TaxTMI 
TaxTMI 
2020 (12) TMI 1120
X X X X Extracts X X X X
X X X X Extracts X X X X
....cond issue involved is with respect to the scope of exercise of power under Rule 86A of the Rules. In other words, the issue is whether the authority concerned is empowered to retain any amount deposited by a registered person during any inquiry or investigation in the absence of any confirmed liability against the assessee and, more particularly, without issuance of a show-cause notice and assessment/adjudication order imposing any tax liability on the assessee. 3. So far as the connected writ application, i. e., the Special Civil Application No.8163 of 2020 is concerned, the question arising therein is whether the authorities could have debited a sum of Rs. 7.65 Crore from the credit ledger thereby debiting the ITC availed by the writ applicant on various inputs and input services without there being any demand or any final assessment order. 4. We first take up the Special Civil Application No.8841 of 2020. 5. The facts giving rise to the Special Civil Application No.8841 of 2020 may be summarized as under:- 5.1 By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs; "(A) That Your Lordships may be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce, and this agency is the Investigating Agency for the Jaipur Zone. It appears from the materials on record that the respondent No.4 has been conducting the investigation against the writ applicant through the respondent No.3. 5.3 It is not in dispute that the writ applicant is registered with the GST Department, and while paying the GST on the goods manufactured, it has been availing the ITC on the input transactions upon receiving the tax paid inputs and tax invoices. The dispute in the present litigation is pertaining to the A.Y.2017-18 and 2018-19 respectively. During this period of two assessment years, referred to above, the writ applicant received tax paid inputs from 36 registered dealers, the details of those has been furnished at Annexure-A to the writ application. It appears that the suppliers of inputs are located across the Country and registered with the GST Authorities, in charge of their respective divisions and commissionerates. 5.4 The writ applicant received the tax invoices from its suppliers and the transactions of inputs received and the ITC availed have been recorded in the electronic credit ledger maintained by the writ applicant. The monthly returns in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id inputs from the 36 input suppliers, referred to above. It is pointed out that all the 36 input suppliers are registered with the GST Department. The same pattern and method of receiving the inputs and tax invoices including the paying price and tax by the RTGS has been followed in case of all the input suppliers who have submitted their returns before the jurisdictional GST Officers. It is argued that despite the same pattern and method being adopted, referred to above, the dispute has arisen only with respect to the supplies received from six out of the 36 registered dealers. This, according to Mr. Dave, is something which is not palatable or sufficient enough to block the ITC of a huge amount. 7. Mr. Dave would argue that his client has paid an amount of Rs. 13,36,23,413/- to the input suppliers through the RTGS and it is not the case of the Department that such payment made towards the price inclusive of the tax to this input suppliers through the normal banking channel was received back by the writ applicant in any manner. In other words, the argument of Mr. Dave is that the payment of a substantial amount, as referred to above, to the input suppliers would go to show that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Concepts Global Impex vs. Union of India, 2019 (365) ELT 32 (P & H); (iii) Abhishek Fashions Pvt. Ltd. vs. Union of India, 2006 (202) ELT 762 (Guj.) 11. The ratio of the three judgments, referred to above, is that unless there is assessment and demand, the amount deposited by the assessee under coercion/threat of arrest, cannot be appropriated. The Revenue cannot justify retaining the amount deposited by merely saying that the same was voluntarily deposited. The Revenue should bear in mind that they are creatures of statute and are bound by statutory law; the powers that they exercise are conferred upon them by the statute and there are no powers de hors the statute. In such circumstances, the Revenue is duty bound to act as provided by the provisions under which it can exercise such powers. The Revenue is not an organization which is entitled to retain money without any sanction of law. 12. Mr. Dave vociferously argued that the unilateral action of blocking the ITC thereby preventing the writ applicants from utilizing such credit is illegal and unjustified, more particularly, when there is no assessment of any tax liability against the writ applicant firm. He would argue that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of the principles of natural justice is recording of reasons and communicating such reasons to the affected party. 15. In the aforesaid context, Mr. Dave seeks to rely on the following judgments; (i) M/s. Ajantha Industries & Ors. vs. Central Board & Direct Taxes, New Delhi & Ors., (1976) 1 SCC 1001 (ii) CIT, West Bengal vs. Oriental Rubber Works, (1984) 1 SCC 700. 