Yasho Industries Limited vs Union Of India
2021 Latest Caselaw 6831 Guj

    C/SCA/7388/2021                               CAV JUDGMENT DATED: 24/06/2021




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD


                R/SPECIAL CIVIL APPLICATION NO. 7388 of 2021


FOR APPROVAL AND SIGNATURE:



HONOURABLE MS. JUSTICE BELA M. TRIVEDI                                  Sd/-

and
HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI                              Sd/-
==========================================================

1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO

2 To be referred to the Reporter or not ?

YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution NO of India or any order made thereunder ?

========================================================== YASHO INDUSTRIES LIMITED Versus UNION OF INDIA ========================================================== Appearance:

MR ABHISHEK RASTOGI, ADVOCATE WITH MR BHAVESH B CHOKSHI(3109) for the Petitioner(s) No. 1,2 for the Respondent(s) No. 1,2,3 ==========================================================

CORAM:HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI

Date : 24/06/2021

CAV JUDGMENT (PER : HONOURABLE MS. JUSTICE BELA M. TRIVEDI)

1. The petitioners by the present petition filed under Article 226

C/SCA/7388/2021 CAV JUDGMENT DATED: 24/06/2021

of the Constitution of India have challenged the Summons

dated 12.4.2021 (Annexure-A) issued under Section 70 of

the Central Goods and Services Tax Act, 2007 (herein after

referred to as 'CGST Act"), calling upon the petitioners to

give evidence and produce the documents as mentioned

therein in connection with the inquiry initiated against the

petitioners. The petitioners also have sought directions

against the respondent No.3 to issue refund/allow recredit of

INR 3 Crore paid by the petitioners on 9.2.2021 vide Form

No.GST DCR-03 (Annexure-F). The petitioners have also

sought direction to quash and set aside the impugned

Circular dated 5.7.2017 (Annexure-B), in connection with the

assignment of functions to the officers as the 'proper officers'

in relation to the various functions of the CGST Act and the

Rules made thereunder.

2. The petitioner No.1 is a public limited company engaged in

the business of manufacturing and exporting specialized

chemicals having its factory set up at GIDC Plot Nos.2514,

2515, 2505/A Phase-IV, Vapi and the petitioner No.2 is the

Factory Manager of the petitioner No.1. The petitioner

Company is the holder of Advance Authorization Licences

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granted in terms of the Scheme set out in Chapter-IV (AA

Scheme) of Foreign Trade Policy 2015-2020. It appears that

the Directorate of Revenue Intelligence, Kolkata Zonal Unit

vide the Communication dated 11.11.2020 addressed to the

Mumbai Office of the petitioner No.1, had intimated that an

inquiry was initiated against the petitioner and other

importers, who had incorrectly availed the benefits of EOU

Scheme extra in terms of the Customs Notification

Nos.78/2017-Cus, 79/2017-Cus, and 48/2017-Cus

respectively, and also simultaneously availed the benefit of

refund of duty paid on the goods exported towards fulfillment

of the export obligation. Being aggrieved by the said

communication the petitioner had preferred a writ petition

bearing No.WP(L) No.8839 of 2020 before the Bombay High

Court in which the Bombay High Court, vide the order dated

8.1.2021 issued the notice to the concerned respondents.

3. As per the further case of the petitioners, the manufacturing

unit of the petitioners at Vapi was visited by the officers of

the respondent No.3 on 9.2.2021 in connection with the said

inquiry and during the said visit, a sum of Rs.3 crore was

recovered from the petitioners on the alleged incorrect IGST

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refunds. The copy of the Form DRC-03 in respect of the

payment of INR 3 crore has been produced at Annexure-F.

According to the petitioners, the said payment was made by

the petitioners under extreme duress and not on their own

volition and the same was reflected in the column of

'reasons', where it was stated that the said amount was paid

under protest towards an inquiry in connection with an

incorrect claim of double benefits. It is further case of the

petitioners that subsequent to the said visit the respondent

No.3 issued the impugned summons invoking Section 70 of

the CGST Act, calling upon the petitioners to remain present

on 21.4.2021 to give evidence and/or to produce documents

namely tender statement, copy of advance authorization

under which refund of IGST was claimed and on which raw

material was imported duty free and quantification of refund

claimed till date on advance authorization under which

refund of IGST has been claimed and on which raw material

was imported duty free. According to the petitioners, they

are facing two parallel investigating proceedings namely the

proceedings initiated pursuant to the communication dated

11.11.2020 by the DRI, Kolkata Zonal Unit and the

proceedings instituted by the respondent No.3 vide the

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impugned summons, invoking Section 70 of the CGST Act

and hence, the petition has been filed.

