Case Law Details
Zuric Traders Petitioner Vs Commissioner, Customs and Central Excise (Delhi High Court)
The Hon’ble High Court, New Delhi in the matter of M/s Zuric Traders v The Commissioner, Customs and Central Excise, Delhi and Anr [W.P.(C) 13911/2021 dated July 15, 2022] quashed the letter issued by the Revenue department for blocking assessee’s bank account as it does not comply with the perquisites embedded under Section 83 of the Central Goods and Services Tax Act 2017 (CGST Act).
Facts:
A Letter dated February 25,2020 (“the Letter”) was issued by the Revenue department (“the Respondent”) to the IndusInd Bank, Punjabi Bagh Branch, New Delhi to block the bank account of the M/s Zuric Traders (“the Petitioner”). Being aggrieved by the Letter, the Petitioner has filed the present writ petition to direct the Respondent for unblocking the bank account. In this regard the Hon’ble High Court issued the notice to the Respondent, to file a counter affidavit.
Petitioner’s contention:
- There is no reference to Section 83 of the CGST Act. The Letter was never served to the Petitioner. The Petitioner obtained the knowledge only when the bank account has been blocked.
- Submitted that, if the Section 83 of the CGST Act had been mentioned in the communication, the right of the Petitioner to file objections would have been triggered under Rule 159(5) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”).
- Hence, the action taken by the Respondent is violative not only of the provisions of Section 83 of the CGST Act, but also Rule 159(5) the CGST Rules.
Respondent’s contention:
- The Letter has been issued in exercise of power conferred under Section 83 of the CGST Act.
- By virtue of the orders passed by the Supreme Court in Cognizance for Extension of Limitation [Suo Motu Writ Petition (C) No.3/2020 dated March 23, 2022], the time frame prescribed under Section 83 of the CGST Act stands extended and that the department would have the benefit of period prescribed in Section 83 of the CGST Act.
- Inward supplies had been made to the Petitioner, the investigation has shown that the foreign currency remittances have not been received against the exports made by the Petitioner for which the Integrated Goods and Services Tax (“IGST”) refund was credited to the account of the Petitioner. Hence the Respondent have to make the recovery of the IGST refund availed by the Petitioner.
Issues:
- Whether the Letter issued, was in reference to Section 83 of the CGST Act?
- Whether the time frame conferred in Section 83 of the CGST Act be extended by the virtue of orders passed by the Supreme Court in Cognizance for Extension of Limitation [Suo Motu Writ Petition (C) No.3/2020 dated March 23, 2022]?
- Whether the refund of the IGST was wrongly availed by the Petitioner?
Held:
The Hon’ble High Court, New Delhi in [W.P.(C) 13911/2021 dated July 15, 2022] has held as under:
- The Letter does not advert to Section 83 of the CGST Act and the Petitioner would have been entitled to trigger the provisions of Rule 159 (5) of the CGST Rules i.e., to file objections against the Letter purported “blocking” of the bank account.
- Further that, the expression used in Section 83 is “provisional attachment” and not “blocking”; with the former having a definitive connotation in law, as its use requires fulfilment of certain pre-requisites.
- Opined that, the blocking order does not comply with the jurisdictional pre-requisites which are embedded in Section 83 of the CGST Act.
- The Letter is thus, quashed.
- Stated that Section 83 of CGST Act, provides a time frame i.e. statutory space for enabling investigation, to protect the interest of the revenue and not a period of limitation.
- Lastly, that the foreign remittances against the export made by the Petitioner have not been received, has never been put to the Petitioner and no record to show that this aspect was put to the petitioner
- Directed the Respondent to communicate the bank regarding unblocking the Petitioner’s account.
Relevant Provision:
Section 83 of the CGST Act:
(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1).
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FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The principal grievance of the petitioner emerges from the communication dated 25.02.2020 addressed by the respondents/revenue to the IndusInd Bank, Punjabi Bagh Branch, New Delhi.
