TMI Blog2020 (12) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearing for the writ applicants as regards the indefeasible right to avail the ITC vis-a-vis Rule 86A of the Rules should fail and hereby fails. Scope of powers under Rule 86A - Rule 86A talks about reason to believe which is necessary to be formed for the purpose of blocking the input tax credit in cases of inquiry or investigation into fraudulent transactions. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - there must be material, based on which alone the authority could form its opinion that it has become necessary to block the input tax credit pending an inquiry or investigation into the fraudulent transactions of fake/bogus invoices. The existence of relevant material is a pre-condition to the formation of the opinion. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of blocking the ITC in exercise of power under Rule 86A of the Rules, then such action would definitely amount to malice in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmunicated to the writ applicants in this regard, yet in the facts of the present case, it cannot be said that exercise of power under Rule 86A for the purpose of blocking the ITC is mala fide or without any application of mind. There are highly disputed questions of fact as regards the debit of the ITC from the electronic credit ledger. Indisputably, the investigation is in progress. A prima facie case could be said to have been made out against the writ applicants. However we may only say that the investigation cannot continue for an indefinite period of time. Almost more than a year has elapsed and, in such circumstances, the authorities concerned should arrive at some conclusion or the other. Even Rule 86A of the Rules prescribes one year time limit - the respondents are directed to complete the investigation within a period of four weeks from the date of the receipt of this order and take an appropriate decision whether any case has been made out for issue of show-cause notice under Section 74 of the Act or not. Application dismissed. - R/Special Civil Application No. 8841 of 2020 With R/Special Civil Application No. 8163 of 2020 - - - Dated:- 24-12-2020 - Honourab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioner to utilize such ITC of ₹ 84,34,547/- and also allow the Petitioner to take credit of ₹ 25 Lakhs in electronic credit ledger for paying GST/IGST on the goods manufactured and supplied by the Petitioner. (B) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order, quashing and setting aside DRC-03 Form dated 21.12.2019 (Annexure-'G') thereby ordering cancellation of debit entries of ₹ 25,00,000/- in the Petitioner's Electronic Credit Ledger maintained under the CGST Act; (C ) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to stay the blocking of ITC of ₹ 84,34,547/- by the Respondents and direct Respondent No.2 herein to allow the Petitioner to utilize such ITC of ₹ 84,34,547/- as well as ₹ 25 Lakhs for paying GST on supplied of the final products on the terms and conditions that may be deemed fit by this Hon'ble Court. (D) An ex-parte ad-interim relief in terms of Para-17(C) above may kindly be granted. (E) Any other further relief that may be deemed fit in the facts and circumstances of the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch inputs to all the suppliers is made through the RTGS. 5.5 It appears from the materials on record that the Directorate General of Goods Services Tax Intelligence, Jaipur Zonal Unit received information that some registered dealers have been supplying only the tax invoices to the various manufacturers of steel products located across the Country, and in the course of such inquiry against such registered dealers/supplies, it was revealed that the writ applicant herein had also received inputs from them involving the ITC to the tune of ₹ 2.40 Crore. In such circumstances, the Investigating Agency thought fit to initiate an inquiry against the writ applicant herein by drawing the Panchnama dated 4th April, 2019. It is the case of the Department that the inquiry, so far, prima facie reveals that the concerned suppliers of inputs, referred to above, had issued only the tax invoices without supplying any tax paid inputs and the transactions of these input suppliers/registered dealers are only on paper and, therefore, the ITC availed by all the buyers including the writ applicant herein on such tax invoices of these input suppliers is inadmissible. It further appears from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit ledger maintained by the writ applicant along with the details of ITC and the final products like the TMT Bars, Rounds etc. Mr. Dave pointed out that approximately 3,821 MTs of the inputs received from these suppliers has also been recorded in the statutory production register maintained by the firm and such final products were supplied to the customers on payment of the appropriate GST by the firm. It is argued by Mr. Dave that if transactions involving 3,821 MTs of inputs were only on paper, as alleged by the Department, then the firm could not have manufactured the final products cleared on payment of the GST. 8. Mr. Dave further argued that the GSTR-3B Returns of the firm regarding the availment of the ITC on all such input transactions and utilization thereof were assessed finally by the jurisdictional Bhavnagar GST Officers without any objection and the same signifies the actual receipt of the tax paid inputs and utilization thereof by the firm. In this context, Mr. Dave pointed out that even in the reply affidavits of the respondents, such facts are not disputed. 