16. Mr. Dave vehemently argued that it is a settled principle of law that the credit of tax paid on inputs, in different services, and capital goods is an indefeasible right of the assessee. Since credit is a vested right of the assessee, the same cannot be extinguished or curtailed in any manner without the proper authority of law. Mr. Dave argued that with the introduction of Rule 86A of the CGST Rules, the aforesaid right to such credit is sought to be curtailed on flimsy grounds though temporarily. In the context of being an indefeasible right of the assessee, Mr. Dave, seeks to rely significantly on the decision of the Supreme Court in the case of Eicher Motors Ltd. vs. Union of India, reported in 1999 (106) ELT 3 (SC ). 17. Mr. Dave submitted that indisputably, no reasons have been recorded by the Joint....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t herein, blocking the ITC of Rs. 84,34,547/- may also be quashed and set aside. Mr. Dave prays that so far as the Special Civil Application No.8163 of 2020 is concerned, the two DRC-03 Forms both dated 9th April, 2019 (Annexure-F to the petition) may be quashed and the respondents may be directed to permit the writ applicants to avail the credit entry of Rs. 7.65 Crore in the credit ledger for utilizing such credit in accordance with law. Submissions on behalf of the respondents:- 22. Mr. Devang Vyas, the learned Asst. Solicitor General of India assisted by Mr. P.Y. Divyeshwar, the learned Addl. Standing Counsel for Union of India appearing for the respondents has vehemently opposed both the writ applications. Mr. Vyas would submit that both the litigations on hand are very serious as there are allegations of availing the ITC by the writ applicants on the strength of fake/bogus invoices. Mr. Vyas would submit that the investigation inboth the cases is in progress and there is more than a prima facie case to invoke Rule 86A of the Rules for the purpose of blocking of the unutilized ITC. Mr. Vyas would submit that the investigation undertaken so far has prima facie revealed that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 With reference to Para 1 to 5.1 of the petition, it is true that the dispute involved in the case in hand is about inputs, purportedly sold and supplied by various registered taxpayers including (i) M/s Anjani Metals and Steels, Chhattisgarh (GSTIN-22AWNPS2137D1ZP); (ii) M/s Kanchan Alloys and Steels, Jharkhand (GSTIN- 20BVTPP5808C1ZL); (iii) M/s Om Shiv Jharkhand (GSTIN- 20AALHM5998L1ZJ); (iv) Alloys and Steels, Chhattisgarh 22AALHM5998L1ZF); (v) M/s Shakambari Jharkhand (GSTIN-20AJMPP3256C1ZJ) and Vishkarma Industries, Jharkhand Metalicks, M/s Shiv (GSTIN- Metalicks, (vi) M/s (GSTIN- 20FJWPS4147A1Z5), as mentioned in this para, who have supplied invoices to the Petitioner, on the basis of which they have availed Input Tax Credit (ITC) during F.Y. 2017-18 and F.Y. 2018-19. Apart from above said six suppliers, M/s Sumeg Steels Pvt. Ltd., Rajasthan (08AAGCK3978G2Z4) have also supplied invoices to the Petitioner, without actual supply of goods on the basis of which Petitioner has availed Input Tax Credit (ITC) during 2017-18. However, it is pertinent to submit that acting upon specific information that M/ s Vishkarma Industries, Jaipur, a trading firm (GST Number 08FJWPS4147A1ZR), ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... M/s Om Shiv Metalicks, Jharkhand 83,84,996/- 4. M/s Shakambri Metalicks, Jharkhand 2,52,06,800/- 5. M/s Shiv Alloys and Steels, Chhattisgarh 86,16,958/- 6. M/s Vishkarma Industries, Jharkhand 5,25,068/- 7. M/s Sumeg Steels Pvt. Ltd., Rajasthan 33,02,362/- Total 4,95,69,048/- Investigation conducted so far have indicated that petitioner, M/s S.S. Industries, Bhavnagar, Gujarat is one such beneficiary, who have arranged such invoices and availed ITC amounting to Rs. 4,95,69,048/ -, merely on the strength of invoices issued by the aforementioned seven taxpayers, without actual receipt of goods. Such act of the petitioner is against the basic principles as set out in sub-sections (2) of section 16 of the CGST Act, 2017 and liable for penalty under section 74 read with section 122 of the CGST Act, 2017. Further, such action is also punishable under section 132 of the said Act, for their criminal liability. The bifurcation of ITC availed by the Petitioner herein is as under: The Petitioner have availed ineligible ITC to the tune of Rs. 4,95,69,048/- based on fake/bogus invoices without actual receipt of goods. Further, Anti-Evasion Wing of Bhavnagar C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to what has already been stated herein above it is respectfully submitted that this office (Respondent No. 4, which is headed by Additional Director General) is the premier investigating agency of the country for the matters related to evasion of tax matters of GST, Central Excise and Service Tax. The officers of the Directorate General of Goods 86 Services Tax Intelligence have been invested with all powers under the Central Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax, 2017 and the rules made thereunder, throughout the territory of India, as are exercisable by the Central Tax Officers of the corresponding rank vide Notification No. 14/2017-Central Tax dated 01.07.2017. As stated above, investigation in this case is underway. It is worth mentioning that Show Cause Notice in the case is yet to be issued. This petition is premature as the same has been filed before