagar Empire Jewels Private Limited and promoters of the companies with the help of other persons have planned and executed this massive scam of availing and passing on fraudulent and ineligible Input Tax Credit to their companies. 7.3.4. It appears that prima facie the promoters/ directors of Sagar Diamond Limited, RHC Global Exports limited, Sagar Empire Jewels Private Limited carefully planned the scam by creating 2 vert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from these companies to their Bank accounts. (Violation of Section 16 and Attracting Penalty U/s 122 of GGST Act, 2017). 7.7. It appears that prima facie, above mentioned bank receipts has been used by Sagar Diamond limited, RHC Global Exports limited, Sagar Empire Jewels Private Limited in their second vertical i.e. Surat SEZ having same Bank Accounts by showing import of goods without payment of import duty and IGST. Export shown against such imports by Sagar Diamond limited, RHC Global Exports limited, Sagar Empire Jewels Private Limited do not have any corresponding receipts in terms of foreign remittance against the so-called exports shown by them. It is further observed that Sagar Diamond limited, RHC Global Exports limited, Sagar Empire Jewels Private Limited has sold goods imported to DTA (Domestic Tarrif Area) without payment of Tax in grey market. Government exchequer has incurred huge loss of revenue in the form of Goods and Services Tax. Tax rate of GST in the case of Jewellery 3% wherein Diamonds/Ruby Stone are fall in 0.25% slab. 7.8. It appears that prima facie below mentioned table is showing export shown by these Companies without receiving any corresponding payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or seizure or investigation or inspection in the special economic zone or units situated therein and it also suggests that authorized officer of Central Government is empowered to carryout such process without any prior approval or intimation. So, moment authorization is reflecting, such measure can be undertaken against special economic zone or unit. Section 6 of the GGST Act in this context is also relevant to the issue which deals with authorization of the officer of Central Tax as proper officer in certain circumstances, which reads as under:- Section 6: Authorisation of officers of central tax as proper officer in certain circumstances. (1) Without prejudice to the provisions of this Act, the officers appointed under the Central Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify. (2) Subject to the conditions specified in the notification issued under sub-section (1),- (a) where any proper officer issues an order under this Act, he shall also issue an order under the Central Goods and Services Tax Act, as authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners is accepted that they are SEZ units and as such not subjected to such rigors of investigation or inspection, same would defeat the very purpose of the Act and apart from this, there appears to be no visible inconsistency in both the Acts i.e. SEZ Act 2005 or GST Act, 2017 and here, undisputedly, it has been stated that Development Commissioner, SEZ had already been duly intimated before search and seizure by departmental officer while initiating proceedings under Section 67 of the CGST Act and that being so, submission made by petitioners appearing to be not worthy of acceptance. 20. In addition to this, uncontroverted facts which are stated in the affidavit and volume of such would also be one of the considerations which cannot be ignored while exercising equitable jurisdiction and once authorities are empowered, there is hardly any reason for this Court to intercept this process which is going against the petitioners right from March 2023. It appears that action was initiated by an authority by seizing the premises from 3.3.2023 and then it appears that under the guise of this petition, now an attempt is being made to avoid proceedings by conveying to the authorities t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the SEZ Act, 2005. 41.3.3 Section 51 of the SEZ Act, 2005 providing that the Act would have overriding effect does not justify adoption of a different definition in the Act for the purposes of another statute. A non-obstante clause only enables the provisions of the Act containing it to prevail over the provisions of another enactment in case of any conflict in the operation of the Act containing the non-obstante clause. In other words, if the provision/s of both the enactments apply in a given case and there is a conflict, the provisions of the Act containing the non-obstante clause would ordinarily prevail. In the present case, the movement of goods from the Domestic Tariff Area into the Special Economic Zone is treated as an export under the SEZ Act, 2005, which does not contain any provision for levy of export duty on the same. On the other hand, export duty is levied under the Customs Act, 1962 on export of goods from India to a place outside India and the said Act does not contemplate levy of duty on movement of goods from the Domestic Tariff Area to the Special Economic Zone. Therefore, there is no conflict in applying the respective definitions of export in the two e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take disadvantage of situation by bringing such kind of litigation. Record has indicated that after issuance of notice, petitioners appear to have started not cooperating and have indicated to wait for orders from the Court. This conduct on the part of petitioners is not appreciable and as such we find it proper to impose costs upon the petitioners to have adopted such course of action. 24. At this stage, we remind ourselves to one of the salutary observations which have been made by Hon ble Apex Court in paragraphs 13 and 14 in the case of Dnyandeo Sabaji Naik v. Pradnya Prakash Khadekar reported in (2017) 5 SCC 496), which read as under :- 13. This Court must view with disfavour any attempt by a litigant to abuse the process. The sanctity of the judicial process will be seriously eroded if such attempts are not dealt with firmly. A litigant who takes liberties with the truth or with the procedures of the Court should be left in no doubt about the consequences to follow. Others should not venture along the same path in the hope or on a misplaced expectation of judicial leniency. Exemplary costs are inevitable, and even necessary, in order to ensure that in litigation, as in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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