DELHI HIGH COURT
Indo International Tabacco Ltd.
Additional Director General, DGGI & Ors.
[Manmohan, & Navin Chawla, JJ]
W. P. (C) No. 2420 of 2021
Date of Decision: January 11, 2022
Search and Seizure – Territorial Jurisdiction – Multiple Search operations–Repeated Summons– Search by Multiple Agencies- Parallel Investigations – Centralization of Investigations with DGGI by transfer order – Availment and utilization of inadmissible ITC – Section 6(2)(b) of CGST Act, 2017 – Overlapping exercise of Jurisdiction by the Central & State Tax Officers – Circular dated 05.10.2018 clarifying initiation of Intelligence based enforcement action– – Notifications empowering proper officer – Notification No. 2/2017 – Notification 14/2017– Central Tax Officers with all India jurisdiction – Transfer of Investigation to DGGI – justified – Petition Dismissed. Sections 2(91), 6(2)(b) of CGST Act, 2017.
The petitioners are engaged in the business of manufacturing & selling of tobacco products. Being aggrieved of multiple search operations and repeated summons by multiple agencies, petitioners filed this Writ Petition to challenge the conduct of alleged parallel investigation by officers of CGST, DDGI Ahmedabad and Delhi Unit, Joint Commissioner (AE), etc. Petitioner firm’s GST registration was also cancelled by the Respondents for alleged availment and utilization of inadmissible ITC. The thrust of contentions of petitioner was that the issuance of such multiple summons by multiple agencies is violative of the mandate of Section 6(2)(b) of the CGST Act and also the Circular No. D.O.F. No. CBEC/20/43/01/2017-GST (Pt.) dated 05.10.2018 issued u/s 168 of CGST Act clarifying initiation of Intelligence based enforcement action. They submitted that it is only the jurisdictional Commissionerate that has the jurisdiction to carry out the entire process of investigation, including the issuance of Show Cause Notices, adjudications, recovery, etc. He further submitted that Section 6(2) of the CGST Act, 2017 states that if the SGST Officer of the State Government has already initiated proceedings, then the CGST Officers cannot exercise any power on the same subject matter, which is intelligence-based enforcement action on the entire taxpayers.
On the other hand, respondent contended that the Central Government and the State Governments have issued notifications empowering the ‘proper officers’. Vide Notification No. 02 of 2017 dated 19.06.2017, issued by the CBEC, various Central Tax Officers have been appointed vesting them with jurisdiction on specified territories i.e. for limited territorial jurisdiction. Whereas, vide Notification No. 14/2017 dated 01.07.2017, the CBEC has appointed the Central Tax Officers with All India jurisdiction. It submitted that where the subject matter is of all-India jurisdiction, then only the Officers appointed under Notification No. 14 of 2017 dated 01.07.2017 can exercise power under Section 6(2)(b) of the CGST Act, 2017. Furthermore, the present case appeared to be a fake ITC scam perpetuated by various entities spread across the country and involved the misuse of ITC of more than ₹300 crore. The same required a thorough investigation by a specialised investigating agency having all-India jurisdiction. The DGGI, AZU, vide letter dated 01.03.2021, had requested all the concerned formations of the DGGI to transfer the investigation to the DGGI, AZU.
Hon’ble court observed that, the investigations that were initiated by various jurisdictional authorities against the Petitioners and the same have been transferred to officials of the Respondent to be brought under one umbrella. Furthermore, in the course of investigating of a tax entity, a situation may arise where the investigation may have to be carried out from entities which are not within the territorial jurisdiction of the Officer appointed or with the limited territorial jurisdiction. It cannot be said that in every such case, the ‘proper officer’ having limited territorial jurisdiction must transfer the investigation to the ‘proper officer’ having pan India jurisdiction. Thus the Hon’ble Court held that, the Circular cannot be extended to cover all and myriad situations that may arise in the administration and the functioning of the GST structure. Moreover, Section 6 of the CGST Act and the above said Circular clearly has a limited application, which is of ensuring that there is no overlapping exercise of jurisdiction by the Central and the State Tax Officers. It is to bring harmony between the Centre and the State in the implementation of the GST regime.
It was held that transfer of all the cases to DGGI, Ahmedabad was correct and the challenge to such transfer if not sustainable. Petition dismissed.
GAUHATI HIGH COURT
Union of India
[Hitesh Kumar Sharma, J]
Date of Order/Decision: 23.08.2021
Bail Application – Issue of Invoices without actual supply of goods – Bail u/s 439 of CrPC, 1973 – Fake Invoices – Fraudulent practices of availment & utilization of ITC – Bail Application by Tax Consultant – Search proceedings in the office of Tax Consultant – Incriminating Documents – Fake Invoices – No Individual Role in commission of offence – Huge Economic Offence – Detailed Investigation essential – Petitioner on Bail likely to hamper the investigation and tamper evidence –Bail Application Rejected. Sections 69/132 of CGST Act, 2017.
