Gujarat High Court
M/S. Shree Dhanlaxmi Metal Industries ... vs The State Of Gujarat on 14 June, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1084 of 2024
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M/S. SHREE DHANLAXMI METAL INDUSTRIES THROUGH ITS
PROPRIETOR KAPIL HUKMICHAND KOTHARI
Versus
THE STATE OF GUJARAT & ORS.
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Appearance:
MR SAURABH SOPARKAR, SENIOR ADVOATE WITH MR. HARDIK V
VORA(7123) for the Petitioner(s) No. 1
for the Respondent(s) No. 2,3
MS SHRUNJAL SHAH, AGP for the Respondent(s) No. 1,2,3
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 14/06/2024
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Advocate
Mr.Saurabh Soparkar with learned advocate
Mr.Hardik V.Vora for the petitioner and
learned AGP Ms.Shrunjal Shah for the
respondent no.
2. By this petition under Article 226 of
the Constitution of India the petitioner
has prayed for the following reliefs:
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"a. A writ of certiorari, or any
other appropriate writ, order
and/or directions in the nature of
certiorari to quash the provisional
attachment orders dated 14.09.2023
(Annexure A) and release the
attachment over immoveable
propertiesincluding factory land,
factory building, plant and
machineries and 2 residential
flats;
b. A writ of certiorari, or any
other appropriate writ, order
and/or directions in the nature of
certiorari to quash the provisional
attachment orders dated 14.09.2023
(Annexure A) and release the
attachment over moveable properties
including stock lying at the
premises, 2 current bank accounts,
fixed deposit and all the debtors'
balances;
c. A writ of mandamus, or any other
appropriate writ, order and/or
directions in the nature of
mandamus directing the respondent
to refrain from resorting to any
coercive measure against the
petitioner;
(cc) A writ of mandamus, or any
other appropriate writ, order
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and/or directions in the nature of
mandamus directing the respondent
to forthwith return 2 mobile phones
being Apple i-phone 11 Pro Max (512
GB) and Infinixhot 30i (128 GB)
seized during course of search;
(cd) Pending the admission, hearing
and final disposal of this
petition, this Hon'ble Court may
direct the Respondent authorities
to release the attachment over
immoveable properties including
factory land, factory building,
plant and machineries and 2
residential flats; and release the
attachment over moveable properties
including stock lying at the
premises, 2 current bank accounts,
fixed deposit and all the debtors'
balancesand return 2 mobile mobile
phones being Apple i-phone 11 Pro
Max (512 GB) and Infinixhot 30i
(128 GB).
d. A writ of mandamus, or any other
appropriate writ, order and/or
directions in the nature of
mandamus to allow protection to
petitioner in any further
proceedings consequent to search;
e. A writ of Mandamus or writ,
order, or direction in the nature
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of Mandamus directing the
respondents to carry out any
further Summons through in camera
proceedings or proceedings in front
of Advocate;
f. Any other and further relief
deemed just and proper be granted
in the interest of justice;
g. To provide for the cost of this
petition."
3. The brief facts of the case are has
under:
3.1. The petitioner, a sole proprietorship
firm engaged in the business of trading
and processing of copper items, having its
principal place of business at Plot
nos.1,2,3 Opp. Pipe Factory, Kadodara
Bardoli Road, Palsana, Surat-394315 and is
registered under CGST Act, 2017 with
registration No. 24AEBPK5633A1Z5.
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years ago, the petitioner has diligently
served various customers, consistently
delivering quality products and services
and over this extensive period, he has
garnered an impeccable reputation built on
trust, reliability, and unwavering
dedication to ethical business practices.
The petitioner is a regular tax payer and
has diligently fulfilled all the
compliances. Turnover of business for
Financial Year 2022-23 was Rs.207.54
Crore, for Financial Year 2021-22 was
Rs.322.98 crores and for Financial Year
2020-21 was Rs.110.72 crores.
3.3. An information was received by the
Respondent no.3 that certain firms which
were engaged in bogus billing have
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generated fake sale invoices to petitioner
and fraudulently transferred input tax
credit. Based on such information, it was
alleged that the petitioner is one of the
beneficiaries of fictitious billing
activities and a search operation was
conducted u/s 67(2) of the CGST Act and
GGST Act at the residential premises as
well as the business premises from
12.09.2023.
3.4. Various documents and digital data
were verified by the officers but no
incriminating documents were discovered at
any of the premises. Moreover, during the
course of the investigation, physical
verification of stock was also conducted
by the Respondent but no discrepancies
were detected between the physical
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inventory and the stock recorded in the
books of accounts which substantiates the
authenticity and legitimacy of
petitioner's business operations. During
the course of search, statement of the
proprietor was also recorded.
3.5. It was alleged that the petitioner
had made bogus purchases from 39 firms
amounting to Rs. 214.27 crores during the
period from July 2017 to August 2023 and
claimed fake input tax credit of Rs.32.67
crores. Based on such accusations, the
Respondent no.3 prepared grounds for
provisional attachment and passed orders
in Form GST DRC-22 for provisional
attachment of immovable properties
including factory land, factory building,
plant and machineries and two residential
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flats and movable properties including
stock lying at the premises, two current
bank accounts, fixed deposit and all the
debtors' balances as on 14.09.2023.
3.6. Search continued till 16.09.2023 and
the Respondent no.3 seized 17 purchase
files and one pocket diary as per Order of
Seizure in Form GST INS-02 dated
16.09.2023 and attached stock amounting to
Rs.1,35,020/- as per Order of Prohibition
in Form GST INS-03 dated 16.09.2023.
3.7 Further, an arrest memorandum was
issued by Assistant Commissioner-3,
Enforcement, Division-5, Vadodara and the
proprietor was arrested at 04:30 p.m. on
16.09.2023. The investigation continued
and eventually the Respondent concluded
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that the petitioner has obtained bogus ITC
of Rs.76.68 crores. He was released on
bail vide order dated 11.12.2023 in
Criminal Misc. Application no.21834 of
2023 by this Court.
3.8. On getting bail, the petitioner
immediately approached the tax consultants
to seek further assistance and accordingly
filed the request letter on 03.01.2024 for
copy of panchnama, statement recorded,
documents seized and requested to return
the mobile phones seized during the search
proceedings. Further, the petitioner also
filed an application in Form GST DRC-22A
for release of provisional attachment over
the assets as it adversely hampers the
business. Moreover, the Petitioner also
obtained the valuation report for fair
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market value of factory land and two
residential premises, and requested the
Respondent no.3 to release other assets
except the factory land having value of
Rs.51.95 crores as it covers the majority
of alleged bogus ITC.