9. Mr. Dave would argue that the respondents have not been able to furnish an iota of material before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the statutory registers but were also reported to the jurisdictional GST Officers on monthly basis all throughout the period of two years in question. 13. Mr. Dave has a very serious grievance to redress while pointing out that all the input suppliers under cloud have been allowed to scott free of the GST Net by accepting their respective applications for de-registration. Mr. Dave pointed out that the GST Officers in charge of their divisions and Commissionerates allowed such applications and permitted deregistration. According to Mr. Dave, the orders for cancellation of registration passed by the jurisdictional GST Officers would indicate that no tax was found to be outstanding or payable from any of the concerned input suppliers. If the Department had a slightest of the doubt in this regard, then it would have initiated proceedings under Section 76(2) of the CGST Act against all such input suppliers. Mr. Dave further argued that when the registered input suppliers alleged to have issued the tax invoices without supplying the tax paid inputs to the writ applicants, were allowed to surrender their registrations without any liability, then no proceedings for the very same tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm's credit ledger. It is pointed out that even in the reply affidavit as also in the course of the hearing of this writ application, it was not argued by the learned Assistant Solicitor General of India appearing on behalf of the respondents that the reasons have been recorded by the respondent No.4 in the form of notings in the file. Mr. Dave would submit that assuming for the moment that some reasons have been recorded in the form of notings in the file, such reasons, at no point of time, were communicated to his clients. It is only when his clients attempted to use the ITC lying in the credit ledger for discharging their GST liability, it was reported on the GST Network (GSTN) Portal that the credit of ₹ 84,34,547/- had been blocked. Mr. Dave would argue that his clients are seriously prejudiced by blocking of the ITC. 18. Mr. Dave further pointed out that Sub-Rule (3) of Rule 86A provides that the restriction on utilization of the credit shall cease to have effect after the expiry of period of one year from the date of imposing such restriction. The argument of Mr. Dave in this regard is that if the decision of blocking credit is not communicated to the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the statements of various persons have been recorded including one of the partners of the partnership firm, i.e,. the writ applicant No.1 herein and, in such statements, there is a clear cut admission of fraud. Mr. Vyas submitted that no sooner the investigation is over, then a show-cause notice shall be issued under Section 74 of the CGST Act, and along with the showcause notice, the materials relied upon, more particularly, the documentary evidence would also be made available to the writ applicant herein. Mr. Vyas argued that the formalities like recording the transactions in the statutory returns and forms, and payment through the RTGS against the goods in accordance with the invoice and payment for the transportation etc. was all just a show so as to give a color of genuineness to such transactions. Mr. Vyas argued that the amount of ₹ 25 Lakh was paid by the writ applicant of the Special Civil Application No.8841 of 2020 voluntarily by using the Login ID and password and, in such circumstances, such voluntary payment cannot be refunded at this stage. It is argued that the allegations of coercion or pressure are reckless and without any foundation for the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual supply of goods, coordinated simultaneous search operation was planned and executed on 13.09.2018 at 19 premises spread over in three states viz. Rajasthan, Jharkhand and Chhattisgarh which included various trading firms, recipients of such GST invoices and residences of suspected persons. During the course of search operations various records/documents in the form of purchase invoices, sale invoices, LRs of fake transportation firms, gadgets, mobile phones, blank signed cheque books, private records containing incriminating details have been seized under Panchnama proceedings from all over the places. Evidences recovered from all over the searched places conclusively established that all such transactions are only on papers and no physical movement of goods has taken place. By this way, recipients of invoices have availed ITC involved in such invoices merely on the strength of such invoices, without actual receipt of goods. Subsequently, cases were booked by this office against the trading firms, who have supplied invoices, recipients of such invoices who have availed ITC, merely on the strength of such