Afzal Husain Sayed (Proprietor, ... vs Principal Commissioner Of ...
2023 Latest Caselaw 11436 Bom

2023:BHC-OS:13247-DB



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                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                      ORDINARY ORIGINAL CIVIL JURISDICTION

                                 WRIT PETITION (L) NO.28259 OF 2023

           Afzal Husain Saiyed                            .. Petitioner
                 Versus
           Principal Commissioner of Central Tax,
           Mumbai Central & Ors.                          .. Respondents
                       ---
           Mr.Abhishek A. Rastogi a/w Ms.Renita Alex, Ms.Meenal Songire,
           Ms.Pooja Rastogi for Petitioner.
           Mr.Karan Adik a/w Mr.Satya Prakash Sharma for respondent nos.1 & 2.

                           ---
                                            CORAM       : G. S. KULKARNI &
                                                          JITENDRA JAIN, JJ.

RESERVED ON : 4th November 2023 PRONOUNCED ON : 7th November 2023

JUDGMENT:- (Per : Jitendra Jain, J.)

. By this petition filed under Article 226 of the Constitution of

India, the petitioner has challenged the cancellation of registration under

Central Goods and Service Tax Act by an order dated 5 th October 2023

and attachment of his Bank Account No.4412198904 with Kotak

Mahindra Bank and Bank Account No.259904778835 with IndusInd

Bank on 12th September 2023.

2. Brief facts are as under :-

(i) The petitioner is engaged in the business of trading in metal

scrap and is registered under Central Goods and Services Act, 2017 (for

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short "the CGST Act").

(ii) 5th September 2023, summons were issued to the petitioner in

regard to avail of Input Tax Credit (ITC) by using fake invoices.

(iii) On 8th September 2023, the petitioner was arrested and was

judicially remanded.

(iv) On 18th September 2023, a show cause notice was issued to the

petitioner for cancellation of the registration and on 12 th September 2023,

bank accounts were also attached. It is on this backdrop that the present

petition is filed.

3. The petitioner has contended that the show cause notice and

order for cancellation of the registration do not provide for any reasons

which is an incurable defect, and therefore, the same be quashed and set

aside. The petitioner also submitted that since he is in judicial custody, he

could not respond to the said show cause notice and, therefore, the same

is passed ex-parte. The petitioner relied upon the decision of this Court in

case of Makesburry India Pvt. Ltd. Vs. State of Maharashtra & Ors.

passed in Writ Petition No.7506 of 2023 decided on 3 rd October 2023 in

support of his contention that such a notice is bad in law. With respect to

the attachment of the bank accounts, the petitioner submitted that no

intimation of the same has been given to him by the Respondents and it is

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only on the intimation from the banks, he came to know that the bank

accounts are attached.

4. The petitioner further stated that the attachment is also not in

accordance with Section 83 of the CGST Act, inasmuch as, there is no

formation of an opinion by the Commissioner. The petitioner, however,

alternatively, contended that he may be permitted to avail the remedy

available under sub-rule (5) of Rule 159 of Central Goods and Services

Tax Rules, 2017 (for short "the CGST Rules") and to make an application

for revocation of the attachments.

5. Per contra, the respondents have drawn our attention to the

affidavit-in-reply and more particularly paragraph 22 and submitted that

on the date when the show cause notice for cancellation of the registration

was issued, the petitioner had transferred ITC amounting to

Rs.3,09,60,643/- although he was in judicial custody on that date. The

respondents also referred to the statement recorded on 7 th September

2023 to justify the action of cancellation of registration and attachment

of the bank accounts. The respondents further submitted that in the

statement of the petitioner, he has stated that he does not have any

employee in the firm whereas in the petition, he has, on oath, stated that

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attachment of the bank accounts needs to be lifted since he has to make

payment of salaries to his various employees. The respondents also relied

upon the decision of this Court in case of Ashok Kumar Vishwakarma

Vs. Union of India & Ors. passed in Writ Petition No.11326 of 2023

decided on 4th October 2023 and contended that insofar as the

attachment of the bank accounts are concerned, the petitioner needs to

adopt the remedy by invoking sub-rule (5) of Rule 159 of the CGST

Rules. The respondents prayed for dismissal of the present petition.