3.9. Respondent no.3 issued a notice on
19.01.2024 granting an opportunity of
personal hearing on 20.01.2024. In
response to the same, the petitioner
personally attended the hearing and filed
a reply on 20.01.2024 requesting to lift
the attachment over movable assets so that
his business can be resumed. However, vide
order dated 29.01.2024 bearing reference
no. DCST/ENF-7/AC2/SRT/SDMI/PA ORDER/2023-
24/89, Respondent no.3 rejected the
request.
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3.10. This Court by order dated 07.02.2024
asked the petitioner to furnish bank
guarantee of Rs.15 crore so as to protect
the interest of the revenue in order to
lift the attachment over the stocks and
the debtors and the bank account, however,
the petitioner refused to provide such
security to protect the interest of the
revenue in order to see that the stock and
debtors and the bank accounts of the
petitioners are released so as to enable
the petitioner to do the business. On
inquiry it was found that the petitioner
was in business for more than two decades
however, the petitioner was unable to
provide the security in form of bank
guarantee to protect the interest of the
revenue and insisted upon the lifting of
provisional attachment over the immovable
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properties.
4. Learned Senior Advocate Mr.Saurabh
Soparkar with learned advocate Mr.Hardik
Vora for the petitioner submitted that the
respondent authorities have committed an
error in attaching the movable properties
of the petitioner by the impugned
provisional Attachment Order dated
14.09.2023 passed under Section 83 of the
Goods Service Tax Act.
5. It was further submitted that the
impugned provisional Attachment Order
using the Bank accounts of the petitioner
has affected both personal and business
activities making it very difficult for
the petitioner to manage daily finances,
payment to employees, conduct necessary
transactions, resulting into damage to the
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reputation of the petitioner by affecting
relationship with debtors.
6. It was submitted that notices sent to
the debtors regarding attachment of their
outstanding balances have raised doubts
about the stability of business
jeopardizing future collaborations and
trust. The petitioner is n affected by the
provisional attachment of immovable
properties. It was submitted that the
petitioner is ready and willing to
continue with the attachment over the
immovable properties however the
attachment of the stock and the debtors
amounting to Rs.4,58,21,834/- as per order
dated 14.09.2023 is not required and the
petitioner maybe permitted to do the
business in absence of any determination
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of the tax liability by the respondent
authority.
7. Learned Senior Advocate Mr.Soparkar
relied upon the Circular dated 23.02.2021
issued by the CBEC and more particularly
para no.3.4.5 of the Circular which
provides as under:
"As far as possible, it should also
be ensured that such attachment does
not hamper normal business activities
of the taxable person. This would
mean that raw materials and inputs
required for production or finished
goods should not normally be attached
by the Department."
8. It was therefore submitted that
provisional attachment over plant and
machinery, bank account, stock and debtors
is contrary to the circular which is
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binding upon the respondent authorities in
as much as such assets are essential for
day to day operations of running the
business by the petitioner.
9. Learned Senior Advocate Mr.Soparkar
also relied upon Para no.3.4.4 of the
Circular which provides that movable
property should normally be attached only
if the immovable property, available for
attachment, is not sufficient to protect
the interest of the revenue. Reference was
made to the valuation report dated
31.12.2023 estimating the value of the
factory land at Rs.51.96 crores and
residential flat at Chakwawala Complex
valued at Rs.1.87 crores and residential
flat at Vanilla Sky valued at Rs.4.75
crores. It was pointed out that as per the
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satisfaction note for attachment of the
properties, fraudulent income tax credit
availed by the petitioner was Rs.32
crores. It was therefore submitted that
considering the value of immovable
properties, the same would be sufficient
to protect the interest of the department
and therefore prayed for lifting the
provisional attachment over the movable
properties.
10. Learned Senior Advocate Mr.Soparkar
referred to and relied upon the following
decisions in support office submissions:
Radha Krishan Industries Vs. State of
Himachal Pradesh reported in [2021] 127
taxmann.com 26(SC):
"29. At this stage, we will advert to
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relevant precedents outlining the
contours of the power of provisional
attachment and specifically, in the
context of provisions worded similarly
to Section 83 of the HPGST Act.
30. The decision of this Court in Raman
Tech Process Engg Co and Anr v Solanki
Traders26 was concerned with the power
of a civil court under Order 38 Rule 5
of the CPC to order an attachment
before judgment. In that case,
proceedings had been instituted by the
respondent, for the recovery of moneys
due for the supply of material to the
appellant. The plaintiff moved an
application under Order 38 Rule 5, for
a direction to the defendants to
furnish security for the suit claim and
if they failed to do so, for attachment
before judgment. This Court described
the power of attachment before judgment
in the following terms:
"5. The power under Order 38, Rule 5
Civil Procedure Code is a drastic
and extraordinary power. Such power
should not be exercised mechanically
or merely for the asking. It should
be used sparingly and strictly in
accordance with the Rule. The
purpose of Order 38, Rule 5 not to
convert an unsecured debt into a
secured debt. Any attempt by a
plaintiff to utilize the provisions
of Order 38 Rule 5 as a leverage for
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coercing the defendant to settle the
suit claim should be discouraged.
Instances are not wanting where
bloated and doubtful claims are
realized by unscrupulous plaintiffs,
by obtaining orders of attachment
before judgment and forcing the
defendants for out of court
settlements, under threat of
attachment.
6. A defendant is not debarred from
dealing with his property merely
because a suit is filed or about to
be filed against him. Shifting of
business from one premises to
another premises or removal of
machinery to another premises by
itself is not a ground for granting
attachment before judgment. A
plaintiff should show, prima facie,
that his claim is bona fide and
valid and also satisfy the court
that the defendant is about to
remove or dispose of the whole or
part of his property, with the
intention of obstructing or delaying
the execution of any decree that may
be passed against him, before power
is exercised under Order 38, Rule 5
CPC. Courts should also keep in view
the principles relating to grant of
attachment before judgment [internal
citation omitted]."
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31. A body of precedent has emerged in
the High Courts on the exercise of the
power under Section 83 of the CGST Act
(akin to the State GST Act27). The
shared learning which emerges from these
decisions of the High Court needs
recognition. In Valerius Industries v
Union of India28, the Gujarat High Court
laid down the principles for the
construction of Section 83 of the
SGST/CGST Act. The High Court noted that
a provisional attachment on the basis of
a subjective satisfaction, absent any
cogent or credible material, constitutes
malice in law. It further outlined the
principles for the exercise of the
power:
"52. [...] The order of provisional
attachment before the assessment
order is made, may be justified if
the assessing authority or any other
authority empowered in law is of the
opinion that it is necessary to
protect the interest of revenue.
