AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 895
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, commencing from 15.10.2018 and continuing on various dates thereafter. Seizures of voluminous documents and records have been effected. The petitioner has also been called upon to furnish various records and has done so, under letters dated 17.11.2018 and 22.11.2018. 3. The list of documents submitted on 17.11.2018 is set out below:- 'JAYACHANDRAN ALLOYS PVT LTD Following Original / Documents submitted to GST HPU Officers dt: 17/11/2018 S.No. Name of the Register Reports Date From To 1 Despatch Inspection Report 3/14/2018 4/21/2018 2 Lead Counting Note 9/25/2018 11/1/2018 3 Daily stock book 9/6/2018 11/17/2018 4 Vehicle Follow up chart 7/5/2018 9/20/2018 5 Daily stock book 5/30/2018 9/5/2018 6 Daily stock book 11/1/2017 2/18/2018 7 Despatch Inspection Report 5/31/2018 6/26/2018 8 Despatch Inspection Report 2/6/2018 3/13/2018 9 Battery Dimandle scrap Inward 2/11/2018 11/16/2018 10 Lead Outward Note 7/11/2018 11/17/2018 11 Lead Outward Note (security) 3/28/2018 11/17/2018 12 Lead Outward Note 11/1/2018 11/17/2018 13 JCA Ganeshapuram to JCG Perundhurai DC Material Register 10/12/2018 11/17/2018 14 St....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isposal of the writ petition. 8. A counter affidavit has been filed by the respondents attempting to answer the main as well as the interim prayer. 9. The following issues arise, in my view, for resolution:- 1. Whether the petitioner is entitled to a mandamus as prayed for in regard to supply of the documents and statements sought for by it in the light of the provisions of the Act? 2. Whether the interim protection sought for to prevent the respondents from invoking the powers under Section 69 of the Act read with Section 132 thereof in respect of the petitioner is liable to be granted? 3. Whether the petitioner's request for a direction to the respondents to complete adjudication and make an assessment after following the due process of law is liable to be accepted? 10. The Central Goods and Service Tax Act, 2017, is a virgin enactment, born on 01.07.2017. The scheme of the Act is however not so different from the Indirect Tax Statutes that it has subsumed, the provisions of which it integrates, to provide a comprehensive and single assessment for turnover from the sale of goods and provisions of services. 11. Simply put, the scheme calls for regular returns to be f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....here has been no proper compliance with the requirements of the statute. The Managing Director of the petitioner was threatened that he would be arrested in the light of the provisions of Section 69 of the CGST Act and he was coerced into signing statements, including one dated 21.02.2019, admitting various liabilities and providing for a schedule of payments to the Department. 16. The anticipated demand as per the statement recorded is of a sum of Rs. 18,99,50,468/-, and the petitioner has undertaken to remit Rs. 5,00,00,000/- on or before 28.02.2019 and the balance of Rs. 13,99,50,468/- before the end of March 2019. The said statement has been retracted the very next day vide letter dated 22.02.2019 sent by registered post and e-mail. The petitioner relies on various Circulars issued under the erstwhile service tax regime to state that the powers of arrest and prosecution would arise only if the Department is in possession of evidence to prove that the Assessee had indulged in fraud or had intended to defraud the Revenue. The Circulars address specifically habitual offenders whereas in the present case the petitioner is a sterling assessee that has made substantial payments of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dated 21.02.2019 wherein various lapses on the part of the petitioner have been tabulated and the petitioner has signed the same conceding to the lapses and agreeing to pay the tax arising therefrom amounting to a sum of Rs. 18,99,50,468/-. The Department also refers to the conduct of the Assessee in avoiding summons and in not co-operating with the proceedings. 21. As regards the allegation that the Managing Director had been coerced into signing statement dated 21.02.2019 under threat of arrest, the counter states that 'they had only pointed out the statutory provision (section 132 of the Act) as it exists'. The respondents reiterate that the petitioner has indulged in Bill Trading activity which is an offence under Section 132 of the CGST Act. According to them Section 132 (i) (c) read with Section 132 (i) (b) of the Act provides that where the person has availed Input Tax Credit using Invoices/Bill without actually supplying such goods or services, he/it has committed a punishable offence. Such punishment, where the benefit wrongly availed exceeds rupees five hundred lakhs, is imprisonment which may extend to five years with fine. It is on the strength of the aforesaid concl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....engaging in bill trading activities and launched an investigation in the premises to verify the business activities of the petitioner and its compliance with the provisions of the Act. This investigation is in terms of section 67 of the Act, extracted below:- '67. Power of inspection, search and seizure.