4. The learned Advocate Mr.Abhishek Rastogi appearing with

the learned Advocate Mr.Bhavesh Chokshi for the

petitioners, at the outset, challenging the jurisdiction of the

respondent No.3 in issuing the summons, submitted that the

power to issue summons in terms of Section 70 of the CGST

Act vests exclusively with the 'Proper Officer' as defined in

Section 2(91) of the said Act. Pressing into service Section

167 of the CGST Act, Mr. Rastogi submitted that the

delegation of powers by the Commissioner has to be

specified by way of the Notification as contemplated in the

said section. According to him, the respondent No.3 is an

officer of Directorate General of Goods and Services Tax

Intelligence (DGGI) and holds the designation of a Senior

Intelligence Officer and his appointment under the CGST Act

could be traced to the Notification dated 1.7.2017 and thus,

the respondent No.3 is appointed as a Central Tax Officer

and is in the rank of Superintendent under CGST Act.

Elaborating the said arguments, Mr.Rastogi submitted that

since the respondent No.3 did not hold the designation of the

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Commissioner, the specific function under Section 70 has to

be assigned to him by a Commissioner in the Board as

contemplated under Section 2(91) and such assignment has

to be through the medium of Notification in the light of

Section 167 of the CGST Act.

5. Placing reliance on the decision of the Supreme Court in

case of Canon India Pvt. Ltd. Vs. Commissioner of

Customs, reported in 2021 SCC Online SC 200,

Mr.Rastogi submitted that the entrustment of functions is a

vital ingredient in the proper exercise of the powers by an

authority. The respondent No.3, in the instant case, having

wrongly assumed the jurisdiction by virtue of Circular dated

5.7.2017 to issue the summons the same is without

jurisdiction.

6. Assailing the impugned Circular dated 5.7.2017, Mr.Rastogi

submitted that Section 2(91) is merely a definition clause,

which does not confer any powers to assign the functions.

The said Circular also makes reference to Section 20 of the

IGST, which merely incorporates by reference, certain

provisions of the CGST Act and makes them applicable to

the IGST Act. Since the delegation of powers by the

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Commissioner under Section 167 of the CGST Act has to be

effectuated through a Notification, such power cannot be

exercised in any manner, except in the manner prescribed in

Section 167. Mr.Rastogi, to substantiate his submissions,

has relied upon the decision of the Supreme Court in case of

Atlas Cycle Industries Ltd. Vs. State of Haryana,

reported in 1971 (2) SCC 564; in case of Food

Corporation of India Vs. Commissioner of Commercial

Taxes, reported in (1999) 116 STC 173 (Patna); in case of

Suresh Kumar Bansal Vs. Union of India, reported in

2016 (43) STR (Delhi); in case of Hukam Chand Shyal Lal

Vs. Union of India, reported in (1976) 2 SCC 128 and in

case of Mackinnon Mackenzie and Company Limited Vs.

Mackinnon Employees Union, reported in (2015) 4 SCC

544.

7. In an another limb of his arguments, the learned Advocate

Mr.Rastogi vehemently submitted that the coercive action of

the respondent No.3 has culminated into the recovery of an

amount of Rs.3 crore from the petitioners without issuance of

any show-cause notice or finalization of demand pursuant to

the adjudication. Placing reliance on the decision of Punjab

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and Haryana High Court in case of Century Metal

Recycling Vs. Union of India, reported in 2009 (234) ELT

234 (P&H), he submitted that unless there is an assessment

and demand, the amount deposited by the petitioners, even

though termed as voluntary, cannot be appropriated. The

reliance has also been placed on the interim order passed by

this Court in case of Bhumi Associate Vs. Union of India, in

Special Civil Application No.3196 of 2021, whereby the Court

had issued the guidelines with regard to the recovery of

amount made at the time of search/inspection proceedings

under Section 67 of the CGST Act. Mr.Rastogi lastly

submitted that the action of the respondent No.3 is also in

violation of the principles of natural justice and that the

parallel proceedings against the petitioners on the same

issue are not sustainable.

8. At the outset, it may be noted that the submissions made by

the learned Advocate Mr.Rastogi for the petitioners, though

may appear or sound very attractive, the Court has not found

any substance in the same. In order to appreciate his

submissions it would be beneficial to reproduce the relevant

provisions of CGST Act and IGST ACt. The definition of

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'Proper Officer' is contained in Section 2(91) of the CGST

Act, which reads as under:-

"Section 2. In this Act, unless the context otherwise requires,-

(91) "Proper Officer" in relation to any function to be performed under this Act, means the Commissioner or the officer of the Central Tax who is assigned that function by the Commissioner in the Board."