However, the subjective satisfaction
should be based on some credible
materials or information...It is not
any and every material, howsoever
vague and indefinite or distant,
remote or far-fetching, which would
warrant the formation of the belief.
(1) The power conferred upon the
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authority under Section 83 of the
Act for provisional attachment could
be termed as a very drastic and far-
reaching power. Such power should be
used sparingly and only on
substantive weighty grounds and
reasons.
(3) The power of provisional
attachment under Section 83 of the
Act should be exercised by the
authority only if there is a
reasonable apprehension that the
assessee may default the ultimate
collection of the demand that is
likely to be raised on completion of
the assessment. It should,
therefore, be exercised with extreme
care and caution.
(4) The power under Section 83 of
the Act for provisional attachment
should be exercised only if there is
sufficient material on record to
justify the satisfaction that the
assessee is about to dispose of
wholly or any part of his/her
property with a view to thwarting
the ultimate collection of demand
and in order to achieve the said
objective, the attachment should be
of the properties and to that
extent, it is required to achieve
this objective.
(5) The power under Section 83 of
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the Act should neither be used as a
tool to harass the assessee nor
should it be used in a manner which
may have an irreversible detrimental
effect on the business of the
assessee.
(6) The attachment of bank account
and trading assets should be
resorted to only as a last resort or
measure. The provisional attachment
under Section 83 of the Act should
not be equated with the attachment
in the course of the recovery
proceedings.
(7) The authority before exercising
power under Section 83 of the Act
for provisional attachment should
take into consideration two things:
(i) whether it is a revenue
neutral situation.
(ii) the statement of "output
liability or input credit".
Having regard to the amount paid
by reversing the input tax
credit if the interest of the
revenue is sufficiently secured,
then the authority may not be
justified in invoking its power
under Section 83 of the Act for
the purpose of provisional
attachment." (emphasis
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supplied)"
41. Sub-Section (1) of Section 83 can be
bifurcated into several parts. The first
part provides an insight on when in
point of time or at which stage the
power can be exercised. The second part
specifies the authority to whom the
power to order a provisional attachment
is entrusted. The third part defines the
conditions which must be fulfilled to
validate the power or ordering a
provisional attachment. The fourth part
indicates the manner in which an
attachment is to be leveled. The final
and the fifth part defines the nature of
the property which can be attached. Each
of these special divisions which have
been explained above is for convenience
of exposition. While they are not
watertight compartments, ultimately and
together they aid in validating an
understanding of the statute. Each of
the above five parts is now interpreted
and explained below:
(i) The power to order a provisional
attachment is entrusted during the
pendency of proceedings under any one of
six specified provisions: Sections 62,
63, 64, 67, 73 or 74. In other words, it
is when a proceeding under any of these
provisions is pending that a provisional
attachment can be ordered;
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(ii) The power to order a provisional
attachment has been vested by the
legislature in the Commissioner;
(iii) Before exercising the power, the
Commissioner must be "of the opinion
that for the purpose of protecting the
interest of the government revenue, it
is necessary so to do";
(iv) The order for attachment must be
in writing;
(v) The provisional attachment which
is contemplated is of any property;
(v) The provisional attachment which
is contemplated is of any property
including a bank account belonging to
the taxable person; and
(vi) The manner in which a provisional
attachment is levied must be specified
in the rules made pursuant to the
provisions of the statute.
48. Now in this backdrop, it becomes
necessary to emphasize that before the
Commissioner can levy a provisional
attachment, there must be a formation of
"the opinion" and that it is necessary
"so to do" for the purpose of protecting
the interest of the government revenue.
The power to levy a provisional
attachment is draconian in nature. By
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the exercise of the power, a property
belonging to the taxable person may be
attached, including a bank account. The
attachment is provisional and the
statute has contemplated an attachment
during the pendency of the proceedings
under the stipulated statutory
provisions noticed earlier. An
attachment which is contemplated in
Section 83 is, in other words, at a
stage which is anterior to the
finalization of an assessment or the
raising of a demand. Conscious as the
legislature was of the draconian nature
of the power and the serious
consequences which emanate from the
attachment of any property including a
bank account of the taxable person, it
conditioned the exercise of the power by
employing specific statutory language
which conditions the exercise of the
power. The language of the statute
indicates first, the necessity of the
formation of opinion by the
Commissioner; second, the formation of
opinion before ordering a provisional
attachment; third the existence of
opinion that it is necessary so to do
for the purpose of protecting the
interest of the government revenue;
fourth, the issuance of an order in
writing for the attachment of any
property of the taxable person; and
fifth, the observance by the
Commissioner of the provisions contained
in the rules in regard to the manner of
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attachment. Each of these components of
the statute are integral to a valid
exercise of power. In other words, when
the exercise of the power is challenged,
the validity of its exercise will depend
on a strict and punctilious observance
of the statutory pre- conditions by the
Commissioner. While conditioning the
exercise of the power on the formation
of an opinion by the Commissioner that
"for the purpose of protecting the
interest of the government revenue, it
is necessary so to do", it is evident
that the statute has not left the
formation of opinion to an unguided
subjective discretion of the
Commissioner. The formation of the
opinion must bear a proximate and live
nexus to the purpose of protecting the
interest of the government revenue.
49. By utilizing the expression "it is
necessary so to do" the legislature has
evinced an intent that an attachment is
authorized 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
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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 crystallized. 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 assesses can be levied.
The Commissioner must be alive to the
fact that such provisions are not
intended to authorize Commissioners to
make preemptive strikes on the property
of the assessee, merely because property
is available for being attached. There
must be a valid formation of the opinion
that a provisional attachment is
necessary for the purpose of protecting
the interest of the government revenue.
50. These expressions in regard to both the
purpose and necessity of provisional
attachment implicate the doctrine of
proportionality. Proportionality mandates the
existence of a proximate or live link between
the need for the attachment and the purpose
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which it is intended to secure. It also
postulates the maintenance of a proportion
between the nature and extent of the
attachment and the purpose which is sought to
be served by ordering it. Moreover, the words
embodied in sub-Section (1) of Section 83, as
interpreted above, would leave no manner of
doubt that while ordering a provisional
attachment the Commissioner must in the
formation of the opinion act on the basis of
tangible material on the basis of which the
formation of opinion is based in regard to
the existence of the statutory requirement.
