TaxTMI 
TaxTMI 
2025 (5) TMI 1430
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....-A2; c. Issue a writ of mandamus or any other writ or order or direction in the nature of writ of mandamus to unblock the input tax credit of Rs.3,13,07,146-00/- immediately; and c. Grant any other relief that this Hon'ble deems fit in the facts and circumstances of the case including costs, in the interest of justice and equity. " 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3. A perusal of the material on record will indicate that the Electronic credit ledger of the petitioner was blocked by the impugned order at Annexure - A dated 13.01.2025, by invoking Rule 86A of the Central Goods and Services Tax Rules, 2017 (for short 'the CGST Rules'). In this context, learned counsel for the petitioner invited my attention to the material on record in order to point out that before passing the impugned order, pre-decisional hearing was not provided to the petitioner 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 ....
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....unity to show cause as to why such a presumption should not be drawn. Moreover, in a given transaction of an agreement to sell, there might be several bona fide considerations which might induce a seller to sell his immovable property at less than what might be considered to be the fair market value. For example: he might be in immediate need of money and unable to wait till a buyer is found who is willing to pay the fair market value for the property. There might be some dispute as to the title of the immovable property as a result of which it might have to be sold at a price lower than the fair market value or a subsisting lease in favour of the intending purchaser. There might similarly be other genuine reasons which might have led the seller to agree to sell the property to a particular purchaser at less than the market value even in cases where the purchaser might not be his relative. Unless an intending purchaser or intending seller is given an opportunity to show cause against the proposed order for compulsory purchase, he would not be in a position to rebut the presumption of tax evasion and to give an interpretation to the provisions which would lead to such a result would....
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....ce there is no right of appeal or revision), it has an opportunity to demonstrate that the reasons which persuaded the authority to pass an order adverse to his interest were erroneous, irrational or irrelevant, and (2) that the obligation to record reasons and convey the same to the party concerned operates as a deterrent against possible arbitrary action by the quasi-judicial or the executive authority invested with judicial powers. 30. Section 269UD(1), in express terminology, provides that the appropriate authority may make an order for the purchase of the property 'for reasons to be recorded in Writing'. Section 269UD(2) casts an obligation on the authority that it 'shall cause a copy of its order under sub-section (1) in respect of any immovable property to be served on the transferor'. It is, therefore, inconceivable that the order which is required to be served by the appropriate authority under sub-section (2) would be one which does not contain the reasons for the passing of the order or is not accompanied by the reasons recorded in writing. It may be permissible to record the reasons separately but the order would be an incomplete order ....
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....Conversely if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature, and no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing, shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative process or frustrate the need for utmost promptitude. In short, this rule of fair play must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise.' 13. Initially, it was the general view that the rules of natural justice would....
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....use in that event the court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences for the party affected. The principle will hold good irrespective of whether the power conferred on a statutory body or Tribunal is administrative or quasi-judicial. 16. We may, however, hasten to add that no general rule of universal application can be laid down as to the applicability of the principle of audi alteram partem, in addition to the language of the provision. Undoubtedly, there can be exceptions to the said doctrine. Therefore, we refrain from giving an exhaustive catalogue of the cases where the said principle should be applied. The question whether the principle has to be applied or not is to be considered bearing in mind the express language and the basic scheme of the provision conferring the power; the nature of the power conferred and the purpose for which the power is conferred and the final effect of the exercise of that power. It is only upon a consideration of all these matters that th....
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....ia 45, a question arose whether in the absence of a provision for giving the concerned parties an opportunity of being heard before an order is passed under the provisions of section 269UD of the Act, for purchase by the Central Government of an immovable property agreed to be sold on an agreement to sell, an opportunity of being heard before such an order could be passed should be given or not. Relying on the decisions of this court in Union of India v. Col. J.N. Sinha and Olga Tellis 47 it was held that: 'Although Chapter XX-C does not contain any express provision for the affected parties being given an opportunity to be heard before an order for purchase is made under section 269UD, not to read the requirement of such an opportunity would be to give too literal and strict an interpretation to the provisions of Chapter XX- C and in the words of judge learned hand of the United States of America "to make a fortress out of the dictionary." Again, there is no express pro vision in Chapter XX-C barring the giving of a show-cause notice or reasonable opportunity to show cause nor is there anything in the language of Chapter XX-C which could lead to such an implication. T....
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....he assessee suffers civil consequences and the order passed would be prejudicial to him and, therefore, the principles of natural justice must be held to be implicit. The court has further observed that if the assessee was put to notice, he could show that the nature of accounts is not such which would require appointment of special auditors. He could further show that what the assessing officer considers to be complex is, in fact, not so. It was also open to him to show that the same would not be in the interests of the Revenue. 21. In the light of the aforenoted legal position, we are in respectful agreement with the decision of this court in Rajesh Kumar that an order under section 142(2A) does entail civil consequences. At this juncture, it would be relevant to take note of the insertion of the proviso to section 142(2D) with effect from June 1, 2007. The proviso provides that the expenses of the auditor appointed in terms of the said provision shall, henceforth, be paid by the Central Government. In view of the said amendment, it can be argued that the main plank of the judgment in Rajesh Kumars to the effect that direction under section 142(2A) entails civil conseque....
