Fine Exime Pvt Ltd vs Union Of India Through The ...
2021 Latest Caselaw 10724 Bom

                                             15-IA.1322.2021 & WP-2127-21


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       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
               CIVIL APPELLATE JURISDICTION
             INTERIM APPLICATION NO. 1322 OF 2021
                             IN
                WRIT PETITION NO. 2127 of 2021

      Fine Exime Private Limited                 }     Applicant/
                                                       Petitioner
             Vs
      1. Union of India                   }
      2. The Principal Commissioner,      }
         Central Tax and CX, Mumbai East. }
      3. Development Bank of Singapore    }
      4. The Commissioner of CGST & Central}
         Excise (Appeals-II) Mumbai.       }          Respondents
      In the matter of
      Fine Exime Private Limited                 }     Petitioner
                  Versus
      1. Union of India                          }
      2. The Principal Commissioner,             }
         Central Tax and CX, Mumbai East.        }
      3. Development Bank of Singapore           }     Respondents
                              WITH
                  WRIT PETITION NO. 2127 OF 2021
      Fine Exime Private Limited                 }     Petitioner
                Versus
      1. Union of India                     }
      2. The Principal Commissioner, Central}
         Tax and CX, Mumbai East.           }
      3. Development Bank of Singapore      }         Respondents

      Mr.Prakash Shah with Mr.Jas Sanghvi for the
      applicant/petitioner.
      Mr.Pradeep Jetly-Senior Advocate with Mr.Nilesh
      Sawant for the Union of India.
      Mr.Sujit Mashal with Mr.Huzeta Nasikwala
      i/b.Nashikwala Law Office for respondent no.3.


                              Page 1 of 13
                                           15-IA.1322.2021 & WP-2127-21




                   CORAM :- DIPANKAR DATTA, CJ.&
                            G. S. KULKARNI, J.

           HEARD ON        :- AUGUST 3, 2021

      JUDGMENT ON         :- AUGUST 10, 2021.


JUDGMENT [Per DIPANKAR DATTA, CJ.]:-

1. Interim Application No. 1322 OF 2021 dated June 6,

2020 is filed in Writ Petition No. 2127 of 2021. The prayers in

the interim application read as follows: -

(a) That this Hon'ble Court be pleased to modify its order dated 02.03.2021 and the direction given in paragraph 6 of the said order dated 02.03.2021 that "the remaining amount of 90% continuing under debit freeze which shall be subject to outcome of the appeal or such order that may be passed by the appellate authority" be deleted.

(b) That this Hon'ble Court be pleased to quash and set aside the impugned attachment order dated 01.12.2020 issued by Respondent No.2 and de-freeze the balance amount of 90% kept in debit freeze vide order dated 02.03.2021 passed by this Hon'ble Court.

(c) That this Hon'ble Court be pleased rectify the word 'Respondent No.2' with the word 'Respondent No.3' in paragraph 1 of the said order dated 02.03.2021 passed by this Hon'ble Court.

15-IA.1322.2021 & WP-2127-21

(d) That this Hon'ble Court be pleased direct Respondent No.4 to decide the Appeal bearing V2(A)123/ADC/JC/CGST/ME/2021 filed by the Petitioner expeditiously preferable within a period of 4 weeks.

2. While hearing the interim application, we have heard

Mr.Shah, learned counsel for the applicant/writ petitioner

(hereafter 'the petitioner') and Mr.Jetly, learned senior counsel

for the respondents on the merits of the writ petition too. We

propose to dispose of the writ petition as well as the interim

application by this common judgment and order.

3. The petitioner invoked the writ jurisdiction of this Court

for quashing of an order dated December 1, 2020 passed by

the Principal Commissioner, Central Tax and CX, Mumbai East,

Mumbai (respondent no.2). By such order, the respondent

no.2 had directed provisional attachment of the petitioner's

bank account maintained with the Development Bank of

Singapore Ltd. (respondent no.3), in exercise of power

conferred by Section 83 of the Central Goods and Services Tax

Act, 2017 (hereinafter "the CGST Act" for short). The

respondent no.3 was directed not to allow any debit to be

made from the said account or any other account operated by

the petitioner without prior permission.

15-IA.1322.2021 & WP-2127-21

4. A bare reading of the order dated December 1, 2020

would reveal that the petitioner was accused of claiming

fraudulent refund under Section 54 of the CGST Act. It is also

noted therefrom that the respondent no.2 was given to

understand by the Dongri Police Station, Mumbai (vide

correspondence dated November 27, 2020) that upon a

written request being made, the said bank account having

Rs.5,20,13,134/- had been temporarily frozen by the

respondent no.3.

5. The petitioner mounted a challenge to the said order

dated December 1, 2020 on the ground that the condition

precedent for provisional attachment of a bank account, as

referred to in Section 83 of the CGST Act, was non-existent.