While dealing with a similar provision
contained in Section 4536 of the Gujarat
Value Added Tax Act 2003 , one of us (Hon'ble
Mr Justice MR Shah) speaking for a Division
Bench of the Gujarat High Court in Vishwanath
Realtor v State of Gujarat37 observed:
"8.3. Section 45 of the VAT Act confers
powers upon the Commissioner to pass the
order of provisional attachment of any
property belonging to the dealer during
the pendency of any proceedings of
assessment or reassessment of turnover
escaping assessment. However, the order
of provisional attachment can 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
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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, the Commissioner
may exercise the powers under Section 45
of the VAT Act." (emphasis supplied)
51. We adopt the test of the existence of
"tangible material". In this context,
reference may be made to the decision of this
Court in the Commissioner of Income Tax v
Kelvinator of India Limited38. Mr Justice SH
Kapadia (as the learned Chief Justice then
was) while considering the expression "reason
to believe" in Section 147 of the Income Tax
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Act 1961 that income chargeable to tax has
escaped assessment inter alia by the omission
or failure of the assessee to disclose fully
and truly all material facts necessary for
the assessment of that year, held that the
power to reopen an assessment must be
conditioned on the existence of "tangible
material" and that "reasons must have a live
link with the formation of the belief". This
principle was followed subsequently in a two
judge Bench decision in Income Tax Officer,
Ward No. 162 (2) v Techspan India Private
Limited39. While adverting to these decisions
we have noticed that Section 83 of the HPGST
Act uses the expression "opinion" as
distinguished from "reasons to believe".
However for the reasons that we have
indicated earlier we are clearly of the view
that the formation of the opinion must be
based on tangible material which indicates a
live link to the necessity to order a
provisional attachment to protect the
interest of the government revenue.
72. For the above reasons, we hold and
conclude that
(i) The Joint Commissioner while
ordering a provisional attachment under
section 83 was acting as a delegate of
the Commissioner in pursuance of the
delegation effected under Section 5(3)
and an appeal against the order of
provisional attachment was not available
under Section 107 (1);
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(ii) The writ petition before the High
Court under Article 226 of the
Constitution challenging the order of
provisional attachment was maintainable;
(iii) The High Court has erred in
dismissing the writ petition on the
ground that it was not maintainable;
(iv) The power to order a provisional
attachment of the property of the
taxable person including a bank account
is draconian in nature and the
conditions which are prescribed by the
statute for a valid exercise of the
power must be strictly fulfilled;
(v) The exercise of the power for
ordering a provisional attachment must
be preceded by the formation of an
opinion by the Commissioner that it is
necessary so to do for the purpose of
protecting the interest of the
government revenue. Before ordering a
provisional attachment the Commissioner
must form an opinion on the basis of
tangible material that the assessee is
likely to defeat the demand, if any, and
that therefore, it is necessary so to do
for the purpose of protecting the
interest of the government revenue.
(vi) The expression "necessary so to do
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for protecting the government revenue"
implicates that the interests of the
government revenue cannot be protected
without ordering a provisional
attachment;
(vii) The formation of an opinion by the
Commissioner under Section 83(1) must be
based on tangible material bearing on
the necessity of ordering a provisional
attachment for the purpose of protecting
the interest of the government revenue;
(viii) In the facts of the present case,
there was a clear non-application of
mind by the Joint Commissioner to the
provisions of Section 83, rendering the
provisional attachment illegal;
(ix) Under the provisions of Rule
159(5), the person whose property is
attached is entitled to dual procedural
safeguards:
(a) An entitlement to submit
objections on the ground that the
property was or is not liable to
attachment; and
(b) An opportunity of being heard;
There has been a breach of the mandatory
requirement of Rule 159(5) and the
Commissioner was clearly misconceived in
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law in coming into conclusion that he
had a discretion on whether or not to
grant an opportunity of being heard;
(x) The Commissioner is duty bound to
deal with the objections to the
attachment by passing a reasoned order
which must be communicated to the
taxable person whose property is
attached;
(xi) A final order having been passed
under Section 74(9), the proceedings
under Section 74 are no longer pending
as a result of which the provisional
attachment must come to an end; and
(xii) The appellant having filed an
appeal against the order under section
74(9), the provisions of sub-Sections 6
and 7 of Section 107 will come into
operation in regard to the payment of
the tax and stay on the recovery of the
balance as stipulated in those
provisions, pending the disposal of the
appeal."
11. Referring to the above decisions it
was submitted by the learned Senior
Advocate that the case of the petitioner
is squarely covered by the conclusions
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arrived at by the Hon'ble Supreme Court
and the respondent authorities are
therefore required to be directed to lift
provisional attachment over the immovable
properties of the petitioner.
12. Reliance was also placed on the
decision of this Court in case of Arya
Metacast (P.) Ltd. Vs. State of Gujarat
(Gujarat) wherein it is held as under:
"11. In the facts of the case,
undisputedly, the respondent no.2
has not only provisionally attached
the stock of goods lying at the
factory premise of the writ
applicants, at the same time, the
respondent No.2 has also
provisionally attached the demat
account and current account of the
writ applicants. These are the
valuable assets of the writ
applicants, more particularly, raw
material and the finished goods are
valuables which are otherwise
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necessary for running of the
business of the applicants. Even
operating the demat account and
current account are essentially
required for the routine business of
the writ applicants. Time and again,
this Court as well as even the
instructions instructions issued by
the higher authority of the
respondents, has directed the proper
officer to ensure that their action
of the provisional attachment should
not hamper normal business
activities of the taxable person.
Even thereafter this Court vide
judgment dated 27.01.2022 passed in
Special Civil Application No.188 of
2022 in the case of M/s. Utkarsh
Ispat LLP Vs. State of Gujarat had
an occasion to deal with the similar
facts whereby the respondent
authorities have provisionally
attached goods, stock and
receivables and also bank accounts.
This Court did not approve the
provisional attachment of the goods,
stock and receivables more
particularly, when the entire stock
and receivables have been pledged
and a floating charge has been
created in favour of the Kalupur
Commercial Bank Limited for the
purpose of availing the cash credit
facility with the provisional
attachment of the goods, stock and
receivables the entire business will
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come to a standstill.