6. We have heard learned counsel for the petitioner and the

respondents and with their assistance. We also have perused the

documents annexed to the petition and the reply affidavit filed by

respondent nos.1 and 2.

7. Having heard learned counsel for the parties, in our view, the

show cause notice and order cancelling the registration clearly does not

provide for any reason whatsoever for such action being taken against the

petitioner and, therefore, there is an incurable defect in the order which

cannot be improvised in the reply of the respondents. In our view, the

order cancelling the registration ought to have contained reasons for the

said cancellation of the registration and in the instant case, no such

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reason can be found in the order cancelling the registration. This bench

in an identical situation, has quashed and set aside such order of

cancellation of registration which was bereft of any reason. The

petitioner is justified in placing reliance on the decision in case of

Makesburry India Pvt. Ltd. (supra). Para 12 of the said decision reads

thus:-

"12. Learned counsel for the petitioner would thus be correct in submitting that the impugned order cancelling the petitioner's registration as also rejecting the petitioner's appeal are ex-facie without application of mind, as no reasons are set out in both the orders. The petitioner's contention that the impugned orders are in breach of principles of natural justice and has resulted into unwarranted harassment to the petitioner as much substance. In support of his contention, reliance is placed on the decision of this Court in C.P. Pandey & Co. Vs. Commissioner of State Tax1, Monit Trading Pvt. Ltd. Vs. Union of India2, Ramji Enterprises & Ors. Vs. Commissioner of State Tax & Ors.3 and Nirakar Ramchandra Pradhan Vs. Union of India & Ors.4 "

8. We are, therefore, of the view that insofar as the order

cancelling the registration and show cause notice for such cancellation are

concerned, the same is arbitrary and illegal.

9. Insofar as the attachment of the bank accounts is concerned,

the petitioner and the respondents are at ad idem that the petitioner

should avail the remedy provided by sub-rule (5) of Rule 159 of the

1 (2023) 10 Centax 11 (Bom.) 2 (2023) 8 Centax 248 (Bom.) 3 Writ Petition No.277 of 2023 dated 10.07.2023 4 Writ Petition No.2534 of 2023 dated 11.09.2023

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CGST Rules. We are, therefore, of the opinion that the petitioner needs to

invoke sub-rule (5) of Rule 159 of the CGST Rules to the order of

attachment in question as the rule itself would permit. Thus, in the facts

and circumstances of the case, we are not inclined to exercise our

discretionary jurisdiction under Article 226 of the Constitution of India to

interfere in the impugned attachment order.

10. We accordingly dispose of the petition in terms of the following

order : -

ORDER

(i) The impugned show cause notice dated 18th September,

2023 is quashed and set aside. The consequential order dated

5th October, 2023 cancelling the petitioner's registration also

would stand quashed and set aside.

(ii) We also clarify that we have not precluded the respondents

from exercising any other powers as may be available to the

respondents in law as the facts and circumstances may

warrant.

(iii) Needless to observe that setting aside the impugned order

would result in the registration of the petitioner being

restored. It is, however, clarified that this would not

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preclude the revenue from issuing any fresh order to

suspend the registration as may be permissible in law.

(iv) Insofar as the attachment of the bank accounts is concerned,

the petitioner is free to adopt the remedy available under

sub-rule (5) of Rule 159 of the CGST Rules as the

petitioner was bonafide pursuing the present petition. We

permit the petitioner to raise an objection by invoking sub-

rule (5) of Rule 159 of the CGST Rules within a period of

one week from the date of uploading this order. If the same

is filed, let the same be decided by the Commissioner in

accordance with law without raising any objection as to

limitation. All contentions of the parties in that regard are

expressly kept open.

(v) Petition is disposed of in the above terms. No costs.

        JITENDRA JAIN, J.                      G. S. KULKARNI, J.