Applicant filed a Bail Application under Section 439 of the Cr.P.C. seeking Bail of the accused under Section 132(5) of CGST Act, 2017. The allegation against him was that he had managed/collected the fake invoices and facilitated commission of the offence by the co-accused Amit Kumar. He was accused of fraudulent practices of availing as well as passing on ITC accumulated through issuance of fake GST invoices and corroborating the same through issuance of E-way bills without actual supply of goods. The Applicant was the Tax Consultant of the M/s Maruti Traders and was in custody for over a month. During search proceedings at his office, incriminating documents such as E-way bills, invoices were found. It came out from the materials so far collected by the Investigating Agency was clearly suggestive that he was arranging fake invoices. He submitted that being a Tax Consultant, he had no individual role in the commission of the offence and had done his duty as a Tax Consultant only on the basis of the materials given to him. The Hon’ble High Court held that complaint alleged a huge economic offence and therefore, a thorough and detail investigation is essential. Further, considering the materials so far collected by the Investigating Agency and the role of this petitioner in facilitating commission of the offence of huge tax evasion of ₹ 28,97,85,917/-, the enlargement of the Petitioner on bail, at this stage, would likely to hamper the investigation and tamper evidence which may amount to compromising with the entire investigation of the case. Hence, Bail Application rejected.
CALCUTTA HIGH COURT
LGW Industries Ltd.
Union of India
[Md. Nizamuddin, J]
WPA No.23512 of 2019
Date of Decision: 13.12.2021
Input Tax Credit – Genuineness and identity of suppliers – Registered Taxable Person – Goods in question are fake and non-existing – Registration of supplier had already been cancelled with retrospective effect – payment through banking channels –Transactions made before cancellation – Transactions are genuine and supported by valid documents – GSTR 2A – Cancellation of Registration of Suppliers – Verification of genuineness of suppliers – No failure on the part of petitioner – Cases Remanded Back with directions to Revenue to prove ingeniousness of the transaction failing which ITC to be allowed. – Section 16(2) of CGST Act, 2017
GST authorities alleged that the suppliers from whom the petitioners/buyers were claiming to have purchased the goods in question were all fake and non-existing and the petitioners had not verified the genuineness and identity of the aforesaid suppliers who were Registered Taxable Persons (RTP) before entering into any transaction with those suppliers. The registration of suppliers in question had already been cancelled with retrospective effect covering the transactions period in question. Petitioners contended that the transactions in question were genuine and valid by relying upon all the supporting relevant documents required under law. Moreover, they had paid the amount of purchases in question as well as tax on the same through banks and all the purchases in question invoices-wise were available on the GST portal in Form GSTR-2A. Thus, the Hon’ble Court held that if all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and in the event the petitioners shall be given the benefit of ITC in question. It cannot be said that that there was any failure on the part of the petitioners in compliance of any obligation required under the statute before entering the transactions in question or for verification of the genuineness of the suppliers in question.
High Court remanded the matter back to consider the documents relied on by the petitioner to prove genuineness of its purchases (including payment of value of goods and GST thereon to suppliers). if purchases are found to be genuine and were undertaken prior to cancellation of registration, benefit of ITC should be allowed to the petitioners.
GUJARAT HIGH COURT
Manish Scrap Traders
[J.B. PARDIWALA, J AND NISHA M. THAKORE, J]
R/SPECIAL CIVIL APPLICATION NO. 76 of 2022
Date of Decision: 05.01.2022
Provisional attachment of Cash Credit Account¬– GST DRC 22– Section 83 of CGST Act, 2017 – Debtor creditor relationship – provisional attachment of a cash credit account is no longer res integra – Prima Facie Commissioner committed contempt – Explanation sought as to how he distinguished the binding judgments that Cash Credit Account cannot be attached.
Subject matter of challenge is the order of provisional attachment of the Cash Credit Account which has been passed in the Form GST DRC-22 in exercise of powers under the provisions of Section 83 of the CGST Act, 2017. The Bank and the writ applicant do not have the debtor – creditor relationship. The Hon’ble Court held that the law as regards the provisional attachment of a cash credit account is no longer res integra. Furthermore, the Principal Commissioner, CGST, Surat is in contempt and he owes an explanation as to on what basis he has distinguished all the orders passed by this Court over a period of time taking the view that a cash credit account could not be provisionally attached in exercise of powers under Section 83 of the CGST Act, 2017.
