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2020 Supreme(Guj) 903
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Vikram Nath, J.B.Pardiwala, JJ.
M/s S.S. Industries – Petitioner
Versus
Union of India – Respondent
R/Special Civil Application No. 8841 of 2020 with R/Special Civil Application No. 8163 of 2020
Decided On : 24-12-2020
Advocate Appeared:
For the Petitioner: Mr. P.M. Dave, Ld. Counsel With Mr. A S Tripathi
For the Respondent: Mr P Y Divyeshvar
Point of Law: 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 administrativeWhere 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 may make, interference either at the initial or at the intermediate is not viewed by Courts with affection.`
Headnote:
CGST Act - Section 74(1) – Constitution of India, 1950 - Article 226 - Assessment Order - Quashing and Setting Aside Blocking of Input Tax Credit - Whether authorities could have debited a sum from credit ledger thereby debiting ITC availed by writ applicant on various inputs and input services without there being any demand or any final assessment order - Civil Application is concerned, two issues are involved therein - First issue relates to true interpretation of Rule 86A of CGST Rules inserted vide Notification in CGST Rules - Rule 86A is in respect of power and procedure for blocking input tax credit (ITC) in electronic credit ledger of a registered person - Second issue involved is with respect to scope of exercise of power under Rule 86A of Rules - Issue is whether authority concerned is empowered to retain any amount deposited by a registered person during any inquiry or investigation in absence of any confirmed liability against assessee and, more particularly, without issuance of a show-cause notice and assessment/adjudication order imposing any tax liability on assessee –
Finding of the Court:
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 Rules prescribes one year time limit - In such circumstances, we direct respondents to complete the investigation within a period of four weeks from the date of 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 - We do not deem fit and reasonable to pass an order in exercise of our writ jurisdiction directing the respondents to give back the credit of the ITC to the writ applicant and permit them to avail the same, we are saying that let the investigation be completed within six weeks and appropriate decision shall be taken and communicated to the writ applicant –
JUDGMENT :
J.B.PARDIWALA, J.
1. Since the issues involved in both the captioned writ applications are by and large the same, those were heard analogously and are being disposed of by this common judgment and order.
2. So far as the Special Civil Application No.8841 of 2020 is concerned, two issues are involved therein. The first issue relates to the true interpretation of Rule 86A of the CGST Rules inserted vide the Notification No.75/2019-CT dated 26th December, 2019 in the CGST Rules. The Rule 86A is in respect of the power and procedure for blocking the input tax credit (ITC) in the electronic credit ledger of a registered person. The second issue involved is with respect to the scope of exercise of power under Rule 86A of the Rules. In other words, the issue is whether the authority concerned is empowered to retain any amount deposited by a registered person during any inquiry or investigation in the absence of any confirmed liability against the assessee and, more particularly, without issuance of a show-cause notice and assessment/adjudication order imposing any tax liability on the assessee.
3. So far as the connected writ application, i.e., the Special Civil Application No.8163 of 2020 is concerned, the question arising therein is whether the authorities could have debited a sum of Rs.7.65 Crore from the credit ledger thereby debiting the ITC availed by the writ applicant on various inputs and input services without there being any demand or any final assessment order.
4. We first take up the Special Civil Application No.8841 of 2020.
5. The facts giving rise to the Special Civil Application No.8841 of 2020 may be summarized as under:-
5.1 By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs;
“(A) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order, thereby quashing and setting aside blocking of Input Tax Credit (ITC) aggregating to Rs.84,34,547/- in the Petitioner's Electronic Credit Ledger and also directing Respondent No.2 to allow the Petitioner to utilize such ITC of Rs.84,34,547/- and also allow the Petitioner to take credit of Rs.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 Rs.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 Rs.84,34,547/- by the Respondents and direct Respondent No.2 herein to allow the Petitioner to utilize such ITC of Rs.84,34,547/- as well as Rs. 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 also please be granted.”
5.2 The writ applicant No.1 is a partnership firm, inter alia, engaged in the business of manufacture of goods like the TMT Bars etc. The writ applicant No.2 is one of the partners of the partnership firm. The factory premises and manufacturing activities of the writ applicant is located within the jurisdiction of the Bhavnagar GST Commissionerate. The respondent No.2- Deputy Commissioner of CGST has the jurisdiction to initiate appropriate inquiry in respect of the writ applicants under the laws of the GST. The third respondent- Additional Commissioner of CGST (Anti Evasion) is a proper officer of the GST Department, in charge of the Bhavnagar Commissionerate for carrying out inquiries and investigation under the GST laws. T