invoices, without actually receipt of goods and other persons involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under section 74 read with section 122 of the CGST Act, 2017. Further, such action is also punishable under section 132 of the said Act, for their criminal liability. The bifurcation of ITC availed by the Petitioner herein is as under: The Petitioner have availed ineligible ITC to the tune of ₹ 4,95,69,048/- based on fake/bogus invoices without actual receipt of goods. Further, Anti-Evasion Wing of Bhavnagar Commissionerate has also initiated investigation against M/s S.S. Industries for making supplies, clandestinely, without payment of applicable GST. Subsequently, Investigation conducted by the Anti Evasion wing of Bhavnagar Commissionerate revealed that M/s S.S. Industries had supplied/cleared TMT Round Bars from their factory, totally valued at ₹ 91,64,364/ -, without issuing any invoice thereof and without payment of applicable GST thereon. By this way M/s S.S. Industries has evaded payment of GST amounting to ₹ 16.49 lakh. Partners of M/s S.S. Industries, Shri Sher Singh Shekhawat has categorically admitted this fact in his statement dated 20.05.2019. On being asked by this office, entire investigation was transferred to DGGI, JZU, Jaipur by the Bhav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation in this case is underway. It is worth mentioning that Show Cause Notice in the case is yet to be issued. This petition is premature as the same has been filed before issuance of Show Cause Notice and, thus, also before adjudication of the same. It is pertinent to submit that the petitioner has made general allegations without any basis with intent to delay the investigation from escaping their legitimate tax liability. Further, on completion of ongoing investigation, a Show Cause Notice will be issued to the petitioner by Respondent No. 4 for which petitioner can file his reply. However, instead of using the efficacious alternative remedy available with them, petitioner has chosen to file this petition under Article 226 of the Constitution. With reference to para 8 to 8.2 of the petition, investigation of the case is underway. Copies of all the relied upon documents, including statements, will be provided along with the show cause notice, which will be issued on completion of the investigation, within the time frame and as per the provisions of the CGST Act, 2017 and Rules made thereunder. This is clearly an afterthought of the petitioner. The contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch amount from their current account ledger, they could have done so. Further, ITC amounting to ₹ 84,34,547/ -, which was available in their credit ledger was blocked for wrongly availed ITC by them merely on the strength of invoices supplied by the aforementioned seven firms. Since they have already utilised the ITC involved (though ineligible) and availed on the strength of such invoices. The amount was paid by the petitioner voluntarily and the same was paid by them on GSTN by using their Login Id Password subsequent to perusal and being convinced with the available evidences. Apart from statement dated 01.05.2019, four more statements of Shri Sher Singh Shekhawat have been recorded on 20.05.2019, 21.06.2019, 23.07.2019 and 20.01.2020. Further, the amount has been deposited voluntarily, there is no requirement for issuance of acknowledgement in DRC-04 and/or DRC-05 forms by any proper officer. DRC-04 and DRC-05 are issued under Rule 142(2) and 142(3), respectively which basically deals with `Notice and order for demand of amount payable under the CGST Act, 2017, which is not the issue in the present case. 5.11 Rule 142 of the Central Goods and Services Tax (CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, those be rejected. 26. Mr. Vyas further pointed out that affidavit-in-reply has also been filed on behalf of the respondents in the connected writ application, i.e. the Special Civil Application No.8163 of 2020 and the same is also on the same line like the one referred to above. 27. In such circumstances, referred to above, Mr. Vyas prays that the connected writ application also does not merit any consideration and the same be rejected. ANALYSIS 28. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether pending inquiry or investigation into the allegations of fraudulent transactions with respect to fake/bogus invoices for the purpose of availing the ITC, the respondents could have blocked/debited the input tax credit (ITC) in the electronic credit ledger of the writ applicants by virtue of the power under Rule 86A of the CGST Rules which came into force vide the Notification No.75/2019-CT dated 26th December, 2019. 29. Before adverting to the rival submissions canvassed on either side, we may first look into the provisions of Rule 86A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount. (2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit. (3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction. . 