12. For the aforesaid reasons,
present writ application succeeds in
part. We hereby quash and set aside
the order of the provisional
attachment dated 27.11.2021 qua the
stock of goods, two demat accounts
as well as current account of the
writ applicants is concerned. So far
the prayer of the writ applicants
with regard to release of electronic
items including Mobile Phone, laptop
and other documents seized during
the search proceedings are
concerned, same is also directed to
be released forthwith on condition
that the writ applicants shall file
an undertaking before the respondent
no.2 thereby declaring that the
aforesaid goods electronic items
including mobile phone, laptop and
other seized documents shall be
retained in its original form and
shall not be disposed of pending the
investigation, if any. At the same
time, we permit the respondent
authorities to secure the original
data by availing necessary
certificate under Section 65B of the
Information and Technology Act."
13. Reliance was placed on the decision of
this Court in case of Utkarsh Ispat LLP
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Vs. State of Gujarat reported in [2022]
136 taxmann.com 1 (Gujarat), wherein the
Hon'ble Court relying upon the decision of
the Hon'ble Supreme Court in case of Radha
Krishan Industries (Supra) as well as
circular dated 23.02.2021 held as under:
"38 What is relevant for our
purpose is clause 3.4.5 of the
guidelines referred to above. It
says that as far as possible, the
authority should ensure that the
attachment does not hamper the
normal activities of the taxable
person. It has been clarified
that the raw materials and input
required for the production or
finished goods should not
normally be attached by the
department.
39 In the case on hand, we do not
approve the provisional
attachment of the goods, stock
and receivables, more
particularly, when the entire
stock and receivables have been
pledged and a floating charge has
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been created in favour of the
Kalupur Commercial Bank Limited
for the purpose of availing the
cash credit facility with the
provisional attachment of the
goods, stock and receivables the
entire business will come to a
standstill."
14. Reliance was placed upon the decision
of this Court in case of Patran Steel
Rolling Mill Vs. Assistant Commissioner of
taxmann.com 80 (Gujarat) wherein it is
held as under:
"8. Before parting, the court deems it
fit to caution the concerned
authorities that while exercising
powers under section 83 of The GGST
Act, the authorities should try to
balance the interest of the Government
revenue as well as a dealer to ensure
that while the interest of the revenue
is safeguarded, the dealer is also in
a position to continue with his
business, because it is only if the
dealer continues with the business
that he would generate more revenue.
The authorities should keep in mind
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that bringing the business of a dealer
to a halt does not in any manner serve
the interest of the revenue.
Therefore, while taking action under
section 83 or 67(2) of the GGST Act,
the concerned authorities should take
care to ensure that equities are
maintained and while securing the
interest of the revenue, they should
attempt to see that the dealer is in a
position to continue with the
business. This court does not intend
to lay down any absolute proposition
that in no case drastic action should
be taken, but that the respondents
should consider the background and
history of the dealer as well as his
financial position to ascertain as to
whether or not he would otherwise be
in a position to pay the dues that may
be assessed upon the culmination of
any assessment proceedings that may be
initiated. If the dealer is a fly by
night operator or a habitual offender
or does not have sufficient means to
pay the dues that may arise upon
assessment, such action may be
justified. Such drastic powers under
section 83 of the Act should not be
exercised as a matter of course, but
only after due application of mind to
the relevant factors."
15. Learned Senior Advocate Mr.Soparkar
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also referred to and relied upon the
Circular No.171 dated 06.07.2022, to
submit that the Principle Commissioner GST
in the said Circular has clarified the
issues with regard to the issuance of the
tax invoices without actual supply of
goods and services or both and to ensure
uniformity in the implementation of the
provisions of the law across the
formations the Board has clarified the
issues. Reliance was also placed on the
illustration given in issue no.3 to submit
that when a registered person has issued
tax invoice to another registered person
without any underlying supply of goods or
services or both and other person avails
input tax credit on the basis of the said
tax invoices and further passes on the
said input tax credit to another
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registered person by issuing invoices
without underlying supply of goods or
services or both, only shall be liable for
penal action and not the third person who
has received the input tax credit from the
second person. It was submitted in the
facts of the case of the petitioner also
the issue of invoices by the petitioner,
there is no allegation against the
petitioner for passing on the ITC without
underlying supply of the goods. It was
therefore submitted that even on merits
the petitioner has a very good case and
there is no likelihood of any demand
against the petitioner.
16. It was therefore submitted that
considering the facts of the case the
impugned provisional orders of attachment
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upon a immovable properties of the
petitioners maybe ordered to be lifted.
17. On the other hand learned AGP
Ms.Shrunjal Shah submitted that the
petitioner has indulged in issuing the
fraudulent invoices without underlying
supply of the goods by entering into bogus
billing transaction with 79 dealers and
wrongly availed ITC of Rs.76.68 crore and
it was submitted that during the course of
investigation it is found that only to
claim ITC purchases were shown without any
receipt of the goods. The modus operandi
of the petitioner was found that the goods
were purchased from unregistered person at
low price and merely to get benefit of
ITC, fabricated bills and invoices were
issued by 79 suppliers.
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18. Learner AGP Ms.Shrunjal Shah referred
to the statements of the transporters who
have accepted that the lorry receipts
produced by the petitioner are also
fabricated. It was therefore submitted
that provisional attachment order in Form
DRC-22 is passed after considering the
objections raised by the petitioners
wherein it is observed that the immovable
properties of the petitioner are not
sufficient to fulfill the liability, which
may arise and therefore as per the
Circular dated 23.02.2021, the respondents
were justified in passing the Provisional
Attachment Order on movable properties in
addition to the immovable properties as
the same is not sufficient to protect
interest of the revenue.
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19. It was pointed out that even if the
valuation report submitted by the
petitioners for immovable properties may
be considered, still the immovable
properties of the petitioners are not
sufficient to protect the interest of the
revenue considering the amount of evasion
involved and in view of the finance
statement of the petitioner after due
application of mind, the respondent has
passed the impugned orders of provisional
attachment of the immovable properties of
petitioners.
20. It was further submitted that the
contention of the petitioners that it is
difficult to continue his business
considering the movable properties of the
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petitioners are attached, 79 dealers who
have been found bogus are approximately
31% of the total 256 dealers with whom the
petitioner has undertaken the transactions
and the total ITC claimed by the
petitioners from the period from 2017-18
amounts to Rs.146.60 crores out of which
the ITC of around Rs.276.68 crores is
bogus and therefore more than 52% of the
total ITC claimed by the petitioners
appears to be bogus.
21. It was submitted that the evidence is
found by the respondent Department showing
bogus billings in case of the petitioners
and therefore in the facts of the case,
the respondent authorities have passed the
impugned order of provisional attachment
under Section 83 of the Act.