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....nature of an inquiry before assessment, is purely an administrative act giving rise to no civil consequence and, therefore, at that stage a pre-decisional hearing is not required. In Rajesh Kumar, it has been held that in view of section 136 of the Act, proceedings before an assessing officer are deemed to be judicial proceedings. Section 136 of the Act stipulates that any proceeding before an Income-tax authority shall be deemed to be judicial proceeding within the meaning of sections 193 and 228 of the Penal Code, 1860, and also for the purpose of section 196 of the Penal Code, 1860 and every Income- tax authority is a court for the purpose of section 195 of the Criminal Procedure Code, 1973. Though having regard to the language of the provision, we have some reservations on the said view expressed in Rajesh Kumar's case54, but having held that when civil consequences ensue, no distinction between quasi-judicial and administrative order survives, we deem it unnecessary to dilate on the scope of section 136 of the Act. It is the civil consequence which obliterates the distinction between quasi-judicial and administrative function. Moreover, with the growth of the administrativ....
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....would entail and visit the appellants with serious civil consequences. 8.9 In K.I. Shephard's case 55, the apex court held as under (page 448 in SCC): "15. Fair play is a part of the public policy and is a guarantee for justice to citizens. In our system of Rule of Law every social agency conferred with power is required to act fairly so that social action would be just and there would be furtherance of the well-being of citizens. The rules of natural justice have developed with the growth of civilisation and the content thereof is often considered as a proper measure of the level of civilisation and Rule of Law prevailing in the community. Man within the social frame has struggled for centuries to bring into the community the concept of fairness and it has taken scores of years for the rules of natural justice to conceptually enter into the field of social activities. We do not think in the facts of the case there is any justification to hold that rules of natural justice have been ousted by necessary implication on account of the time frame. On the other hand we are of the view that the time limited by statute provides scope for an opportunity to be extended....
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....er hand, the normal rule should apply. It was also contended on behalf of the respondents that the excluded employees could now represent and their case could be examined. We do not think that would meet the ends of justice. They have already been thrown out of employment and having been deprived of livelihood they must be facing serious difficulties. There is no justification to throw them out of employment and then given them an opportunity of representation when the requirement is that they should have the opportunity referred to above as a condition precedent to action. It is common experience that once a decision has been taken, there is a tendency to uphold it and a representation may not really yield any fruitful purpose.' 13. The view that has been taken by this court in the above observation is that once a decision has been taken, there is a tendency to uphold it and a representation may not yield any fruitful purpose. Thus, even if any hearing was given to the employees of CORIL after the issuance of the impugned circular, that would not be any compliance with the rules of natural justice or avoid the mischief of arbitrariness as contemplated by article 14 of....
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....-Revenue blocking the ECL of the appellants without providing/granting pre- decisional hearing and confirmed by the learned single judges deserve to be set aside. 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 respondents-revenue were justified in passing the impugned orders blocking the Electronic Credit Ledgers of the appellants by invoking Rule 86A of the CGST Rules which mandates that the respondents-revenue should have 'reasons to believe' that the ITC available in the ECL was fraudulently availed or was ineligible as contemplated in the said provision; in this regard, the learned Single Judge noticed that 2 pre-requisites/conditions had to be satisfied/fulfilled before invocation of Rule 8....
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....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 Commissioner, must have "reasons to believe" that credit of input tax available in the electronic credit ledger is either ineligible or has been fraudulently availed by the registered person, before disallowing the debit of amount from electronic credit ledger of the said registered person under rule 86A. The reasons for such belief must be based only on one or more of the following grounds: a) The credit is availed by the registe....
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....rounds 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 rule 86A and whether disallowing such debit of electronic credit ledger of the said person is necessary for restricting him from utilizing/ passing on fraudulently availed or ineligible input tax credit to protect the interests of revenue. Such "Reasons to believe" shall be duly recorded by the concerned officer in writing on file, before he proceeds to disallow debit of amount from el....
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....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 ECL but, was due to the fact that he felt compelled to obey the command of another officer. This is not the manner in which the law expects the power under rule 86A to be exercised. When a thing is directed to be done in a particular manner, it must be done in that manner or not at all is the well-established principle of administrative law. On a perusa....
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....tually 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 sub-section (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 deemed to be concluded upon the person paying the tax with interest under Section 50 and a penalty equivalent to 50 per cent of the tax within thirty days of the communication of an order. These provisions indicate how sub-sections (5), (8) and (11) operate at different stages of the process. 49. Now in this b....
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....lising 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 the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assessee can be levied. The....
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....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/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the Revenue may not be in a position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion,....
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....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 provisions under the CGST Act, 2017 and Rules made there under was followed by this Court in the context of Section 281B of the I.T. Act by this Court in Indian Minerals Case (supra), wherein it was held as under:- "8. As....
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....xures-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, non- speaking 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 clearly unfounded and without any basis and consequently, the said apprehension of the respondents cannot be accepted". 12. In the instant case, a perusal of the impugned order will clearly indicate....
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....ding 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 not found forthcoming from the order issued blocking the said credit and it is entirely based on the satisfaction of another officer; it is quite possible that....