- (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-- (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be. (7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months. (8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under subsection (2), be disposed of by the proper officer in such manner as may be prescribed. (9) Where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him under sub-section (2), he shall prepare an inventory of such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... C.PRADEEP MANAGING DIRECTOR 07.12.2018 NOT APPEARED 7 VIVEGANANDAN S PRODUCTION MANAGER 17.12.2018 APPEARED 8 MAHENTHIRAN M DESPATCH SUPERVISOR 18.12.2018 APPEARED 9 S.SIVAGURUSAMY GENERAL MANAGER 19.12.2018 APPEARED 10 D. JAGADESH FINANCE MANAGER 20.12.2018 APPEARED 11 C.PRADEEP MANAGING DIRECTOR 21.12.2018 APPEARED AND C PRADEEP, REQUESTED TO POSTPONE ON 27.12.18 12 D.JEGADEESH FINANCE MANAGER 26.12.2018 APPEARED 13 C.PRADEEP MANAGING DIRECTOR 27.12.2018 APPEARED 14 C.PRADEEP MANAGING DIRECTOR 28.12.2018 C PRADEEP, MD REQUESTED TO POSTPONE ON 03.01.19 15 C.PRADEEP MANAGING DIRECTOR 03 & 04.01.2019 APPEARED AND C PRADEEP, MD REQUESTED TO POSTPONE ON 09.01.2019 16 C.PRADEEP MANAGING DIRECTOR 09.01.2019 APPEARED AND C PRADEEP, MD REQUESTED TO POSTPONE ON 10.01.19 17 C.PRADEEP MANAGING DIRECTOR 10.01.2019 APPEARED 18 C.PRADEEP MANAGING DIRECTOR 17.01.2019 NOT APPEARED AND C.PRADEEP, MD SENT LETTER AND REQUESTED TO POSTPONE FOR 15 DAYS 19 C.PRADEEP MANAGING DIRECTOR 30.01.2019 C Pradeep requested for adjournment on 01.02.2019 20 C.PRADEEP MANAGING DIRECTOR ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or rules made thereunder, with the intention to evade tax; (b) issues any any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax; (c) avails input tax credit using such invoice or bill referred to in clause (b); (d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d); (f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act; (g) obstructs or prevents any officer in the discharge of his duties under this Act; (h) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, be for a term not less than six months. (4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act, except the offences referred to in sub-section (5) shall be noncognizable and bailable. (5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of subsection (1) and punishable under clause (i) of that sub-section shall be cognizable and nonbailable. (6) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Commissioner. Explanation. - For the purposes of this section, the term "tax" shall include the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or refund wrongly taken under the provisions of this Act, the State Goods and Services Tax Act, the Integrated Goods and Services Tax Act or the Union Territory Goods and Services Tax Actand cess levied under the Goods and Services Tax (Compensation to States) Act..' 32. Statement dated 21.02.2019 recorded from the Managing Director of the petitioner company reads....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plied by M/s. EGMI, Mangalore, and the quantity of raw material used at M/s.JCA as confirmed by the Managing Director of M/s. JCA in his statement works out to Rs. 17,94,30,110/- Rs. 3,22,97,420/- Total liability Rs. 18,99,50,468/- When you are going to pay the GST liability of Rs. 18,99,50,468/-? I admit unconditionally that I am liable to pay a sum of Rs. 18,99,50,468/- (Eighteen crores ninety nine lakhs fifty thousand four hundred and sixty eight) an amount approximately equal to the GST evaded by my company on my instruction. I am willing to pay the amount along with interest. I shall pay Rs. 5 crore before 28th February 2019 and the remaining amount before March 31st 2019. I accept that I have past avoided my appearance before department on 7.2.2019 due to my son naming ceremony. I had sent by FM to represent on my behalf before the department even though I was aware that no one except me know the full details of my company. I fully accept all the liabilities along with interest and assure that I shall pay the same as above. Sd/-... 21/2/2019  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the provisions of the Finance Act 1994 (FA), do not permit the DGCEI or for that matter the Service Tax Department (ST Department) to by-pass the procedure as set out in Section 73A(3) and (4) of the FA before going ahead with the arrest of a person under Sections 90 and 91 of the FA. The power of arrest is to be used with great circumspection and not casually. It is not to be straightway presumed by the DGCEI, without following the procedure under Section 73A (3) and (4) of the FA, that a person has collected service tax and retained such amount without depositing it to the credit of the Central Government. (ii) Where an assessee has been regularly filing service tax returns which have been accepted by the ST Department or which in any event have been examined by it, as in the case of the two Petitioners, without commencement of the process of adjudication of penalty under Section 83 A of the FA, another agency like the DGCEI cannot without an SCN or enquiry straightway go ahead to make an arrest merely on the suspicion of evasion of service tax or failure to deposit service tax that has been collected. Section 83 A of the FA which provides for adjudication of penalty provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... service tax arrears, the resort to the extreme coercive measure of arrest followed by the detention of Mr. Pallai was impermissible in law. (vii) In terms of