9. Section 70 empowers the proper officer under the Act to

summon any person to give evidence and produce

documents in connection with the inquiry initiated against

him and the said proceedings are deemed to be judicial

proceedings within the meaning of Section 193 and Section

228 of IPC. Section 70 reads as under:-

"70. Power to summon person to give evidence and produce documents.-

(1) The proper officer under this Act shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a Civil Court under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).

(2) Every such inquiry referred to in sub-section (1) shall

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be deemed to be a "judicial proceedings" within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860)."

10. Chapter XV of CGST Act pertains to demand and

recovery and Section 74 falling therein pertains to the

determination of tax not paid or short paid or erroneously

refunded or input tax credit wrongly availed or utilized for any

reason of fraud or any willful misstatement or suppression of

facts. Since the petitioner had made payment of Rs.3 crore

under Section 74(5) as per Form GST DRC-03, the relevant

part of Section 74 is reproduced as under:

"Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful- misstatement or suppression of facts.-

74(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any willful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit, requiring him to show cause as to why he should not pay the amount specified

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in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.

(2) to (4) xxx

(5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.

(8)xxx

(9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.

(10) The proper officer shall issue the order under sub-

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section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates to or within five years from the date of erroneous refund."

11. Since the learned Advocate Mr.Rastogi has placed

heavy reliance on Section 167 pertaining to the delegation of

powers by the Commission is reproduced as under:-

"167. Delegation of Powers.-

The Commissioner may, by notification, direct that subject to such conditions, if any, as may be specified in the notification, any power exercisable by any authority or officer under this Act may be exercisable also by another authority or officer as may be specified in such notification."

12. Since the impugned Circular dated 5.7.2017 has been

issued in exercise of the powers conferred by Section 2(91)

of CGST Act read with Section 20 of IGST Act, it may be

noted that Section 20 of the IGST Act pertains to the

application of the provisions of CGST Act to the IGST Act

mutatis mutandis.

13. From the bare reading of Section 70 of the CGST Act,

it clearly emerges that the proper officer has the power to

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summon any person whose attendance he considers

necessary either to give evidence or to produce the

documents in any inquiry in the same manner in the case of

a Civil Court under the CPC. Now, as per the definition of

'proper officer' as contained in Section 2(91), a 'proper

officer' in relation to any function to be performed under the

CGST Act means the Commissioner or the officer of the

Central Tax, who is assigned that function by the

Commissioner in the Board. It is pertinent to note that as

stated in the petition itself, the respondent No.3 is an officer

of Directorate General of Goods and Services Tax

Intelligence (DGGI) holding the designation of Senior

Intelligence Officer, who was appointed as the Central Tax

Officer with all the powers under the CGST Act and IGST Act

and the Rules made thereunder, as are exercisable by the

Central Tax Officers of the corresponding rank of

Superintendent as specified in the Notification No.14 of

2017-CT dated 1.7.2017 issued by the Central Board of

Excise and Customs. It is further pertinent to note that the

respondent No.3 being the officer of the Central Tax and the

Superintendent under the CGST Act by virtue of the said

Notification dated 1.7.2017, he was also assigned the

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powers of proper officer by the Board vide Circular dated

5.7.2017 issued in exercise of the powers conferred by

Clause (91) of Section 2 of the CGST Act read with Section

20 of the IGST Act. Therefore, the respondent No.3 is a

proper officer in relation to the function to be performed

under the CGST Act as contemplated under Section 2(91),

and as such, was entitled to issue summons under Section

70 of the CGST Act in connection with the inquiry initiated

against the petitioner.

14. The submission of Mr.Rastogi that the said assignment

of function has to be by way of Notification and not by way of

Circular in view of Section 167 of the CGST Act is thoroughly

misplaced. Section 167 of the CGST Act pertains to the

delegation of powers by the Commissioner exercisable by

any authority or officer under the Act to be exercisable also

by another authority or officer as may be specified in the

Notification. So far as Section 2(91) is concerned, it pertains

to the proper officer in relation to any function to be

performed under the CGST Act to be the Commissioner or

the officer of Central Tax, who is assigned that function by

the Commissioner in the Board. Here the Board means the

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"Central Board of Indirect Taxes and Customs" as defined in

Section 2(16) of the CGST Act. Vide the Circular dated

5.7.2017 the said Board namely the Central Board of Excise

and Customs in exercise of the powers conferred by Section

2(91) of the CGST Act read with Section 20 of the IGST Act

and subject to Section 5(2) of the CGST Act has assigned

the officers the functions as that of proper officers in relation

to the various Sections of the CGST Act and the Rules made

thereunder, and as such the Superintendent of Central Tax

has been assigned the function of Section 70(1) of the CGST

Act. Thus, there being no delegation of powers by the

Commissioner, the provisions contained in Section 167 of

the CGST Act could not be said to have been attracted, nor

was there any necessity to issue Notification as sought to be

submitted by Mr.Rastogi. There could not be any

disagreement to the proposition of law laid down by the

Supreme Court in case of Canon India Pvt. Limited (supra)

relied upon by the learned Advocate Mr.Rastogi that when a

statute directs that the things to be done in a certain way, it

must be done in that way alone. However, in the instant

case, the Board has assigned the officers to perform the

function as proper officers in relation to various Sections of

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CGST Act and the Rules made thereunder by issuing the

Circular in question, the question of issuing Notification for

delegation of powers by the Commissioner as contemplated

under Section 167 of the CGST Act does not arise.