2. Since the communication is brief, for the sake of convenience, the same is extracted hereafter:
“To,
The Bank Manager,
Induslnd Bank, Punjabi Bagh Branch,
Ground Floor, UGF, Plot No 29 North West Avenue,
Club Rd, Punjabi Bagh, Delhi 110026
Sir /Madam,
Subject: Confirmation for GST refunds of Zuric Traders (IEC No. AACFZ5051G)-reg.
Please refer to your letter no. 02/2020/Zurich Traders/001dated 17.02.2020 on the above subject.
2. In this regard, it is informed that the issue has been taken up with jurisdictional GST field formation with a request to examine the issue in entirety and report the outcome to this office. In view of the above, it is requested to keep the account blocked and maintain the status-quo till credentials of M/s. Zuric Traders are established and verified.
3. This issues with the approval of Competent Authority.
Yours faithfully
s/d
Assistant Commissioner”
3. Notice in this petition was issued on 07.12.2021, which was made returnable on 27.01.2022. At the point in time when the notice was issued, an opportunity was granted to the respondents/revenue to file a counter-affidavit in the above-captioned writ petition.
3.1 Since then, the matter has been listed twice i.e., on 27.01.2022 and 15.03.2022. On 27.01.2022, since the Bench did not convene, the matter was adjourned to 15.03.2022. On 15.03.2022, the respondents/revenue sought a further four weeks to file a counter-affidavit in the matter.
4. Mr Ravi Prakash, who appears on behalf of the respondents/revenue, concedes that a counter-affidavit was lodged with the Registry only on 14.07.2022. Quite naturally, the counter-affidavit could not have been placed on record by the Registry, as it was lodged a day before the hearing.
5. As indicated at the very outset, via the impugned communication dated 25.02.2020, the petitioner’s bank account remains blocked since February/March 2020. Nearly two years and four months have passed since the respondents/revenue took recourse to the impugned action.
5.1. The respondents/revenue have taken their own sweet time to lodge the counter-affidavit and that too, one day before the next date of hearing.
5.2. Since the counter-affidavit is not on record, and the petitioner’s counsel has pressed the matter, given the leeway granted to the respondents/revenue up until now, we have called upon Mr Prakash to argue the matter and put forth the respondents/revenue’s defence in the matter.
6. Mr Prakash has submitted that the impugned action has been taken in the exercise of powers under Section 83 of the Central Goods and Services Tax Act, 2017 [hereafter referred to as “the 2017 Act”].
6.1. It is Mr Prakash’s contention that by virtue of the orders passed by the Supreme Court in Suo Motu Writ Petition (C) No.3/2020, the timeframe prescribed under Section 83 of the 2017 Act stands extended.
6.2. In other words, according to Mr Prakash, the attachment order would continue till the date provided in the order.
6.3. Based on the order dated 10.01.2022, passed in WP(C.) 3/2020, it is contended that the period spanning between 15.03.2020 and 28.02.2022 shall stand excluded and that the department would have the benefit of period prescribed in Section 83 of the 2017 Act i.e., period for which the provisional attachment order is to subsist, which would commence from 01.03.2022.
6.4. It is further contended that, firstly, since the period of limitation prescribed under Section 83 of the 2017 Act is more than 90 days, the limitation would expire on 01.08.2022.
7. Mr Prakash informs us that the aforementioned submission was advanced in W.P.(C.) No.3551/2020, titled M/s Vikas WSP Ltd. & Ors. v. Directorate Enforcement & Anr which concerned provisional attachment orders passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 [hereafter referred to as “the 2002 Act”]. Mr Prakash contends that Section 83 of the 2017 Act is pari materia to Section 5(1) of the 2002 Act.
7.1. We are told that although, the Learned Single Judge, via judgement dated 18.11.2020, repelled a similar submission advanced on behalf of the Directorate of Enforcement, the matter was carried in appeal to the Division Bench.