4. In the said rules, with effect from the 11th January, 2020, in rule 138E, after clause (b), the following clause shall be inserted, namely:- (c) being a person other than a person specified in clause (a), has not furnished the statement of outward supplies for any two months or quarters, as the case may be. 30. Having referred to Rule 86A above, we may now look into Section 16 of the CGST Act. The same reads thus; Section 16 - Eligibility and conditions for taking input tax credit (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific challenge to the same. In such circumstances, we would confine our adjudication in the present litigation only to the question whether the respondents could be said to be justified in invoking Rule 86A of the Rules for the purpose of blocking the input tax credit of the writ applicants pending the inquiry as regards the fraudulent transactions. Indefeasible right vis-a-vis the benefit of the ITC:- 34 We first propose to deal with the submission of Mr. Dave as regards the indefeasible right of the assessee to avail the benefit of the ITC. 35. In Eicher Motors Ltd. (supra) , the validity and application of the scheme as modified by introduction to Rule 57F (read as 57F (4-A) of the Central Excise Rules, 1944 under which the credit which was lying unutilised on 16th March, 1995 with the manufacturers, stood lapsed in the manner set out therein was questioned. Mr. Dave has pressed into service the following observation/conclusion of the Supreme Court, as contained in Paras-4 and 5 respectively; 4.......As pointed out by us that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods for the purposes of the Modvat Scheme. The assessable value of the intermediate product for the purposes of excise duty in the instant case was admittedly to be determined on the basis of its cost which necessitated the taking into account of the cost of the raw material. The Revenue contended that the excise duty paid by the seller on the raw material was also to be included in the cost of the excisable goods (the intermediate product) in this case. On the other hand, the manufacturers contended otherwise. The Supreme Court rejected the contentions of the Revenue and held in Paras-18 and 19 as under; 18. It is clear from these rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provisions in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been illegally or irregularly taken, in which event it stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the cases of manufacturers who had received their inputs prior to the introduction of the said proviso and are seeking to take credit in regard to the said inputs beyond the period of six months. The following conclusion in Paras-7,8 and 9 respectively of Their Lordships are relevant; 7. Having heard the arguments of the parties and after considering the Rule in question, we think that by introducing the limitation in the said proviso to the Rule, the statute has not taken away any of the vested rights which had accrued to the manufacturers under the Scheme of Modvat. That vested right continues to be in existence and what is restricted is the time within which the manufacturer has to enforce that right. In support of their arguments, they have placed reliance on a judgment of this Court in Etcher Motors Ltd., v. UOI wherein this Court had held that a right accrued to an assessee on the date when it paid the tax on the raw-materials or the inputs would continue until the facility available thereto gets worked out or until those goods existed. In that background, this Court held that by Section 37 of the Act, the authorities concerned cannot make a Rule which could take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 9. Without such a challenge, the appellants want us to interpret the Rule to mean that the Rule in question is not applicable in regard to credits acquired by a manufacturer prior to the coming into force of the Rule. This we find difficult, because in our opinion the language of the proviso concerned is unambiguous. It specifically states that a manufacturer cannot take credit after six months from the date of issue of any of the documents specified in the first proviso to the said sub-rule. A plain reading of this sub-rule clearly shows that it applies to those cases where a manufacturer is seeking to take the credit after the introduction of the Rule and to cases where the manufacturer is seeking to do so after a period of six months from the date when the manufacturer received the inputs. This sub-rule does not operate retrospectively in the sense it does not cancel the credit nor does it in any manner affect the rights of those persons who have already taken the credit before coming into force of the Rule in question. It operates prospectively in regard to those manufacturers who seek to take credit after the coming into force of this Rule. Therefore, in or (sic, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECC 354 (SC) , the Supreme Court ruled that once the credit has been taken validly the right is indefeasible. In the instant case, the writ applicants have not been able to avail the ITC and, in such circumstances, it cannot be said that they have an indefeasible right. In the case of Tungabadra Industries (supra) , referred to above, the Supreme Court approved the view taken by the Karnataka High Court in the case of Union of India v. Modern Mills Ltd . , 1994 (45) ECC 135 (Kar) , in which it was ruled that the accumulated credit could be utilized only subject to the conditions of the Notification and thus even in the case of accumulated credit, no vested right accrued . 