CBEC's own procedures, for the launch of prosecution there has to be a determination that a person is a habitual offender. There is no such determination in any of these cases. There cannot be a habitual offender if there is no discussion by the DGCEI with the ST Department regarding the history of such Assessee. Assuming that, for whatever reasons, if the DGCEI does not talk to ST Department, certainly it needs to access the service tax record of such Assessee. Without even requisitioning that record, it could not have been possible for the DGCEI to arrive at a reasonable conclusion whether there was a deliberate attempt of evading payment of service tax. In the case of MMT, the decision to go in for the extreme step of arrest without issuing an SCN under Section 73 or 73A (3) of the FA, appears to be totally unwarranted. (viii) For the exercise of powers of search under Section 82 of the FA, (i) an opinion has to be formed by the Joint Commissioner or Additional Commissioner or other officers notified by the Board t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dings for quashing of the criminal case and, therefore, this Court does not propose to deal with that aspect of the matter.' 35. The aforesaid decision was carried in Appeal before the Supreme Court and the following order passed in C.A.No.8081/2018 & C.A.No.8082/2018, dated 23.01.2019:- 'Heard learned counsel for the parties at length. The issue is as to whether the power of arrest under Section 91 of the Finance Act, 1994 ('the said Act') can be exercised without following the procedure as set out in Section 73A(3) and (4) of the said Act. The High Court has decided, after detailed discussion, that it is mandatory to follow the procedure contained in Section 73A(3) and (4) of the said Act before going ahead with the arrest of a person under Sections 90 and 91. We are in agreement with the aforesaid conclusion and see no reason to deviate from it. Accordingly, these appeals are dismissed.' 36. Though the discussions and conclusions therein have been rendered in the context of Chapter V of the Finance Act, 1994, levying service tax, I am of the view that they are equally applicable to the provisions of the CGST Act as well. Section 132 of the Act as extracted earlie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... statutory provisions. It is only in such cases that the authorities might be justified in proceedings to pre-empt the assessment and initiate action against the assessee in terms of section 132, for reasons to be recorded in writing. There is no allegation, either oral or in writing in this case that the petitioner is an offender, let alone a habitual one. 40. In the present case, the Department does not dispute that action was intended or envisaged in the light of Section 132 of the CGST Act, the counter fairly stating that the provisions of Section 132 of the CGST Act were 'shown' to the Assessee. There is thus no doubt in my mind that the Department intended to intimidate the petitioner with the possibility of punishment under 132 and this action is contrary to the scheme of the Act. While the activities of an assessee contrary to the scheme of the Act are liable to be addressed swiftly and effectively by the Department, (the statute in question being a revenue statute where strict interpretation is the norm), officials cannot be seen to be acting in excess of the authority vested in them under the statute. I am of the considered view that the power to punish set out in Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petitioner therein, wherein the Bench has issued notice and granted interim protection in the following terms:- 'Issued notice. In the meantime, the petitioner shall not be arrested, provided he appears before the Directorate General of GST Intelligence and in the event of his arrest, he shall be released on bail on furnishing security to the satisfaction of the competent authority. Learned counsel for the petitioner has submitted that the petitioner shall regularly appear, as and when he is called.' 45. Moreover, the High Court of Karnataka at Bengaluru in Criminal Petition No.979 of 2019 c/w Criminal Petition No.980/2019, dated 19.02.2019 while considering the grant of Anticipatory Bail, in circumstances very similar to the matter before me, has allowed the petition and granted bail in favour of the Assessee with conditions. 46. Issue (ii) is answered in favour of the petitioner. Issue (iii) is allowed, directing the respondents to conclude the process of adjudication within a period of twelve (12) weeks from today, after issuing show cause notice to the petitioner setting out the proposals for assessment, affording full opportunity to the petitioner to respond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....epartment, pending assessment. The Section is extracted hereunder: 83. Provisional attachment to protect revenue in certain cases.- 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). 51. The above provision is in pari materia with the provisions of Section 281B of the income Tax Act, 1961 that also provides for a provisional attachment of property of an assessee pending adjudication and assessment/re-assessment proceedings where the Income Tax Department believes that such attachment is necessary to protect the interests of the Revenue. The provision is extracted below for the sake of completion and to demonstrate that the provisions of Section 83 have....