7.2. In the appeal, which is registered as LPA No.362/2020, we are informed, notice has been issued and via order dated 02.12.2020, status quo has been ordered with regard to the ownership, possession and encumbrance on the properties in question.
7.3. Mr Prakash contends that the issue is at large and therefore, the respondents/revenue have a substantial defence to offer, vis-à-vis the relief sought by the petitioner.
8. Dr Avinash Poddar, who appears on behalf of the petitioner, argues to the contrary. According to Dr Poddar, a plain reading of the impugned communication would show that there is no reference to Section 83 of the 2017 Act.
9. Furthermore, Dr Poddar says that the impugned communication was not served on the petitioner. The petitioner obtained knowledge of the same, only when the fact that the petitioner’s bank account had been blocked was communicated to him.
9.1. It is Dr Poddar’s submission that had the relevant provision been mentioned in the communication, the right of the petitioner to file objections would have been triggered under Rule 159(5) of the CGST Rules, 2017 [hereafter referred to as “2017 Rules”.]
9.2. Since the communication was never served and the information received did not disclose that the action had been taken under Section 83 of the 2017 Act, no objections could be filed and consequently, the principles of natural justice were, infracted.
9.3. As per Dr Poddar, no proceedings, as contemplated under Section 83 of the 2017 Act, have been commenced against the petitioner. Therefore, it is Mr Poddar’s submission, that the action is violative not only of the provisions of Section 83 of the 2017 Act, but also Rule 159(5) of the 2017 Rules.
9.4. In support of his plea, Dr Poddar has referred to the judgment of the Supreme Court in dated 20.04.2021 titled M/s Radha Krishan Industries v. State of Himachal Pradesh & Ors. 2021 6 SCC 771.
10. In rejoinder, Mr Prakash says that representations were received from the petitioner. It is also his submission that investigations have been made against persons who had supplied goods to the petitioner.
10.1. In this behalf, reference is made to paragraph 12 of the counter-affidavit; a hard copy of which has been placed before us by Mr Prakash. The said paragraph adverts to three entities, who supposedly had made inward supplies to the petitioners i.e., M/s Laser India Trading, M/s Great Polimar Export and M/s Sharma Traders.
10.2. It is, therefore, the contention of Mr Prakash that their investigations have shown that foreign currency remittances have not been received against exports made by the petitioner vis-à-vis which IGST refund was credited to the account of the petitioner.
10.3. It is, thus, contended that the respondents/revenue have to make the recovery of the IGST refund availed by the petitioner, given the aforesaid circumstances.
11. Having heard learned counsel for the parties, we are of the view that the impugned communication would have to be set aside for the following reasons:
(i) First and foremost, the impugned communication does not advert to Section 83 of the 2017 Act, as would be evident from the extract set forth hereinabove.
(ii) Mr Poddar is right in contending that had reference been made to Section 83 of the 2017 Act, then the petitioner would have been entitled to trigger the provisions of Rule 159 (5) of the 2017 Rules i.e., to file objections qua the impugned act i.e., purported “blocking” of the concerned bank account maintained by the petitioner with the IndusInd Bank, Punjabi Bagh Branch, New Delhi. It is important to emphasize that the expression used in Section 83 is “provisional attachment” and not “blocking”; with the former having a definitive connotation in law, as its use requires fulfilment of certain prerequisites.
(iii) Even if one were to assume that the action was taken under Section 83 of the 2017 Act [as obtaining on the statute 20/25 February 2020], it could have been triggered only during the pendency of proceedings against the petitioner under any one of the following Sections: Sections 62, 63, 64, 67, 73 and 74 of the 2017 Act. That apart, clearly no proceedings, at least to the knowledge of the petitioner, are pending under any of the said provisions.
(iv) The Section 83 also required the respondents to form an opinion that provisional attachment was necessary to protect the interests of the revenue.