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22. Learned AGP Ms.Shah referred to the
satisfaction note dated 14.09.2023 and
further relied upon the averments made in
the affidavit-in-reply filed on behalf of
the respondent no.3 to submit that in the
facts of the case when the petitioner has
indulged into bogus billing which is
further fortified from the statements of
transport recorded in the investigation
that there was no supply of the goods
relating to the invoices generated by the
petitioners, the respondent authority was
justified in passing the impugned order of
provisional attachment of movable
properties of the petitioner in addition
to the immovable properties to protect
interest of the revenue.
23. It was submitted that as per Circular
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no.171 dated 06.07.2022, the case of the
petitioners would fall in second instance
as the petitioners has availed and
utilized the fraudulent ITC on the basis
of the tax invoices, without receiving the
goods or services or both in contravention
of the provision of Section 16(2)(b) of
the CGST Act and the petitioners shall be
liable for the demand and recovery of the
ITC along with penal action under Section
74 of the Act along with applicable
interest under the provision of Section 50
of the CGST Act.
24. It was further submitted that Reliance
placed by the petitioners on the decision
of the Radha Krishan Industries (Supra)
would not be applicable in view of the
facts of the case of the petitioners.
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25. Learned AGP Ms.Shah pointed out that
the facts of the case before the Hon'ble
Supreme Court are totally different than
the facts of the case of the petitioners
and referred to following facts recorded
by the Hon'ble Supreme Court in the
decision as under:
"4. The facts in the context of
which this case arises are thus: the
appellant manufactures lead
according to the specific
requirements of its clients, and has
a factory at village Meerpur
Gurudwara, Kala-Amb in the District
of Sirmaur of Himachal Pradesh. The
appellant has been in the same line
of business since 2008. Upon the
introduction of the Goods and
Services tax4, the appellant "third
respondent" "HPGST Act" "HPGST
Rules" "GST" migrated to and was
registered under GST - GSTIN No.
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O2AAKFR7402H2ZE - with effect from 1
July 2017.
5. On 3 October 2018, a notice5 was
issued to the appellant under
Section 74 of the HPGST Act and the
Central Goods and Services Tax Act6
by the third respondent requiring it
to appear on 9 October 2018 and
produce (i) invoices pertaining to
inward and outward supplies for the
years 2017-18 and 2018-19; (ii)
party-wise summary/ledger of inward
supplies; (iii) proof of payment of
GST with a commodity-wise breakup;
and (iv) copies of GSTR-1, GSTR-2
and GSTR-3 returns from July 2017 to
July 2018. The appellant appeared
before the third respondent and
submitted original tax invoices
pertaining to inward and outward
supplies for 2017-18 and 2018-19 by
a letter dated 15 October 2018.
6. On 10 October 2018, a 'detection
case' was registered against GM
Powertech, Kala-Amb7, one of the
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suppliers of the appellant, under
Section 74 of the HPGST Act and the
CGST Act read with Section 20 of the
Integrated Goods and Services Tax
Act, 20178. This was through a
search and seizure under Section 67
of the HPGST Act and CGST Act. The
partners of GM Powertech were
arrested on 3 December 2018 on the
ground of raising fraudulent claims
of input tax credit9 from
fake/fictitious firms in Delhi and
Kanpur.
7. The appellant received a memo by
an e-mail dated 15 December 2018
from the third respondent directing
it to be present on 17 December 2018
for explaining the allegedly illegal
claim of ITC made during 2017-18 and
December 2018, the appellant
contended that it had validly
claimed ITC as it fulfilled the
conditions under section 16 and
other provisions of the HPGST Act
and the CGST Act.
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8. On 9 January 2019, a notice was
issued to Fujikawa Power, Bagbania,
BBN Baddi, one of the customers of
the appellant, for provisionally
attaching an amount of Rs. 5 crores
due to the appellant, under Section
83 of the HPGST Act. On 19 January
2019, the third respondent passed an
order of provisional attachment in
respect of receivables worth Rs. 5
crores due from Fujikawa Power. This
order inadvertently referred to
Sarika Industries instead of the
appellant. The appellant responded
by a representation dated 29 January
2019, claiming inter alia, that the
order of attachment was without
affording a hearing. The appellant
also claimed that on 26 December
2018, they had noticed that the ITC
had been blocked without prior
notice. On 30 January 2019, the
notice of attachment was withdrawn
by the third respondent.
9. According to the respondents,
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after the case of GM Powertech was
investigated, tax evasion was
detected. GM Powertech was found to
have claimed and utilized ITC
against invoices issued by "fake
fictitious firms without actual
movement of goods..." GM Powertech had
issued invoices to various
recipients in Himachal Pradesh
including the appellant. On 4 July
2020, the third respondent issued an
intimation to the appellant under
Section 74(5) of the HPGST Act of
tax ascertained as being payable11,
advising it to pay tax, interest
"SCN" Form GST DRC-01A and penalty
of Rs. 5.03 crores. The appellant
was given an opportunity to file its
submissions against the
ascertainment of the amount by 4
August 2020.
10. A tax liability of Rs 39.48
crores was confirmed against GM
Powertech on the conclusion of the
proceedings against it. GM Powertech
was found to have no business
establishment or property in
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Himachal Pradesh and the case was
considered to fall into the category
of a serious tax fraud."
26. Referring to the above facts it was
submitted that in the facts of the case
before the Apex Court, the detection case
was registered against the GM Powertech
one of the suppliers of the appellant and
on investigation, tax evasion was detected
and the GM Powertech was found to have
claimed and utilized ITC against the
invoices issued by fake fictitious forms
without actual movement of the goods and
GM Powertech had issued invoices to
various recipients in Himachal Pradesh
including the appellant. It was therefore
submitted that the case before the Hon'ble
Supreme Court would fall within the
situation/instance given in the Circular
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no.171 dated 06.07.2022, whereas the facts
of the case of the petitioners are similar
to that of GM Powertech who has utilized
the ITC against invoices issued by the
supplier's firms without actual movement
of the goods. It was therefore submitted
that the reliance placed by the
petitioners on the decision of the Hon'ble
Supreme Court in case of Radha Krishan
Industries (Supra) are factually stands on
different facts and therefore the same
would not be applicable. It was submitted
that the Hon'ble Supreme Court after
considering that the order of the
provisional attachment held that it
contained no basis for formation of the
opinion that provisional attachment was
necessary to safeguard interest of revenue
and accordingly quashed and set aside such
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orders. Reliance was placed on the
following observations of the Hon'ble
Supreme Court in the context of such
finding:
"66. Ex facie, the above order
passed by the Joint Commissioner
does not indicate any basis for the
formation of the opinion that the
levy of a provisional attachment was
necessary to protect the interest of
the government revenue. The order in
the file noting refers to the fact
that the case of GM Powertech had
resulting in an additional demand of
Rs. 39 crores on account of a
fraudulent claim of ITC for FY 2017-
18 and 2018-19. GM Powertech is
alleged to have passed on the ITC to
various Registered Tax Persons40
situated in Himachal Pradesh by
issuing invoices inter alia to the
appellant during 2018-19 for which a
case under Section 74 had been
initiated. The order records "RTP"
that the appellant had claimed ITC
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of Rs 3.25 crores on the strength of
the invoices issued by GM Powertech.