Mr.Rastogi appears to have misread the powers of the Board

to assign the officers to perform the function as proper

officers in relation to the various Sections of the CGST Act,

as the delegation of powers by the Commissioner to the

other authority or the officer as contemplated in Section 167

of the CGST Act. The Court, therefore, does not find any

substance in the submission of Mr.Rastogi that the

respondent No.3 was not the 'proper officer' as per the

definition contained in Section 2(91) of the CGST Act, and

therefore, had no powers to issue summons under Section

70 of the CGST Act.

15. The Court also does not find any force in the

submission made by Mr.Rastogi that two parallel

proceedings in connection with the same issue were not

sustainable. It may be noted that the communication dated

11.11.2020 was issued by the Directorate of Revenue

Intelligence, Kolkata Zonal Unit, requesting the office of the

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petitioner at Mumbai to furnish details of the imports and

exports during the period from 23.10.2017 till the date in the

prescribed proforma was in relation to the inquiry in

connection with the incorrect availment of double benefits i.e.

exemption of IGST on the input material imported under

Advance Authorization/EOU Scheme and refund of IGST

paid of goods imported, whereas the respondent No.3 has

issued summons to the petitioner at Vapi in relation to the

inquiry in connection with the refund of ITC under the CGST

Act. It is needless to say that the proceedings of issuing

summons under Section 70 of the CGST Act are the

proceedings of judicial nature and the petitioners are bound

to respect the same, and cooperate with the inquiry. As

such, no prejudice is going to be caused to the petitioners if

the statement is tendered or the documents are produced as

required by the respondent No.3.

16. It may be noted that in the writ petition filed by the

Bombay office of the petitioner before the Bombay High

Court challenging the communication dated 11.11.2020

issued by the Directorate of Revenue Intelligence, Kolkata

Zonal Unit, there is no interim order passed in favour of the

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petitioner restraining the respondent authorities from

proceeding further with the inquiry proceedings initiated

against the petitioner.

17. As regards the payment of Rs.3 crore made by the

petitioners on 9.2.2021 vide Form GST DRC-03 under Rule

142(2) and 142(3) of the GST Rules (Annexure-F), it may be

noted that for the particulars at Sr. No.3 i.e. "cause of

payment", it is shown as "voluntary" and at Sr.4 i.e. "section

under which voluntary payment is made", it is shown as

"Section 74(5)". At the bottom of the table in the said Form,

at Sr. No.8 with regard to "reasons", it has been mentioned

that "enquiry in connection with the incorrect claim of double

benefit, that is exemption of IGST, Advance Authorization

and Refund of IGST: under protest". Relying upon the said

endorsement "under protest" the learned Advocate

Mr.Rastogi submitted that the said payment was made by

the petitioners under duress and was not made voluntarily.

Of course, he categorically admitted that there was no

search or seizure proceedings conducted by the officers of

the respondent No.3 as contemplated under Section 67 of

the CGST Act. He also conceded that there was no

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complaint made by the petitioner before the grievance cell or

before any authority of the respondent that the said payment

was made under duress and was not made voluntarily.

18. Though Mr.Rastogi has placed heavy reliance on the

interim order passed by this Court in case of Bhumi

Associates (supra), it may be noted that apart from the fact

that the said order is an interim order, the guidelines issued

in the said interim order appear to have been issued in

connection with the voluntary payment made by the person

during the course of search and seizure proceedings

conducted under Section 67 of the CGST Act. Admittedly,

no search and seizure proceedings have taken place under

Section 67 of the Act, in case of the petitioners. In the

instant case, the petitioners having made payment under

Section 74(5), they appear to have informed the Proper

Officer of such payment in the Form GST DRC-03

(Annexure-F) as contemplated in Rule 142(2) of the said

Rules. It is needless to say that the said payment shall be

dealt with or adjusted by the concerned respondent No.3 in

accordance with law more particularly as per the provisions

contained in Section 74 of the CGST Act.

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19. In that view of the matter, the Court does not find any merit in

the petition. The petition is dismissed in limine.

Sd/-

(BELA M. TRIVEDI, J)

Sd/-

(A. C. JOSHI,J) V.V.P. PODUVAL