41. Thus, in view of the aforesaid discussion, we hold that the vociferous submission of Mr. Dave, the learned counsel appearing for the writ applicants as regards the indefeasible right to avail the ITC vis-a-vis Rule 86A of the Rules should fail and hereby fails. 42. The aforesaid takes us to consider the second limb of Mr. Dave's submission. According to Mr. Dave, the power conferred upon the Revenue under Rule 86A is to be exercised with due care and caution, and that too, based on cogent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral of India appearing for the respondents submitted that there is no specific order passed by the authority concerned, blocking the input tax credit invoking Rule 86A of the Rules. According to Mr. Vyas, there is no such requirement that a specific order should be passed assigning, prima facie, reasons to block the input tax credit and communicate the same to the person concerned. Mr. Vyas would submit that ordinarily, the reasons are found in the form of notings in the original file,on the basis of which, the Court may be in a position to ascertain the genuineness of the belief formed by the authority. We shall deal with this issue as regards whether it is necessary for the authority to pass some order and communicate the same to the person concerned, little later. At present, we are looking into the true purport and scope of Rule 86A of the Rules. The formation of the opinion by the authority undoubtedly should reflect intense application of mind with reference to the materials available on record that it had become necessary to order blocking of the input tax credit pending the inquiry. (See Bhikhubhai Vithlabhai Patel Ors. vs. State of Gujarat , AIR 2008 SCC 1771) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted S. 637 (i) (a) it knew that government would entrust to the Board its power under S. 237 (b). Could the legislature have left without any restraints or limitations the entire power of ordering an investigation to the subjective decision of the Government or the Board? There is no doubt that the formation of opinion by the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided for the opinion of the government and not of the court such an opinion is not subject to a challenge on the ground of propriety, reasonableness or sufficiency. But the Authority is required to arrive at such an opinion from circumstances suggesting what is set out in subclauses (i), (ii) or (iii). If these circumstances were not to exist, can the government still say that in its opinion they exist or can the Government say the same thing where the circumstances relevant to the clause do not exist? The legislature no doubt has used the expression circumstances suggesting . But that expression means that the circumstances need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of observed : Therefore, the words, reason to believe or in the opinion of do not always lead to the construction that the process of entertaining reason to believe or the opinion is an altogether subjective to process not lending itself even to a limited scrutiny by the court that such a reason to believe or opinion was not formed on relevant facts or within the limits or as Lord Radcliffe and Lord Reid called the restraints of the statute as an alternative safeguard to rules of natural justice where the function is administrative. 49. In the Income-tax Officer, Calcutta and Ors. vs. Lakhmani Mewal Das [AIR 1976 SC 1753], the Supreme Court construed the expression reason to believe employed in Section 147 of the Income-Tax Act, 1961 and observed: the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any rights of his dependents, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good. There is nothing paradoxical in the imposition of such legal limits. It would indeed be paradoxical if they were not imposed. 33. The Court is entitled to examine whether there has been any material available with the State Government and the reasons recorded, if any, in the formation of opinion and whether they have any rational connection with or relevant bearing on the formation of the opinion. The Court is entitled particularly, in the event, when the formation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the I.T.O. on the point as to whether action should be initiated for reopening the assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 53. Having given our due consideration to the relevant aspects of the matter, we may only say that it cannot be said that the inquiry or investigation initiated as regards the fake/bogus invoices for the purpose of ITC is malafide or based on absolutely no materials. From what has been stated in the reply affidavit filed on behalf of the respondents, it could be said that prima facie, there is some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not necessarily discriminatory. (vi) Mere possibility of abuse of a discretionary power will not invalidate a statute. (vii) Provision for sanction is one of the safeguards to control arbitrary exercise of power. (viii) If discretion is conferred on high officials, in the absence of evidence of mala fides, it can be considered as a safe-guard against arbitrary exercise of discretion. (ix) It is not the function of the Court to strive to find out the policy of the statute from its crevices, if it cannot be reasonably ascertained from the purpose and provisions of the statute. 