Since no proceedings against the petitioner were pending

under Sections 62 or 63 or 64 or 67 or 73 or 74 of the CGST

Act, it was claimed that the respondent no.2 had acted

without jurisdiction.

6. The writ petition was considered by a co-ordinate Bench

on March 2, 2021. The Bench noted that on January 13, 2021,

a show-cause notice was issued to the petitioner whereafter

15-IA.1322.2021 & WP-2127-21

an order in original dated February 12, 2021 had been passed

by the Deputy Commissioner of CGST and Central Excise,

Mumbai Central Commissionerate confirming the demand of

Rs.5,20,13,134/- along with interest and penalty. After so

noting, the Bench proceeded to pass the following order: -

     "    .....
     2.   .....

3. Learned counsel for the petitioner submits that the very purpose of provisional attachment of the bank account is no longer available with the respondents as the matter has attained finality in the form of order in original subject to filing of appeal by the petitioner. He therefore, seeks withdrawal of the provisional attachment order.

4. On the other hand, Mr. Jetly submits that the entire refund was obtained by the petitioner fraudulently. When officials of respondent No.2 visited the premises of the petitioner no such premises were found, not to speak of any personnel of the petitioner. In such circumstances, he submits that as on today the provisional attachment should not be withdrawn.

5. We have heard learned counsel for the parties and given our thoughtful consideration to the entire matter.

6. Without expressing any opinion on merit, at this stage, we find that the order in original is appealable before Commissioner (Appeals) subject to payment of 10% of the demand. Since petitioner has a statutory

15-IA.1322.2021 & WP-2127-21

right of filing appeal against the order in original, to make such right meaningful, we direct that provisional attachment of the aforesaid bank account of the petitioner shall be withdrawn to the extent of 10% of the credited amount as on today with the remaining amount of 90% continuing under debit freeze, which shall be subject to outcome of the appeal or such order that may be passed by the appellate authority.

7. Stand over to 20th April, 2021."

7. Availing the leave granted by the order dated March 2,

2021, the petitioner carried the order dated February 12,

2021 in an appeal under Section 107 of the CGST Act. As

required by sub-section (6) of Section 107, requisite amount

has been pre-deposited for consideration of the appeal.

Referring to the same, it is contended in the interim

application that in terms of sub-section (7) of Section 107 of

the CGST Act, the respondents are statutorily restrained from

initiating proceedings for recovery of any balance sum. The

interim application also refers to the decision of the Supreme

Court in Radha Krishan Industries vs. State of Himachal

Pradesh & Ors., reported in 2021 SCC OnLine SC 334.

According to the petitioner, proceedings which were initiated

stand terminated by reason of the final order dated February

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12, 2021 and, therefore, there could be no cause for the

respondents to keep the order of provisional attachment of its

bank account alive.

8. Having regard to the nature of relief claimed in the writ

petition as well as the interim application, set out above, we

are tasked to decide a simple issue: whether, having regard to

the decision in Radha Krishan Industries (supra), the order

of provisional attachment dated December 1, 2020 can be

kept alive?

9. Mr. Jetly contended that the decision in Radha Krishan

Industries (supra) was rendered considering a very different

fact situation and, therefore, the ratio of such decision is not

applicable here; and notwithstanding the decision in Radha

Krishan Industries (supra) and culmination of the

proceedings initiated against the petitioner by the order dated

February 12, 2021, since carried in appeal which is pending,

the respondents are justified in not lifting the order of

provisional attachment because new facts of the revenue

being defrauded by the petitioner have been unearthed.

Mr.Jetly, by referring to the reply affidavit of the respondent

no.2 to the additional affidavit of the petitioner, more

15-IA.1322.2021 & WP-2127-21

particularly paragraphs 5 to 8, contended that investigations

against the petitioner are in progress and that further

proceedings in terms of Section 74 of the CGST Act are in

contemplation; in view thereof, it would hit the interest of the

revenue hard if relief claimed by the petitioner is granted.

10. In Radha Krishan Industries (supra), an order of

provisional attachment was challenged before the relevant

Himachal Pradesh High Court in a writ petition. Such petition

was dismissed on the ground that an alternative remedy was

available. Dismissal of the writ petition was challenged before

the Supreme Court. The Supreme Court held that the writ

petition was maintainable before the High Court, which had

erred in dismissing it. While proceeding to answer the issue as

to whether the order of provisional attachment under

challenge was issued in valid exercise of power conferred by

the Himachal Pradesh Goods and Services Act, 2017

(hereafter "the HPGST Act"), the Court had the occasion to

analyze the legal position in respect of, inter alia, provisional

attachment. It was held that the power to order provisional

attachment of property under Section 83(1) of the HPGST Act

was a drastic power being draconian in nature, the conditions

which are prescribed by the statute for a valid exercise of the

15-IA.1322.2021 & WP-2127-21

power must be strictly fulfilled. Considering the provisions of

Section 107 of the HPGST Act, including its sub-sections (6)