ALLAHABAD HIGH COURT
Commissioner of State Tax & Ors.
[Piyush Agwawal, J]
WRIT TAX No. – 1084 of 2021
Date of Decision: 09.12.2021
GST Registration – Relevant documents – Section 25 of UPGST Act – Rule 8 & Rule 9 of UPGST Rules – Inspection at business premises – Notice for seeking information & documents – Cancellation of Registration – Harassment of Assessee – Submission of House Tax Receipt – Non-submission of Electricity Bill – Right to carry on business – Grant of GST Registration Certificate –Writ petition allowed with cost to respondent – Section 25 of UPGST Act, 2017.
Petitioner is engaged in the business of providing employment through consultancy. The Petitioner applied for grant of registration under the UPGST Act through online mode and had provided the documents as per Section 25 of the UPGST Act and Rule 8 and 9 of the UPGST Rules, 2017. Thereafter, inspection was made at the business premises of the petitioner and notice was issued for providing certain information and documents in support thereof. In compliance with the Notice, the Petitioner had submitted the explanation regarding the nature or possession of the business premises as the owner and submitted the House Tax Receipt. On submission of reply, the application of the petitioner was rejected. The Hon’ble Court observed that the Petitioner had every right to carry on her business lawfully and that the two authorities of the State had acted only with a view to harass the petitioner. The Hon’ble court had set aside the rejection of application of GST registration on the ground that if for the purpose of proof of business ownership there is an option to furnish either house tax receipts or electricity bill receipts, then application cannot be rejected on the basis of non-compliance, if receipt of electricity bills are not furnished. The writ petition allowed with cost to the respondent.
TELANGANA HIGH COURT
Deputy Commissioner of SGST
[Ujjal Bhuyan, Chillakur Sumalatha, JJ]
W.P.Nos.527 & 616 OF 2020
Date of Decision: 05.11.2021
Export of Services – Accumulation of ITC – Refund of utilized ITC – Section 54(3) of Telangana SGST Act, 2017 r.w. Section 54(3) of CGST Act, 2017 & Section 20(xiii) of IGST Act, 2017 – Application for refund –Refund claim rejected – Rule 92 of CGST Rules, 2017 – audi alteram partem – Essence of opportunity of being heard – principles of Natural Justice – No substitution by telephonic conversations or emails – petition allowed – Section 54 of CGST Act, 2017
Petitioner is engaged in the business of exporting software and information technology services. In connection with the export business of the petitioner, Input Tax paid on input services and capital goods gets accumulated as unutilized credit in the books of account of the petitioner. As a result, petitioner has been filing refund claims for refund of utilized Input Tax Credit under Section 54(3) of the Telangana SGST, 2017 read with Section 54(3) of the CGST Act, 2017 and Section 20(xiii) of the IGST Act, 2017. In pursuance to this, Respondent rejected such claim for refund on the ground that petitioner had not submitted the required documents in hard copies for verification. Petitioner relied upon the Rule 92 of CGST Rules, 2017, where in proviso it is mentioned that no application for refund shall be rejected without giving the applicant an opportunity of being heard. Thus, the Hon’ble Court held that the expression ‘opportunity of being heard’ is not an expression of empty formality. It is a part of the well-recognized principle of audi alteram partem which forms the fulcrum of natural justice and is central to fair procedure. When the law requires that no application for refund shall be rejected without giving the applicant an opportunity of being heard, the same cannot be substituted by telephonic conversations and exchange of e-mails. Consequently, Impugned Memo is set aside and directed respondent to hear afresh applications for refund.
BOMBAY HIGH COURT
Advent India PE Advisors Private Limited
Union of India and Ors.
[DIPANKAR DATTA, CJ & M. S. KARNIK, J.]
WRIT PETITION NO. 2320 OF 2021
Date of Decision: 03.12.2021
Electronic Credit Ledger – Sub Rule (1) & Sub-rule (3) of Rule 86A of CGST Rules, 2017 – Unblocking of ITC – Restriction ceased on expiry of one year – provisions of Rule 86A of CGST Rules, 2017 – Statutory mandate – Unblock ITC after one year – petitioner’s co-operation with department – Petition disposed of – Rule 86A of CGST Rules, 2017
Petitioner filed this writ petition seeking direction to unblock the ITC availed by the petitioner in its Electronic Credit Ledger with interest at appropriate rate for period during which the Petitioner was deprived of its property. In pursuance to this, Petitioner relied upon the provisions of Rule 86A of the CGST Rules, 2017 and in particular sub-rule (3) thereof, which provides that restriction imposed under sub-rule (1) would cease to have effect after expiry of one year from the date of imposition thereof. The Hon’ble Court observed that having regard to the statutory mandate in sub-rule (3) of rule 86A, the ITC ought to have been unblocked immediately after one year of the restriction being imposed under sub-rule (1) thereof. Whereas, if the respondents were of the view that the petitioner had not been cooperating with the department, they ought to have proceeded against it in a manner known to law. Petition disposed off.