The order merely records that the
submissions which were urged by the
appellant on 5 August 2020 "are not
sustainable". "In view of the facts
involved in the case", the Joint
Commissioner concluded that it is
necessary at this stage to safeguard
the government revenue and since the
appellant had sold goods to Fujikawa
the payment due to it was being
attached provisionally. The order of
the Joint Commissioner contains
absolutely no basis for the
formation of the opinion that a
provisional attachment was necessary
to safeguard the interest of the
revenue. No tangible material has
been disclosed. The record clearly
reveals a breach of the mandatory
pre- conditions for the valid
exercise of powers under Section 83
of the HPGST Act.
70 Clause (a) of sub-Section (6)
provides that no appeal shall be
filed without the payment in full,
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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
Section 63 or Section 64 or Section
67 or Section 73 or Section 74.
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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.
71 Moreover, an order of provisional
attachment was issued by the Joint
Commissioner which was withdrawn on
30 January 2019, after considering
the representations made by the
petitioner. On the very ground,
without any material change in
circumstances. Another order of
provisional attachment came to be
issued by another Joint
Commissioner. Therefore, it was the
contention of the petitioner before
the High Court that the subsequent
order of provisional attachment is
in substance and effect an order
reviewing the earlier order
withdrawing the order of provisional
attachment which was not permissible
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and therefore the subsequent order
of provisional attachment is without
jurisdiction. The High Court has not
considered this aspect. Both the
earlier and the subsequent orders of
provisional attachment are on the
same grounds. Therefore, unless
there was a change in the
circumstances, it was not open for
the Joint Commissioner to pass
another order of provisional
attachment, after the earlier order
of provisional attachment was
withdrawn after considering the
representations made by the
petitioner. This is an additional
ground to set aside the subsequent
order of provisional attachment."
27. Referring to the above findings it was
submitted that the Hon'ble Supreme Court
in case of Radha Krishan Industries
(Supra) in favour of the appellant in
view of the facts of the said case,
whereas in the facts of the case of the
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petitioners, it is found that the
petitioner has indulged in business of
bogus billings without underlying supply
of goods and materials and availed the ITC
of more than Rs.76 crores. It was
therefore submitted that the order passed
by the respondent authority exercising
powers under Section 83 of the Act to
protect the interest of the revenue may
not be interfered. No interference may be
made in the impugned order.
28. Having heard learned advocates for the
respective parties and having considered
the facts of the case and material on
record, prima facie it is apparent from
the facts that the petitioner has indulged
in to bogus billing and therefore without
considering the veracity of the same as
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investigation/inquiry is undergoing, it is
necessary to find out as to whether there
is any basis to pass the provisional
attachment of the movable property in
addition to the immovable properties
already attached by the respondent
Department while invoking provisions of
Section 83 of the Act.
29. On perusal of the impugned order read
with satisfaction note, the respondent
authority has come to the conclusion that
the immovable property of the petitioner
is not sufficient to protect the interest
of the revenue, which is further fortified
from the averments made in the affidavit-
in-reply to the effect that the petitioner
has indulged into bogus billing by
availing the ITC of more than Rs.76 crore.
Therefore, considering such facts, it
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cannot be said that the Commissioner has
failed to form an opinion on the basis of
tangible material that the petitioner is
likely to be subject to demand which would
be more than the value of the immovable
properties and therefore it is necessary
so to do for the purpose of protecting the
interest of the Government revenue,
provisional attachment of the movable
property was also required. The respondent
authorities have passed the impugned order
of provisional attachment also in
consonance with Circular no.171 dated
06.07.2022, which clarifies the issues
involved in issuing tax invoices without
actual supply of goods or services or
both. The said Circular reads as under:
"Circular No.171/03/2022-GST [F.No.CBIC-
20001/2/2022-GST]
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Clarification on various issues relating to
applicability of demand and penalty
provisions under the Central Goods and
Services Tax Act, 2017 in respect of
transactions involving fake invoices
CIRCULAR NO.171/03/2022-GST[F.NO.CBIC-
20001/2/2022-GST], DATED 6-7-2022
A number of cases have come to notice where
the registered persons are found to be
involved in issuing tax invoice, without
actual supply of goods or services or both
(hereinafter referred to as "fake invoices"),
in order to enable the recipients of such
invoices to avail and utilize input tax
credit (hereinafter referred to as "ITC")
fraudulently. Representations are being
received from the trade as well as the field
formations seeking clarification on the
issues relating to applicability of demand
and penalty provisions under the Central
Goods and Services Tax Act, 2017 (hereinafter
referred to as "CGST Act"), in respect of
such transactions involving fake invoices. In
order to clarify these issues and to ensure
uniformity in the implementation of the
provisions of law across the field
formations, the Board, in exercise of its
powers conferred by section 168 (1) of the
CGST Act, hereby clarifies the issues
detailed hereunder.
Sl.No Issues Clarification
.
1. In case where a Since there is only been an
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registered person "A" issuance of tax invoice by
has issued tax the registered person 'A' to
invoice to another registered person 'B'
registered person "B" without the underlying
without any supply of goods or services
underlying supply of or both, therefore, such an
goods or services or activity does not satisfy
both, whether such the criteria of "supply", as
transaction will be defined under section 7 of
covered as "supply" the CGST Act. As there is no
under section 7 of supply by 'A' to 'B' in
CGST Act and whether respect of such tax invoice
any demand and in terms of the provisions
recovery can be made of section 7 of CGST Act, no
from 'A' in respect tax liability arises against
of the said 'A' for the said
transaction under the transaction, and
provisions of section accordingly, no demand and
73 or section 74 of recovery is required to be
CGST Act. Also, made against 'A' under the
whether any penal provisions of section 73 or
action can be taken section 74 of CGST Act in
against registered respect of the same.
person 'A' in such Besides, no penal action
cases. under the provisions of
section 73 or section 74 is
required to be taken against
'A' in respect of the said
transaction. The registered
person 'A' shall, however,
be liable for penal action
under section 122 (1)(ii) of
the CGST Act for issuing tax
invoices without actual
supply of goods or services
or both.