and (7), and bearing in mind that the order of provisional

attachment had been made during pendency of proceedings

under Section 74 thereof which, in due course of time, stood

concluded by an order had been made under sub-section (9)

thereof, the Court proceeded to observe in paragraph 77 as

follows: -

"77. Clause (a) of sub-Section (6) provides that no appeal shall be filed without the payment in full, of such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order as is admitted. In addition, under clause (b), ten per cent of the remaining amount of tax in dispute arising from the order has to be paid in relation to which the appeal has been filed. Upon the payment of the amount under sub-Section (6) the recovery proceedings for the balance are deemed to be stayed. Thus, in any event, the order of provisional attachment must cease to subsist. The appellant, having filed an appeal under Section 107, is required to comply with the provisions of sub-Section (6) of Section 107 while the recovery of the balance is deemed to be stayed under the provisions of sub-Section (7). As observed hereinabove and under Section 83, the order of provisional attachment may be passed during the pendency of any proceedings under Section 62 or

15-IA.1322.2021 & WP-2127-21

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 February, 2021, the order of provisional attachment must come to an end."

(emphasis supplied)

11. It has not been shown by Mr. Jetly that the provisions of

the HPGST Act and the rules framed thereunder, which were

under consideration in Radha Krishan Industries (supra),

are in any manner different from the CGST Act and the rules

framed thereunder with which we are concerned. It also

matters little that proceedings initiated against the appellant

in Radha Krishan Industries (supra) were different from

the provision under which proceedings have been initiated

against the petitioner. Suffice it to note, proceedings having

been initiated against the petitioner under Section 73 of the

CGST Act and such proceedings having been terminated by a

final order under sub-section (9) thereof, for all intents and

purposes the proceedings do not survive and, a fortiori, such

termination would have the effect of terminating the life of the

order of provisional attachment.

15-IA.1322.2021 & WP-2127-21

12. We also record that the order of provisional attachment,

which is the subject matter of challenge in the writ petition,

suffers from an error of jurisdictional fact. Proceedings under

Section 73 had been initiated against the petitioner for

reclaiming the erroneous refund, which was earlier effected on

its prayer. The order of provisional attachment was made not

during pendency of any proceedings under Sections 62 or 63

or 64 or 67 or 73 or 74 of the CGST Act but was made in view

of contemplation of proceedings under Section 73 thereof.

From its inception, i.e., December 1, 2020, the order of

provisional attachment was not at all a valid order. The show-

cause notice having been issued on January 13, 2021 under

Section 73(1) of the CGST Act, i.e., almost 45 days after the

order of provisional attachment was made, the latter suffered

from an error of jurisdictional fact in that, as on December 1,

2020, no proceedings of the nature referred to in sub-section

(1) of Section 83 had been initiated; and, therefore, question

of pendency of such proceedings did not and could not arise.

The jurisdictional fact for exercise of power under Section 83

being non-existent, we declare the order dated December 1,

2020 as void ab initio.

15-IA.1322.2021 & WP-2127-21

13. Be that as it may, the proceedings under Section 73 of

the CGST Act having been taken to its logical conclusion, the

purpose for which the order of provisional attachment had

been made has also ceased to survive and, therefore, the

petitioner is justified in its claim that such order of provisional

attachment ought to be set aside.

14. We grant order in terms of prayer clause (b) of the

interim application. Since the order dated March 2, 2021

would merge in this final judgment and order, we find no

reason to modify the order dated March 2, 2021 in the

manner as prayed for vide prayer clause (a). There shall also

be an order in terms of prayer clause (c) of the interim

application. The necessary correction may be incorporated in

paragraph 2 of the order dated March 2, 2021 by correcting

the figure "2" in the 4th line of paragraph 2 to read "3".

Insofar as prayer clause (d) is concerned, we make no order

since no party is described as respondent no.4 in the array of

respondents in the writ petition. Without any party being

brought on record of the writ petition in a manner known to

law, arraying the appellate authority as respondent no.4 in

the interim application by the petitioner was not proper.

15-IA.1322.2021 & WP-2127-21

15. The writ petition as well as the interim application stands

disposed of. There shall be no order as to costs.

16. Needless to observe, if in future proceedings are

initiated against the petitioner under Section 74 of the CGST

Act or under any other provision as is mentioned in Section 83

thereof, and circumstances do exist for ordering provisional

attachment of the petitioner's property, the respondents shall

be free to proceed and attach such property in accordance

with law.

                      (G. S. KULKARNI, J.)                         (CHIEF JUSTICE)

PRAVIN
DASHARATH
PANDIT
Digitally signed by
PRAVIN DASHARATH
PANDIT
Date: 2021.08.10
14:06:00 +0530