GUJARAT HIGH COURT
Vageesh Umesh Jaiswal
State of Gujarat
[J.B.PARDIWALA, J & NISHA M. THAKORE, J.]
R/SPECIAL CIVIL APPLICATION NO. 19176 of 2021
Date of Decision: 06.01.2022
Registration – Cancellation of – Show Cause Notice for cancellation of Registration – Form GST REG-17/31 – Rule 22(1) of CGST Rules, 2017 – Vague Notice issued – Allegation of bogus billing – SCN not supported by reasons and documentary evidence – Registration cancelled – Writ filed seeking quashing of cancellation order – Allowed – Section 29 of CGST Act, 2017
The premises of the Writ Applicant was searched by the Asst. Commissioner of DGGI (Directorate General of Goods & Services Tax Intelligence), Ahmedabad and various documents like purchase invoices, ledger copies etc. were seized by the officer. Thereafter, respondent issued a Show-cause Notice (SCN) for cancellation of Registration in the Form GST REG-17/31 under Rule 22(1) of the CGST Rules, 2017. Thereafter, Writ applicant filed its reply and brought to the notice of the Commercial Tax Officer that the SCN was as vague as no details of the name of the supplier etc. had been furnished. Subsequently, final order was passed cancelling the Registration.
The Hon’ble court expressed its disappointment for two reasons; first the mode and manner in which the entire exercise had been undertaken by the Commercial Tax Officer in cancelling the registration and secondly the vehemence with which the respondents have opposed the writ application despite serious shortcomings in the impugned action. Being no reasons assigned in the show-cause notice, the final order was passed cancelling the registration. There was just one line stated “Dealer is engaged in bogus billing”.
The Hon’ble Court further held that the whole object of issuing a show-cause notice is to make the recipient of the notice understand what the authority is trying to convey and what the nature of the allegations are. In this case, there were allegations of bogus billing, it was expected of the authority to at least furnish some information about such bogus billing. At this stage, petitioner submitted that along with the show-cause notice, there is always few documents attached which would indicate what the authority wants to convey about the bogus billing. Show cause notice is a mandatory requirement for raising any demand under the CGST Act, 2017 except payment of interest u/s 50 and assessment of non filer of returns u/s 62 of the Act. The issue of SCN is not only to make aware the taxable person against whom the action is intended to be taken but must contain brief facts of case and grounds relied upon for the proposed action and language in precision, the reading of which makes the person concerned understand the case that he has to defend. It should not be issued on assumptions and presumptions. The allegations and findings in the SCN should be supported by some documentary evidences. The Hon’ble Court allowed this Writ application and quashed the impugned order cancelling the registration.
KERALA HIGH COURT
State Tax Officer
[BECHU KURIAN THOMAS, J]
RP NO. 630 OF 2021
Date of Decision: 29.11.2021
Section 130(2) of Customs Act, 1962 – Order of prohibition – Rule 139(2) & Rule 140 of CGST Rules, 2017 –Release of goods, before orders of confiscation are issued – Provisional release of goods under section 130 of the Customs Act, 1962 – discretion of Tax Officer to pass an order of confiscation – release of goods during adjudication and post adjudication – Market value u/s 2 (73) of the Customs Act, 1962– fine on release of goods in confiscation
Review petition had been filed by the State Tax officer against the interim order passed under Original Writ Petition by which it was directed to release the goods leading to question whether section 130(2) of the Customs Act, 1962 contemplates the release of goods by payment of fine in lieu of confiscation, even before orders of confiscation are issued.
By going through the brief facts, an inspection and seizure was conducted by Kerala GST Department as per Rule 139(2) of the CGST Rules, 2017. Orders of prohibition were later issued under Rule 140 of the CGST Rules, 2017. Thereafter, by an interim order, the Hon’ble Court observed that the assessee could approach the Tax Officer for release of goods. In the meantime, the Tax Officer issued three separate show-cause notices, proposing to confiscate the goods and the conveyances and levied penalty under section 130 of the Customs Act, 1962. The notices specified, apart from tax and penalty, the quantum to be paid as fine in lieu of confiscation of the goods. Another writ petition was filed, alleging that the goods were not liable for confiscation and that perishable goods cannot be detained indefinitely. It was claimed that the goods were liable to be released on a provisional basis, upon execution of a bond or a bank guarantee. Again, the Hon’ble Court directed the Tax Officer to release the goods in favour of the assessee, on payment of the amounts contemplated under section 130(2) of the Act. Then the review petition was filed by the State Tax Officer contending that the discretion rests upon the Tax Officer to pass an order of confiscation immediately or later, depending upon the circumstances and it is only thereafter that the goods could be released.