(v) As alluded to above, since, concededly, no proceedings had been initiated on the date when the impugned communication was issued to the petitioner under any of the above aforementioned provisions, the impugned order was issued without jurisdictional facts being present. [See Radha Krishnan case]
(vi) Lastly, the argument advanced by the petitioner that the inward suppliers of the petitioner had been investigated (an aspect that we have referred to hereinabove) and that it has been revealed that foreign remittances against the exports made by the petitioner have not been received, is a facet which, apparently, has never been put to the petitioner. There is nothing placed on record to show that this aspect was put to the petitioner, despite the petitioner making several representations. (See communications dated 06.10.2021, 14.10.2021 and 25.11.2021 addressed by the petitioner to the respondents/revenue.)
12. It is in this context that the respondents/revenue say that there is a possibility of recovery proceedings being launched against the petitioner, as, according to them, IGST credited to the petitioner’s account has been wrongly availed.
13. The issue in the present proceedings, according to us, centers around the tenability of the blocking order which was triggered by the respondents/revenue via the impugned communication.
13.1. In our opinion, the blocking order does not comply with the jurisdictional prerequisites which are embedded in Section 83 of the 2017 Act.
14. Before we conclude, we would also like to advert to the submission made by Mr Prakash, that since, an appeal is pending vis-à-vis a para materia provision found in Section 5(1) of the 2002 Act, in which status quo has been ordered, the blocking order should continue to operate.
14.1. His submission does not impress us for the reason that a perusal of the interim order passed by the Division Bench in LPA No.362/2020 dated 02.12.2020, shows that the operation of the judgment passed by the Learned Single Judge in the Vikas case (supra) has not been stayed, as the interim order directs status quo with regard to the ownership, possession and encumbrances on the properties in issue in that matter. That apart, it is an interim order which pertains to a different statute. The final judgement of the Learned Single Judge is against the proposition advanced by the respondents/ revenue, that the life of the order passed under Section 5(1) of the 2002 Act will get prolonged because of the order dated 10.01.2022, passed by the Supreme Court in Suo motu WP(C.) no. 3/2020. In this context it may be useful to bear in mind that Section 83 of CGST Act, 2017 provides a timeframe i.e., statutory space for enabling investigation, to protect the interest of the revenue and not a period of limitation.
14.2 Besides this, the scope and effect of the provisions of Section 83 of the Act has been decisively ruled upon by the Supreme Court in the Radha Krishnan case. We are bound by the judgment rendered by the Supreme Court in the said case.
14.3 We may note also note that the argument advanced by Mr Prakash that the period provided in Section 83 of the Act i.e., one year, will expire only on 01.08.2022 is also flawed, for the reasons given hereinabove which are briefly the following:
(i) Firstly, the impugned communication is not issued under Section 83 of the 2017 Act.
(ii) Secondly, there are, concededly, no proceedings pending against the petitioner under the provisions referred under Section 83 of the 2017 Act, as it stood at the relevant point in time (i.e., Sections 62, 63, 64, 67, 73 74 of the 2017 Act.)
(iii) Thirdly, it is our understanding that the order passed by the Supreme Court in Suo Motu WP(C.) 3 of 2020, will not extend the time frame provided under Section 83 of the 2017 Act.
(iv) Lastly, even if, paragraph 5(iii) of the order dated 10.01.2022, were to apply, which is what Mr Prakash seeks to place reliance on, the timeframe provided therein, which is, one year, would have perhaps expired in the first week of June 2022. As indicated above, this part need not detain us, as the impugned communication and action is otherwise unsustainable in law.
15. The impugned communication is, thus, quashed.
16. The respondents/revenue will communicate to the concerned bank i.e., IndusInd Bank, Punjabi Bagh Branch, New Delhi, the direction issued by us.
16.1. The subject bank account will be unblocked.
17. The writ petition is disposed of, in the aforesaid terms.
18. Needless to add, if any other remedy is available to the respondents/revenue, with regard to the alleged infraction in law committed by the petitioner, this judgement will not come in its way.
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