2. A registered person Since the registered person
"A" has issued tax 'B' has availed and utilized
invoice to another fraudulent ITC on the basis
registered person "B" of the said tax invoice,
without any without receiving the goods
underlying supply of or services or both, in
goods or services or contravention of the
both. 'B' avails provisions of section 16(2)
input tax credit on (b) of CGST Act, he shall be
the basis of the said liable for the demand and
tax invoice. B recovery of the said ITC,
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further issues along with penal action,
invoice along with under the provisions of
underlying supply of section 74 of the CGST Act,
goods or services or along with applicable
both to his buyers interest under provisions of
and utilizes ITC section 50 of the said Act.
availed on the basis Further, as per provisions
of the above of section 75(13) of CGST
mentioned invoices Act, if penal action for
issued by 'A', for fraudulent availment or
payment of his tax utilization of ITC is taken
liability in respect against 'B' under section 74
of his said outward of CGST Act, no penalty for
supplies. Whether 'B' the same act, i.e. for the
will be liable for said fraudulent availment or
the demand and utilization of ITC, can be
recovery of the said imposed on 'B' under any
ITC, along with penal other provisions of CGST
action, under the Act, including under section
provisions of section 122.
73 or section 74 or
any other provisions
of the CGST Act.
3. A registered person In this case, the input tax
'A' has issued tax credit availed by 'B' in his
invoice to another electronic credit ledger on
registered person 'B' the basis of tax invoice
without any issued by 'A', without
underlying supply of actual receipt of goods or
goods or services or services or both, has been
both. 'B' avails utilized by 'B' for passing
input tax credit on on of input tax credit by
the basis of the said issuing tax invoice to 'C'
tax invoice and without any underlying
further passes on the supply of goods or services
said input tax credit or both. As there was no
to another registered supply of goods or services
person 'C' by issuing or both by 'B' to 'C' in
invoices without respect of the said
underlying supply of transaction, no tax was
goods or services or required to be paid by 'B'
both. Whether 'B' in respect of the same. The
will be liable for input tax credit availed by
the demand and 'B' in his electronic credit
recovery and penal ledger on the basis of tax
action, under the invoice issued by 'A',
provisions of section without actual receipt of
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73 or section 74 or goods or services or both,
any other provisions is ineligible in terms of
of the CGST Act. section 16 (2)(b) of the
CGST Act. In this case,
there was no supply of goods
or services or both by 'B'
to 'C' in respect of the
said transaction and also no
tax was required to be paid
in respect of the said
transaction. Therefore, in
these specific cases, no
demand and recovery of
either input tax credit
wrongly/ fraudulently
availed by 'B' in such case
or tax liability in respect
of the said outward
transaction by 'B' to 'C' is
required to be made from 'B'
under the provisions of
section 73 or section 74 of
CGST Act.
However, in such cases, 'B'
shall be liable for penal
action both under section
122(1)((ii) and section
122(1)(vii) of the CGST Act,
for issuing invoices without
any actual supply of goods
and/or services as also for
taking/ utilizing input tax
credit without actual
receipt of goods and/or
services.
2. The fundamental principles that have
been delineated in the above scenarios
may be adopted to decide the nature of
demand and penal action to be taken
against a person for such unscrupulous
activity. Actual action to be taken
against a person will depend upon the
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specific facts and circumstances of the
case which may involve complex mixture
of above scenarios or even may not be
covered by any of the above scenarios.
Any person who has retained the benefit
of transactions specified under sub-
section (1A) of section 122 of CGST Act,
and at whose instance such transactions
are conducted, shall also be liable for
penal action under the provisions of the
said sub-section. It may also be noted
that in such cases of wrongful/
fraudulent availment or utilization of
input tax credit, or in cases of
issuance of invoices without supply of
goods or services or both, leading to
wrongful availment or utilization of
input tax credit or refund of tax,
provisions of section 132 of the CGST
Act may also be invokable, subject to
conditions specified therein, based on
facts and circumstances of each case.
3. It is requested that suitable trade
notices may be issued to publicize the
contents of this Circular.
4. Difficulty, if any, in implementation
of the above instructions may please be
brought to the notice of the Board.
Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)"
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30. On perusal of the above circular the
case of the petitioner would fall within
second issue as the petitioner has
received invoices without any underlying
supplying goods and has availed input tax
credit on the basis of the tax invoices
and the petitioner has issued invoices
along with underlying supply of goods or
services to its buyers and utilized the
ITC availed on the basis of the bogus
invoices for payment of his tax liability
in respect of outward supplies and hence
the petitioner would be liable for the
demand and recovery of the ITC along with
penal actions, interest and penalty under
the provisions of Section 74 of the CGST
Act. Therefore, the facts of the case
clearly shows that the facts emerging from
the material on record are different than
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that of the facts before the Hon'ble
Supreme Court in case of Radha Krishan
Industries (Supra) where the appellant
before the Hon'ble Supreme Court was the
person who has received tax invoices along
with goods whereas in facts of the present
case the petitioner is the person who has
issued the tax invoice availed ITC
fraudulently on the basis of the bogus
bills without supply of the goods.
Therefore the facts of the case before the
Hon'ble Supreme Court are similar to that
of the third instance whereas facts of the
present case are similar to second
instance as per the aforesaid circular.
31. Considering the facts of the case, it
cannot be said that the respondents have
committed breach of provision of Section
83 of the Act which is intended to
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safeguard the interest of the revenue
which cannot be said to any harassment to
the petitioner as tried to be
demonstrated. In the facts of the case, it
cannot be said that the respondents have
issued provisional attachment order over
the movable properties with a view to
harass the petitioner. The petitioner in
the facts of the case appears to have
indulged in the transaction of the
fraudulent invoices resulting into loss of
revenue by utilizing the ITC of more than
Rs.76 crore.
32. In such circumstances, no interference
is called for in the impugned order of
provisional attachment so far as the
attachment over the movable properties of
the petitioner during the pendency of the
investigation as respondent authority has
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rightly formed an opinion as required
under Section 83 of the Act so as to
protect the interest of revenue, and hence
the provisional attachment over the
movable and immovable properties of the
petitioner is required to be continued.
The petition therefore being devoid of any
merit is accordingly rejected. Notice is
discharged.
(BHARGAV D. KARIA, J)
(NIRAL R. MEHTA,J)
URIL RANA