issuance of Show Cause Notice and, thus, also before adjudication of the same. It is pertinent to submit that the petitioner has made general allegations without any basis with intent to delay the investigation from escaping their legitimate tax liability. Further, on completion of ongoing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Rs. 25,00,000/- against their GST liability (Ineligible ITC) amounting to Rs. 4,95,69,048/-. Therefore, respondent No. 4 blocked the ITC of Rs. 84,34,547/- in terms of the Rule 86A(1)(a) of the CGST Rules, 2017. With reference to para 8.3, 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 seven 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 to pay it from their ITC ledger balance. If they wished to pay such amount from their current account ledger, they could have done so. Further, ITC amounting to Rs. 84,34,547/ -, which was available in their credit ledger was blocked for wrongly availed ITC by them merely on the strength of invoices supplied by the aforementioned seven firms. Since they have already utilised the ITC involved (though ineligible) and availed on the strength of such invoices. The amount was paid by the petitioner voluntarily and the same was paid by them on GSTN by using their Login Id & Passwo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udgments; (I) CCT, Orissa & Ors. vs. Indian Explosive Ltd., AIR 2008 SC 1631; (ii) UOI vs. Cisco Laboratories, 2007 (11) TMI 21 (SC); (iii) Bhubaneshwar Development Authority vs. Commissioner of Central Excise & Service Tax, 2015 (4) TMI 464 (Orissa High Court); (iv) Mega Corporation vs. Commissioner of Service Tax, 2015 (1) TMI 1095 (Delhi High Court); (v) Kirloskar Computer Service Ltd. vs. UOI 1997 (6) TMI 35 (Karnataka High Court); 25. In such circumstances, referred to above, Mr. Vyas, the learned Assistant Solicitor General of India prays that there being no merit in both the applications, those be rejected. 26. Mr. Vyas further pointed out that affidavit-in-reply has also been filed on behalf of the respondents in the connected writ application, i.e. the Special Civil Application No.8163 of 2020 and the same is also on the same line like the one referred to above. 27. In such circumstances, referred to above, Mr. Vyas prays that the connected writ application also does not merit any consideration and the same be rejected. ANALYSIS 28. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36, may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount. (2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit. (3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.". 4. In the said rules, with effect from the 11th January, 2020, in rule 138E, after clause (b), the following clause shall be inserted, namely:- "(c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....duals. Prima facie, it appears that the Rule 86A does not even contemplate for issue of any show-cause notice or intimation notice. In such circumstances, the person affected may be taken by surprise when he would go to the portal to pay taxes and finds that his ITC is not usable. 33. The Constitutional validity of Rule 86A of the Rules is not under challenge in the present case and we do not intend to test its validity in the absence of any specific challenge to the same. In such circumstances, we would confine our adjudication in the present litigation only to the question whether the respondents could be said to be justified in invoking Rule 86A of the Rules for the purpose of blocking the input tax credit of the writ applicants pending the inquiry as regards the fraudulent transactions. Indefeasible right vis-a-vis the benefit of the ITC:- 34 We first propose to deal with the submission of Mr. Dave as regards the indefeasible right of the assessee to avail the benefit of the ITC. 35. In Eicher Motors Ltd. (supra), the validity and application of the scheme as modified by introduction to Rule 57F (read as 57F (4-A) of the Central Excise Rules, 1944 under which the credit whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of the Supreme Court in the case of C.C.E vs. Dai Ichi Karkaria Ltd., reported in 1999 (112) ELT 353 (SC). In the said case, the manufacturers purchased raw material and used the same in the manufacture of an intermediate product and, in turn, used the intermediate product in the manufacture of the final product. The raw material and the intermediate product were liable to excise duty and they were specified goods for the purposes of the Modvat Scheme. The assessable value of the intermediate product for the purposes of excise duty in the instant case was admittedly to be determined on the basis of its cost which necessitated the taking into account of the cost of the raw material. The Revenue contended that the excise duty paid by the seller on the raw material was also to be included in the cost of the excisable goods (the intermediate product) in this case. On the other hand, the manufacturers contended otherwise. The Supreme Court rejected the contentions of the Revenue and held in Paras-18 and 19 as under; " 18. It is clear from these rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llants [Osram Surya (P) Limited] preferred appeals before the Supreme Court, questioning the correctness of that order. The appellants therein had not challenged the validity of the said proviso, accordingly the Supreme Court proceeded on the