57. When we are talking about Rule 86A of the Rules, it reminds us of Section 83 of the CGST Act. Section 83 of the CGST Act provides for provisional attachment of any property including bank account of the taxable person with a view to safeguard the interest of the Revenue. Section 83 of the Act reads thus; 83. Provisional attachment to protect revenue in certain cases:- (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property belonging to the person on whom notice is served under sub-section (1) of section 73 or sub-section (3) of section 73A, as the case may be, in such manner as may be prescribed. 60. The procedure/guidelines prescribed under the above referred provisions are as extracted below: 60.1 In respect of Section 11DDA of CEA:- Circular No. 874/12/2008-CX., dated 30-6-2008 F.No. 201/51/2004-CX-6 Subject : Instructions regarding Section 11DDA of the Central Excise Act, 1944. I am directed to refer to the Section 11DDA of the Central Excise Act, 1944 (hereinafter referred to as the Act ) inserted by the Taxation Laws (Amendment) Act, 2006, with effect from 13-7-2006. This section provides for provisional attachment of property for the purpose of protecting the interests of revenue during the pendency of any proceedings under Section 11A or Section 11D of the Act. 2. In this connection, the Law Ministry has advised that suitable guidelines should be issued to implement Section 11DDA of the Act. The following guidelines are, therefore, issued to maintain uniformity in its implementation by field formations : (i) The proceedings for provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) Where the taxable person fails to pay the amount referred to in sub-rule (3) in respect of the said property of perishable or hazardous nature, the Commissioner may dispose of such property and the amount realized thereby shall be adjusted against the tax, interest, penalty, fee or any other amount payable by the taxable person. (5) Any person whose property is attached may, within seven days of the attachment under sub-rule (1), file an objection to the effect that the property attached was or is not liable to attachment, and the Commissioner may, after affording an opportunity of being heard to the person filing the objection, release the said property by an order in FORM GST DRC-23. (6) The Commissioner may, upon being satisfied that the property was, or is no longer liable for attachment, release such property by issuing an order in FORM GST DRC-23. 60.6 The relevant portion of DRC-22 is reproduced below: Provisional attachment of property under section 83 It is to inform that M/s ---------- (name) having principal place of business at ------- (address) bearing registration number as -------- (GSTIN/ID), PAN --- is a registered taxable person unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions like fake/bogus invoices etc. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. 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. (II) The power conferred upon the authority under Rule 86A of the Rules for blocking the ITC could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on subjective weighty grounds and reasons. (III) The power under Rule 86A of the Rules 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. (IV) The aspect of availing the credit and utilization of credit are two different stages. The utilization of credit is a vested right. No vested right accrues before taking credit. (V) The Government needs to apply its mind for the purpose of laying down some guidelines or procedure for the purpose of invoking Rule 86A of the Rules. In the absence of the same, Rule 86A could be misused and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his client had to debit a total sum of ₹ 7.65 Crore from the credit ledger thereby debiting the ITC availed by the writ applicant on the various inputs and input services. He would submit that the two DRC- 03 Forms for the above referred sum was debited under pressure and was uploaded on the GSTN Portal. He pointed out that his client submitted a letter stating that the reversal of the ITC aggregating to ₹ 7.65 Crore was under protest and that there was nothing wrong in the ITC availed by his client. According to Mr. Dave, his client has, time and again, requested the Divisional GST Officers for reversing the debit entries made on 09.04.2019 in the credit ledger of his client and allow his client to utilize such ITC that had to be debited as a deposit because of the pressure of the Investigating Officers. According to Mr. Dave, his client is not allowed to take credit entry of such ITC aggregating to ₹ 7.65 Crore, though no proceedings in accordance with law have been initiated till this date. He further pointed out that more than one year has elapsed but no proceedings for issuance of show-cause notice under Section 74 of the Act nor for determination of any u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8C1ZL); (iii) M/s Om Shiv Metalicks, Jharkhand (GSTIN-20AALHM5998L1ZJ); (iv) Shiv Alloys and Steels Chhatisgarh (GSTIN-22AALHM5998L1ZF); (v) M/s Shakambari Metalicks, Jharkhand (GSTIN-20A JMPP3256C1ZJ) and (vi) M/s Vishkarma Industries, Jharkhand (GSTIN- 20FJWPS4147A1Z5), as mentioned in this para, who have supplied invoices to the Petitioner, on the basis of which they have availed Input Tax Credit (ITC) during 2017-18 and 2018-19. However, it is pertinent to submit that acting upon specific information that M/s Vishkarma Industries, Jaipur, a trading firm (GST Number 08F JWPS4147 A1ZR), have indulged themselves in facilitation of fraudulent ITC by issuing merely GST invoices, without actual supply of goods, coordinated simultaneous search operation was planned and executed on 13.09.2018 at 19 premises spread over in three states viz. Rajasthan, Jharkhand and Chhattisgarh which included various trading firms, recipients of such GST invoices and residences of suspected persons. During the course of search operations various records/documents in the form of purchase invoices, sale invoices, LRs of fake transportation firms, gadgets, mobile phones, blank signed cheque books, pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T availed by the Petitioner during the F.Y. 2017-18 and 201819. 1 M/s Anjani Metals and Steels, Chhattisgarh 3,97,70,482/- 2 M/s Kanchan Alloys and Steels, Jharkhand 1,18,54,336/- 3 M/s Om Shiv Metalicks, Jharkhand 5,41,50,283/- 4 M/s Shakambri Metalicks, Jharkhand 77,51,672/- 5 M/s Shiv Alloys and Steels, Chhattisgarh 2,71,06,744/- 6 M/s Vishkarma Industries, Jharkhand 1,18,79,119/- Total 15,25,12,636/- The petitioner have availed ineligible ITC to the tune of ₹ 15,25,12,686/- based on fake/bogus invoices without actual receipt of goods. 5.8 With reference to Para 8 to 8.2 of the petition, investigation of the case is underway. Copies of all the relied upon documents, including statements, will be provided along with the show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.11 With reference to Para 8.5 of petition, in addition to what has already been stated herein before it is humbly submitted that though the amount has been deposited voluntarily, there is no requirement for issuance of acknowledgement in DRC-04 and/or DRC-05 forms by any proper officer. DRC-04 and DRC-05 are issued under Rule 142(2) and 142(3), respectively which basically deals with 'Notice and order for demand of amount payable under the CGST Act, 2017, which is not the issue in the present case. Rule 142 of the Central Goods and Services Tax (CGST) Rules, 2017 relating to Notice and Order for Demand of Amounts Payable under the Act , provides as under: Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of subsection (5) of section 73 or, as the case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or where any person makes payment of tax, interest, penalty or any other amount due in accordance with the provisions of the Act, whether on his own ascertainment or, as communicated by the proper officer under sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date o f erroneous refund. Thus, petitioner's contention about issuance of show cause notice is not correct as the same would be issued in terms of above referred provisions. However, before issue of SCN, proper investigation is needed to be conducted to unearth entire modus operandi. This office has taken all required action, as prescribed under law, against each and every person/taxpayer involved in this case. The amount paid by the petitioner was voluntarily and same has been deposited by them admitting their wrong done, which is against the GST law. The quantum of evasion against the petitioner is huge i.e. ₹ 15,25,12,636/- and government cannot allow anyone to misuse the revenue which legitimately belongs to the exchequer. Petitioner terming action taken against them and subsequently voluntary payment made by him as illegal is objectionable and strongly denied. Considering and Judging action of the department, at this stage, as illegal in this manner is not appropriate at the end of the petitioner. Statements of Shri Nikhil Ashokkumar Gupta, Director of M/s Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six weeks and appropriate decision shall be taken and communicated to the writ applicant. 73. Interference with the proceedings initiated by the Statutory Authority in exercise of the extraordinary writ jurisdiction would be justified only in exceptional circumstances. Three situations in which Courts have interfered even when the statutes under which the proceedings are initiated provide for a complete machinery to challenge the orders passed are : (i) Cases where the Constitutional vires of the very enactment under which the proceedings are initiated is under challenge; (ii) Cases where the proceedings have been initiated or concluded in total violation of the principles of natural justice; and (iii) Where the orders impugned are totally without jurisdiction or where private and public wrongs are so inextricably mixed up or where prevention of public injury and the vindication of public justice demands that recourse the Article 226 of the Constitution be taken. In cases where public Revenue are involved and the Statutes under which such revenue are being collected provide for a complete code and a comprehensive machinery for correction the orders that the Authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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