9911796707
TMI Blog2025 (3) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrarily blocking the ECL of the appellant by invoking Rule 86A which is not only contrary to law but also the material on record and consequently, the impugned orders deserve to be quashed.' Thus, in the instant case since no pre-decisional hearing was provided/granted by the respondents before passing the impugned order, coupled with the fact that the impugned order invoking 86A of the KGST/CGST Rules by blocking of the Electronic credit ledger of the petitioner does not contain independent or cogent reasons to believe/accept by placing reliance upon reports of enforcement authority which is impermissible in law, since the same is on borrowed satisfaction as held by the Division Bench, the impugned order deserves to be quashed. It is also pertinent note that in the impugned order the respondent No.3 except stating that the petitioner has availed the credit of input tax fraudulently by receiving the tax invoices without physical receipt of goods, no other reasons are forthcoming. On this ground also, the impugned order dated 14.10.2024 passed by the respondent No.3 deserves to be quashed. Conclusion - The Court quashed the impugned order due to the lack of a pre-decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er nor does the impugned order contain any reason to believe as to why it was necessary to block the Electronic credit ledger and in view of the aforesaid contravention as held by the Division Bench of this Court in the case of K-9-ENTERPRISES vs. STATE OF KARNATAKA made in WA. No.100425/2023 and connected matters, the impugned order deserves to be quashed. 4. Per contra, learned Additional Government Advocate for respondents supports the impugned order and submit that there is no merit in the petition and the same is liable to be dismissed. 5. In K-9-ENTERPRISES (supra), the following points were answered in favour of the petitioner- assessee by holding as under: "8.13 In view of the aforesaid discussion, we are of the considered opinion that the learned Single Judge clearly fell in error in coming to the conclusion that a pre-decisional hearing was not required to have been provided/granted to the appellants by the respondents-revenue prior to passing the impugned orders blocking the ECL of the appellants and consequently, the said findings recorded by the learned Single Judge deserve to be set aside. 9. The next point that arises for consideration is as to whether the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely based on investigation reports and without any application of mind and that the onus was on the respondents - revenue to show that the appellants had deliberately availed fraudulent or ineligible ITC; in the instant case, the ECL of the appellants had been blocked by the respondents without verifying the genuineness of the transaction and a bonafide purchaser cannot be denied ITC on account of a supplier's default and the recipient cannot be made to suffer denial of ITC for the wrong doings of the supplier; so also, blocking of ECL would defeat the principles and purpose of value added tax and would lead to a cascading effect thereby resulting in irreparable injury and hardship to the appellants especially when ITC was a valuable right which cannot be confiscated in a manner opposed to law. 9.3 The learned Single Judge also failed to appreciate that the procedure prescribing the requirements for blocking ECL has been explained by the respondents themselves in the CBEC Circular dated 02.11.2021, the relevant portions are as under: 3.1.2. Perusal of the rule makes it clear that the Commissioner, or an officer authorised by him, not below the rank of Assistant Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection and with maximum care and caution. It contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration of suspicion. The reasons are to be on the basis of material evidence available or gathered in relation to fraudulent availment of input tax credit or ineligible input tax credit availed as per the conditions/ grounds under sub-rule (1) of rule 86A. 3.3.1. The amount of fraudulently availed or ineligible input tax credit availed by the registered person, as per the grounds mentioned in sub-rule (1) of rule 86A, shall be prima facie ascertained based on material evidence available or gathered on record. It is advised that the powers under rule 86A to disallow debit of the amount from electronic credit ledger of the registered person may be exercised by the Commissioner or the officer authorized by him, as per the monetary limits detailed in Para 3.2.1 above. The officer should apply his mind as to whether there are reasons to believe that the input tax credit availed by the registered person has either been fraudulently availed or is ineligible, as per conditions/ grounds mentioned in sub-rule (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground also. 9.6 The learned Single Judge also did not appreciate that the power of disallowing debit of amount from electronic credit ledger must not be exercised in a mechanical manner and careful examination of all the facts of the case is important to determine case(s) fit for exercising power under Rule 86A. The remedy of disallowing debit of amount from electronic credit ledger being by its very nature extraordinary, has to be resorted to with utmost circumspection and with maximum care and caution. It contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration of suspicion. The reasons are to be on the basis of material evidence available or gathered in relation to fraudulent availment of input tax credit or ineligible input tax credit availed as per the conditions/grounds in Rule 86A. 9.7 A perusal of the impugned orders will indicate that the same have been passed based on the communication received from other officers, without any independent application of mind. This shows that exercise of power under Rule 86A was not because he was independently satisfied about the need for blocking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional attachment order came up for consideration