basis that the proviso in question is a valid one. In that context, the Supreme Court considered whether the proviso to the Rule in question is applicable to the cases of manufacturers who had received their inputs prior to the introduction of the said proviso and are seeking to take credit in regard to the said inputs beyond the period of six months. The following conclusion in Paras-7,8 and 9 respectively of Their Lordships are relevant; "7. Having heard the arguments of the parties and after considering the Rule in question, we think that by introducing the limitation in the said proviso to the Rule, the statute has not taken away any of the vested rights which had accrued to the manufacturers under the Scheme of Modvat. That vested right continues to be in existence and what is restricted is the time within which the manufacturer has to enforce that right. In support of their arguments, they have placed reliance on a judgment of this Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....effect questions the validity of the Rule, cannot be permitted to be raised. The argument of the appellants that there was no time whatsoever given to some of the manufacturers to avail the credit after the introduction of the Rule also is based on arbitrariness of the Rule, and the same also will have to be rejected on the ground that there is no challenge to the validity of the Rule. 9. Without such a challenge, the appellants want us to interpret the Rule to mean that the Rule in question is not applicable in regard to credits acquired by a manufacturer prior to the coming into force of the Rule. This we find difficult, because in our opinion the language of the proviso concerned is unambiguous. It specifically states that a manufacturer cannot take credit after six months from the date of issue of any of the documents specified in the first proviso to the said sub-rule. A plain reading of this sub-rule clearly shows that it applies to those cases where a manufacturer is seeking to take the credit after the introduction of the Rule and to cases where the manufacturer is seeking to do so after a period of six months from the date when the manufacturer received the inputs. Thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may call trial and error method. It cannot anticipate all possible abuses. There may be crudities and inequities in the complicated experimental economic Legislation, but on that account alone, it cannot be even struck down as invalid. It is also relevant to note that in the case of Collector of Central Excise, Pune v. Dai Ichi Karkaria Ltd. and Ors., 1999 (65) ECC 354 (SC), the Supreme Court ruled that once the credit has been taken validly the right is indefeasible. In the instant case, the writ applicants have not been able to avail the ITC and, in such circumstances, it cannot be said that they have an indefeasible right. In the case of Tungabadra Industries (supra), referred to above, the Supreme Court approved the view taken by the Karnataka High Court in the case of Union of India v. Modern Mills Ltd ., 1994 (45) ECC 135 (Kar), in which it was ruled that the accumulated credit could be utilized only subject to the conditions of the Notification and thus even in the case of accumulated credit, no vested right accrued. 41. Thus, in view of the aforesaid discussion, we hold that the vociferous submission of Mr. Dave, the learned counsel appearing for the writ applicants as re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case [AIR 1971 SC 2451], that the Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court. 45. In the case on hand, Mr. Vyas, the learned Assistant Solicitor General of India appearing for the respondents submitted that there is no specific order passed by the authority concerned, blocking the input tax credit invoking Rule 86A of the Rules. According to Mr. Vyas, there is no such requirement that a specific order should be passed assigning, prima facie, reasons to block the input tax credit and communicate the same to the person concerned. Mr. Vyas would submit that ordinarily, the reasons are found in the form of notings in the original file,on the basis of which, the Court may be in a position to ascertain the genuineness of the belief formed by the authority. We shall deal with this issue as regards whether it is necessary for the authority to pass some order and communicate the same to the person concerned, little later. At present, we are looking into the true purport and scope of Rule 86A of the Rules. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for a fraudulent or an unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted S. 637 (i) (a) it knew that government would entrust to the Board its power under S. 237 (b). Could the legislature have left without any restraints or limitations the entire power of ordering an investigation to the subjective decision of the Government or the Board? There is no doubt that the formation of opinion by the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided for the opinion of the government and not of the court such an opinion is not subject to a challenge on the ground of propriety, reasonableness or sufficiency. But the Authority is required to arrive at such an opinion from circumstances suggesting what is set out in subclauses (i), (ii) or (iii). If these circumstances were not to exi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he opinion is challengeable on the ground of nonapplication of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute." 48. The Supreme Court while expressly referring to the expressions such as "reason to believe", "in the opinion" of observed : "Therefore, the words, "reason to believe" or "in the opinion of do not always lead to the construction that the process of entertaining "reason to believe" or "the opinion" is an altogether subjective to process not lending itself even to a limited scrutiny by the court that such "a reason to believe" or "opinion" was not formed on relevant facts or within the limits or as Lord Radcliffe and Lord Reid called the restraints of the statute as an alternative safeguard to rules of natural justice where the function is administrative." 