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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
SUNIL B. SHUKRE, ANIL S. KILOR, JJ.
Dee Vee Projects Ltd. – Appellant
Versus
Government of Maharashtra, Department and Others – Respondents
Writ Petition No. 2693 of 2021
Decided on : 11-02-2022
ECL Blocking - Infrastructure Development - Central Goods and Services Tax Act, 2017 - Rule 86-A - The court found that the impugned order of blocking the Electronic Credit Ledger (ECL) was arbitrary and illegal. The court held that the power under rule 86-A is distinct from the power under section 83 and the impugned order could not be considered as the one passed in exercise of power under section 83. The court also found that the impugned order did not specify the amount to the extent to which the ECL has been blocked, making it illegal. The court quashed and set aside the impugned order of blocking the ECL and directed the respondents to consider invocation of power under rule 86-A afresh in accordance with law.
Fact of the Case:
The petitioner, a public limited company engaged in infrastructure development, sought amendment to its registration certificate after the Sales Tax was subsumed into the Goods and Service Tax. The petitioner's ECL was blocked by the Deputy Commissioner, State Sales Tax, MIDC, Nagpur, which had adverse impacts on the petitioner's functioning. The petitioner filed a petition seeking quashing of the action of blocking of ECL and issuance of a direction to the Union of India to come out with proper guidelines for responsible exercise of power under rule 86-A of the Rules, 2017.
Finding of the Court:
The court found that the impugned order of blocking the ECL was arbitrary and illegal. The court quashed and set aside the impugned order and directed the respondents to consider invocation of power under rule 86-A afresh in accordance with law.
Issues: The main issues involved in the petition were: (i) Whether blocking of ECL under Rule 86-A amounts to provisional attachment of property under section 83 of the CGST Act and if so, whether it could have been done without following conditions and procedure prescribed in section 83; (ii) Whether rule 86-A permits blocking of the ECL, and if yes, to what extent; (iii) Whether the order of blocking the ECL is arbitrary and illegal; (iv) Whether, in the facts and circumstances of this case, the respondents are justified in blocking the ECL under rule 86-A.
Ratio Decidendi: The impugned order of blocking the ECL was found to be arbitrary and illegal as it did not specify the amount to the extent to which the ECL has been blocked and did not provide reasons for the blocking. The court held that the power under rule 86-A is distinct from the power under section 83 and the impugned order could not be considered as the one passed in exercise of power under section 83. The court also directed the respondents to consider invocation of power under rule 86-A afresh in accordance with law.
Final Decision: The impugned order of blocking the ECL was quashed and set aside. The respondents were directed to consider invocation of power under rule 86-A afresh in accordance with law.
JUDGMENT :
Sunil B. Shukre, J.
1. Heard.
2. Rule. Rule made returnable forthwith. Heard finally by consent.
3. The petitioner is a public limited company. It is engaged in infrastructure development and it contends that it has presence in various states of India, including the State of Maharashtra.
4. The petitioner company was registered under the provisions of erstwhile State Sales Tax Act and after the Sales Tax was subsumed into the Goods and Service Tax vide the Central Goods and Services Tax Act, 2017 (“CGST Act” for short) which came into force with effect from 12.4.2017, the company was deemed to be registered under the CGST Act, by virtue of operation of section 26 of the CGST Act. In the year 2020, there were certain changes in the management of the company and, therefore, it sought amendment to the registration certificate, which was granted on 18.7.2020. Thereafter, the company changed its registered address and again sought amendment to the registration certificate as regards `change of address' which was granted on 2.11.2020.
5. The petitioner submits that after commencement of GST regime, the petitioner regularly filed its returns till September 2020. Till that time, the petitioner further submits, it had also availed of the credit available in it’s Electronic Credit Ledger (“ECL” for short) to the extent of Rs.48,79,61,446/- as permissible under law.
6. The petitioner submits that operation of ECL went on smoothly till 1.7.2021, despite initiation of some illegal action in the nature of registration of a criminal case against the petitioner, and it’s investigation, which has been questioned for its legality and validity by the petitioner by filing a Criminal Writ Petition No.5/2020, which is pending for the present.
7. The petitioner submits that day of 1.7.2021 came as a surprise for it when it noticed that its ECL was not operational and the portal showed that the ECL was blocked by the Deputy Commissioner, State Sales Tax, MIDC, Nagpur. According to the petitioner, when the official of the Company opened the portal on 1.7.2021 it’s screen showed that petitioner’s ECL was blocked. Blocking of the ECL, according to the petitioner, had its own adverse impact on the functioning of the petitioner as the petitioner was unable to update its ECL, could not avail of the credit therein to discharge its liability to pay the CGST and could not file its returns.
8. The petitioner submits that the credit amount available in the ECL is the property of the petitioner and the blocking of the ECL of the petitioner amounts to illegal provisional attachment of the property of the petitioner under Section 83 of the CGST Act. The petitioner further submits that such attachment can be done only if any proceeding is pending or initiated under any of sections such as sections 62, 63, 64, 67, 73 and 74. The petitioner further submits that there is no proceeding whatsoever pending under any of these sections and, therefore, there cannot be any provisional attachment of the petitioner's property. The petitioner further submits that the only authority for making such attachment is the Commissioner, as provided under sub-section (24) of section 2 of the CGST Act but, there is no order of provisional attachment passed under section 83 of the CGST Act and no procedure whatsoever, as required under law has been followed. It is also submitted that there is no provision in the CGST Act authorising any authority to freeze or block the ECL.
9. The petitioner submits that it sent representation on 2.7.2021, protesting against the unlawful attachment of its property and blocking of ECL and also sent a reminder on 14.7.2021 with a request to unblock the ECL. The petitioner submits that the representation, however, was rejected by respondent no.1 for reasons not earlier recorded. The petitioner further submits that it was at this time that the petitioner learnt about the fact that blocking of petitioner’s ECL was done under rule 86-A of the Central Goods and
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