before the Apex Court in the case of Radha Krishan Industries' case (supra), wherein it was held as under:- 48. On the other hand, when the proper officer is of the opinion that the amount which has been paid under sub-section (5) falls short of the amount which is actually payable, a notice under sub-section (1) is to issue for the amount which falls short of what is actually payable. Sub-section (8) contains a stipulation that where a person who is chargeable with tax under sub-section (1) pays the tax together with interest and a penalty of twenty-five per cent of the tax within thirty days of the issuance of the notice, all proceedings in respect of the notice shall be deemed to be concluded. Under subsection (9), the proper officer after considering the representation of the person chargeable to tax is authorised to determine the amount of tax, interest and penalty due and to issue an order. A period of five years is stipulated by sub-section (10) for the issuance of an order in sub-section (9). Sub-section (11) stipulates that upon service of an order under subsection (9), all proceedings in respect of the notice shall be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it is necessary so to do", it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. 50. By utilising the expression "it is necessary so to do" the legislature has evinced an intent that an attachment is authorised not merely because it is expedient to do so (or profitable or practicable for the Revenue to do so) but because it is necessary to do so in order to protect interest of the government revenue. Necessity postulates that the interest of the Revenue can be protected only by a provisional attachment without which the interest of the Revenue would stand defeated. Necessity in other words postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallised. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, the order of provisional attachment can be passed by the Commissioner when the Commissioner is of the opinion that for the purpose of protecting the interest of the Government Revenue, it is necessary so to do. Therefore, before passing the order of provisional attachment, there must be an opinion formed by the Commissioner that for the purpose of protecting the interest of the Government Revenue during the pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally any property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order as is admitted. In addition, under clause (b), ten per cent of the remaining amount of tax in dispute arising from the order has to be paid in relation to which the appeal has been filed. Upon the payment of the amount under sub-section (6) the recovery proceedings for the balance are deemed to be stayed. Thus, in any event, the order of provisional attachment must cease to subsist. The appellant, having filed an appeal under Section 107, is required to comply with the provisions of sub-section (6) of Section 107 while the recovery of the balance is deemed to be stayed under the provisions of sub-section (7). As observed hereinabove and under Section 83, the order of provisional attachment may be passed during the pendency of any proceedings under Section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74. Therefore, once the final order of assessment is passed under Section 74 the order of provisional attachment must cease to subsist. Therefore, after the final order under Section 74 of the Hpgst Act was passed on 18-2-2021, the order of provisional attachment must come to an end. 11. The said judgment which was passed while dealing with identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and pre-condition as laid down by the Apex Court have neither been complied with nor fulfilled or followed prior to passing the impugned order. It is apparent that the impugned provisional attachment orders at Annexures-D, D1, D2 and D3 do not satisfy the legal requirements as laid down in Radha Krishan's case (supra) and consequently, in view of the fact that the impugned provisional orders are cryptic, unreasoned, nonspeaking and laconic, the same deserve to be quashed. 10. Insofar as the apprehension of the respondents that in the event huge tax payments are to be raised as against the petitioners - assessee, the assessee may not make payment of the same causing loss to the revenue is concerned, in the light of the undisputed fact that the proceedings under Section 153A of the said Act of 1961 have already been initiated coupled with the fact that Section 281 of the said Act of 1961, contemplates that any alienation of any property belonging to the petitioners would be null and void, in addition to the specific assertion made by the petitioner that they own and possess immovable property to the tune of more than Rs.300 crores, the said apprehension of the respondents is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate that there is no finding recorded as to why a provisional order of attachment had to be passed against the petitioner; it is significant to note that there is no finding recorded by the 1st respondent that the petitioner was a 'fly by night operator' from whom it was not possible to recover the likely demand. The impugned order also does not state that the petitioner was either a habitual defaulter nor that he was not doing any business at all or that the petitioner did not have sufficient funds to satisfy the demand. In other words, in the absence of any reasons as to why and how the demand would be defeated by the petitioner, mere apprehension that huge tax demands are likely to be raised on completion of assessment was not sufficient to constitute formation of opinion and existence of proximate and live link for the purpose and necessity of provisional attachment which implicate the doctrine of proportionality. Under these circumstances also, I am of the considered opinion that the impugned order deserves to be quashed. 9.10. On perusal of the entire material on record, we are satisfied that the said independent arrival of opinion that there was a reason to believe is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