49. In the Income-tax Officer, Calcutta and Ors. vs. Lakhmani Mewal Das [AIR 1976 SC 1753], the Supreme Court construed the expression "reason to believe" employed in Section 147 of the Income-Tax Act, 1961 and observed: the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the bel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the legal line is to be drawn. For this purpose everything depends upon the true intent and meaning of the empowering Act. The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependents, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good. There is nothing paradoxical in the imposition of such legal limits. It would indeed be paradoxical if they were not imposed." 33. The Court is entitled to examine whether there has been any material available with t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... must have a rational connection 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 I.T.O. 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 and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the I.T.O. on the point as to whether action should be initiated for reopening the assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to 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." 53. Having given our due consideration to the relevant aspects of the matter, we may only say that it cannot be said that the inquiry or investigation initiated as regards th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the statute invalid, if the statute provides either expressly or impliedly sufficient guidance for exercise of the discretion. (v) Discretionary power conferred by a statute, though wide, is not necessarily discriminatory. (vi) Mere possibility of abuse of a discretionary power will not invalidate a statute. (vii) Provision for sanction is one of the safeguards to control arbitrary exercise of power. (viii) If discretion is conferred on high officials, in the absence of evidence of mala fides, it can be considered as a safe-guard against arbitrary exercise of discretion. (ix) It is not the function of the Court to strive to find out the policy of the statute from its crevices, if it cannot be reasonably ascertained from the purpose and provisions of the statute. " 57. When we are talking about Rule 86A of the Rules, it reminds us of Section 83 of the CGST Act. Section 83 of the CGST Act provides for provisional attachment of any property including bank account of the taxable person with a view to safeguard the interest of the Revenue. Section 83 of the Act reads thus; "83. Provisional attachment to protect revenue in certain cases:- (1) Where during the pendency o....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., with the previous approval of the Principal Commissioner of Central Excise or Commissioner of Central Excise, by order in writing, attach provisionally any property belonging to the person on whom notice is served under sub-section (1) of section 73 or sub-section (3) of section 73A, as the case may be, in such manner as may be prescribed." 60. The procedure/guidelines prescribed under the above referred provisions are as extracted below: 60.1 In respect of Section 11DDA of CEA:- "Circular No. 874/12/2008-CX., dated 30-6-2008 F.No. 201/51/2004-CX-6 Subject : Instructions regarding Section 11DDA of the Central Excise Act, 1944. I am directed to refer to the Section 11DDA of the Central Excise Act, 1944 (hereinafter referred to as "the Act") inserted by the Taxation Laws (Amendment) Act, 2006, with effect from 13-7-2006. This section provides for provisional attachment of property for the purpose of protecting the interests of revenue during the pendency of any proceedings under Section 11A or Section 11D of the Act. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hall be released forthwith, by an order in FORM GST DRC-23, on proof of payment. (4) Where the taxable person fails to pay the amount referred to in sub-rule (3) in respect of the said property of perishable or hazardous nature, the Commissioner may dispose of such property and the amount realized thereby shall be adjusted against the tax, interest, penalty, fee or any other amount payable by the taxable person. (5) Any person whose property is attached may, within seven days of the attachment under sub-rule (1), file an objection to the effect that the property attached was or is not liable to attachment, and the Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC-23. (6) The Commissioner may, upon being satisfied that the property was, or is no longer liable for attachment, release such property by issuing an order in FORM GST DRC-23." 