By going through submissions of both sides, the Hon’ble Court held that the provisions of section 130 of the Act contemplates release of goods on payment of fine in lieu of confiscation at two stages (i) during the process of adjudication, under section 130(2) and, (ii) post-adjudication under section 130(3) of the Act. Moreover, at the time of release of goods under section 130(2) of the Act, the owner of the goods is required to pay the fine in lieu of confiscation alone, while penalty tax and other charges can be paid after adjudication and the basis for calculating the fine in lieu of confiscation under section 130 of the Act is only the market value as defined under section 2(73) of the Act and not the maximum retail price.
BOMBAY HIGH COURT
Saiher Supply Chain Consulting Pvt. Ltd.
Union of India
[S. M. MODAK, R. D. DHANUKA, J.J.]
WRIT PETITION (L.) NO. 1275 OF 2021
Date of Order/Decision: 10.01.2022
Refund Application – Exclusion of period due to COVID pandemic – Rejection of time barred refund application – Circular No. 20/16/04/18-GST dated 18.11.2019 – Section 54(1) of CGST Act, 2017 – exclusion of period 15th March 2020 and 2nd October 2021 –period condoned – Supreme Court order dated 23.09.2021 – Refund Application allowed – Section 54 of CGST Act, 2017.
In this case, petitioner had filed two refund applications which were rejected in view of some discrepancies. The Petitioner thereafter filed third refund application which was however rejected by the Respondent by Order on the ground that the said application was time barred. The Petitioner filed the Writ Petition praying for restoration of the third refund application and for various other reliefs. Petitioner contended that the third refund application, which was required to be filed within two years in accordance with the Circular No. 20/16/04/18-GST dated 18.11.2019, u/s 54(1) of the CGST Act, 2017. The limitation period fell between 15th March 2020 and 2nd October 2021, which period was excluded by the Hon’ble Supreme Court in all such proceedings irrespective of the limitation prescribed under the general law or Special Law whether condonable or not till further Order/s to be passed by the Hon’ble Supreme Court in those proceedings. The Hon’ble Supreme Court by Order dated 23rd September 2021 in Misc. Application No. 665 of 2021 issued further directions that in computing the period of limitation in any Suit, Appeal, Application and or proceedings, the period from 15th March 2020 till 2nd October 2021 shall stand excluded. Consequently the balance period of limitation remaining as on 15th March 2021, if any shall become available with effect from 3rd October 2021.
In view of above, the Hon’ble court held that the Respondent is also bound by the said Order dated 23rd March 2020 and the Order dated 23rd September 2021 and is required to exclude the period of limitation falling during the said period. The third refund application filed by the Petitioner thus was within the period of limitation.
MADRAS HIGH COURT
Aditya Energy Holdings
Directorate General of GST Intelligence
WP.No.9654 of 2021
WMP.No.10223 of 2021
Date of Order/Decision: 10.12.2021
Refund of amount recovered during investigation – Treatment of such amount paid in the course of investigation – petitioner contended that amount paid under coercion – Section 54(1) of CGST Act, 2017 – Amount paid to be treated as “under protest” and is subject to the final appropriation – Section 73 & 74 of CGST Act, 2017 – photo copies of seized documents to be Returned – Case Disposed of.
Petitioner filed this Writ petition claiming the refund of the amount paid by the petitioner during the course of investigation regarding the alleged wrong availment of Input Tax Credit. Petitioner contended that the said amount was paid under coercion. Whereas, Respondent opposed the same with the contentions that the ITC was wrongly availed and summons were also issued to the petitioner, Mahazar was drawn and Seizure Memo was also issued to the petitioner on the same date, the petitioner also appeared to have sent a representation.
Hon’ble Court held that the amount paid by the petitioner shall be treated as amount paid by the petitioner “under protest” and would be subject to the final appropriation in the proceedings to be initiated under Sections 73 / 74 of CGST Act, 2017. Hence, the Writ Petition disposed off with directions to the proper officers concerned to complete the investigation and to return the photo copies of the seized documents and in original which were not required. The respondent shall clearly spell out the reasons and give details of the Relied Upon Documents based on which the demand is proposed to be made against the petitioner.