60.6 The relevant portion of DRC-22 is reproduced below: "Provisional attachment of property under section 83 It is to inform that M/s ---------- (name) having principal place of business at ------- (address) bearing registration number ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C is sought to be availed based on fraudulent transactions like fake/bogus invoices etc. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant the formation of the belief. (II) The power conferred upon the authority under Rule 86A of the Rules for blocking the ITC could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on subjective weighty grounds and reasons. (III) The power under Rule 86A of the Rules should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (IV) The aspect of availing the credit and utilization of credit are two different stages. The utilization of credit is a vested right. No vested right accrues before taking credit. (V) The 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his client had to debit a total sum of Rs. 7.65 Crore from the credit ledger thereby debiting the ITC availed by the writ applicant on the various inputs and input services. He would submit that the two DRC- 03 Forms for the above referred sum was debited under pressure and was uploaded on the GSTN Portal. He pointed out that his client submitted a letter stating that the reversal of the ITC aggregating to Rs. 7.65 Crore was under protest and that there was nothing wrong in the ITC availed by his client. According to Mr. Dave, his client has, time and again, requested the Divisional GST Officers for reversing the debit entries made on 09.04.2019 in the credit ledger of his client and allow his client to utilize such ITC that had to be debited as a deposit because of the pressure of the Investigating Officers. According to Mr. Dave, his client is not allowed to take credit entry of such ITC aggregating to Rs. 7.65 Crore, though no proceedings in accordance with law have been initiated till 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 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, Jharkhand (GSTIN-20AALHM5998L1ZJ); (iv) Shiv Alloys and Steels Chhatisgarh (GSTIN-22AALHM5998L1ZF); (v) M/s Shakambari Metalicks, Jharkhand (GSTIN-20A JMPP3256C1ZJ) and (vi) M/s Vishkarma Industries, Jharkhand (GSTIN- 20FJWPS4147A1Z5), as mentioned in this para, who have supplied invoices to the Petitioner, on the basis of which they have availed Input Tax Credit (ITC) during 2017-18 and 2018-19. However, it is pertinent to submit that acting upon specific information that M/s Vishkarma Industries, Jaipur, a trading firm (GST Number 08F JWPS4147 A1ZR), have indulged themselves in facilitation of fraudulent ITC by issuing merely GST invoices, without actual supply of goods, coordinated simultaneous search operation was planned and executed on 13.09.2018 at 19 premises spread over in three states 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isgarh 3,97,70,482/- 2 M/s Kanchan Alloys and Steels, Jharkhand 1,18,54,336/- 3 M/s Om Shiv Metalicks, Jharkhand 5,41,50,283/- 4 M/s Shakambri Metalicks, Jharkhand 77,51,672/- 5 M/s Shiv Alloys and Steels, Chhattisgarh 2,71,06,744/- 6 M/s Vishkarma Industries, Jharkhand 1,18,79,119/- Total 15,25,12,636/- The petitioner have availed ineligible ITC to the tune of Rs. 15,25,12,686/- based on fake/bogus invoices without actual receipt of goods. 5.8 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 hereunder. This is clearly an afterthought of the petitioner. The contention of the petitioner is not true. Shri Nikhil Ashokkumar Gupta, Director in the petitioner company had voluntarily deposited an amount of Rs. 7,65,00,000/-, vide debit entry no.DI2404190041877 & DI2404190042105 both dated 09.04.2019 on being convinced with the evidences available with this o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvices Tax (CGST) Rules, 2017 relating to "Notice and Order for Demand of Amounts Payable under the Act", provides as under: 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-03 and the proper officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST DRC-04. (3) Where the person chargeable with tax makes payment of tax and interest under subsection (8) of section 73 or, as 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) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me has been deposited by them admitting their wrong done, which is against the GST law. The quantum of evasion against the petitioner is huge i.e. Rs. 15,25,12,636/- and government cannot allow anyone to misuse the revenue which legitimately belongs to the exchequer. Petitioner terming action taken against them and subsequently voluntary payment made by him as illegal is objectionable and strongly denied. Considering and Judging action of the department, at this stage, as illegal in this manner is not appropriate at the end of the petitioner. Statements of Shri Nikhil Ashokkumar Gupta, Director of M/s Rudra Global Infra Products Ltd. have been recorded more than once and while concluding the same he himself had certified that he has given the said statement willingly, on his own free will and without any threat, coercion or inducement. It is established law that Respondent No. 3 i.e. officers of Indirect Tax are not the Police Authorities 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 noth....