2021-TIOL-90-HC-DEL-GST
Proex Fashion Pvt Ltd Vs Government of India
GST - Petitioner seeks to challenge a communication [ FORM GST DRC-22 ] dated 25.11.2020/01.12.2020 by which the bank account of the petitioner in the respondent no.3-Bank has been attached by respondent no. 2, purportedly u/s 83 of the CGST Act, 2017 – Petitioner contends that the respondent authorities have taken action against the petitioner u/s 83 of the Act, pursuant to proceedings initiated u/s 71 of the Act, whereas s.83 of the Act, on its terms, cannot be invoked in such a situation - In the counter affidavit filed by respondent no.2, it has been stated that proceedings were initiated against the petitioner pursuant to a communication from the Directorate General of Analytics and Risk Management (DGARM) - The petitioner was declared as a 'risky exporter', and an attempt was made to elicit certain information and documents from the petitioner - However, several communications addressed to the petitioner at its registered office were returned undelivered - Proceedings under Section 71 of the Act were, therefore, initiated against the petitioner, and the attachment of the bank account under Section 83 of the Act is pursuant to those proceedings.
Held : Bench is of the view that the impugned order cannot be sustained - It is clear from a plain reading of Section 83 that action thereunder is predicated upon pendency of proceedings under Sections 62, 63, 64, 67, 73 or 74 of the Act - Bombay High Court in Kaish Impex Private Limited = 2020-TIOL-151-HC-MUM-GST has held that only upon contingencies provided therein that the power under section 83 can be exercised; that this power is to be used in only limited circumstances and it is not an omnibus power - Division Bench decision of the Punjab and Haryana High Court in Bindal Smelting Pvt. Ltd. = 2020-TIOL-92-HC-P&H-GST is to similar effect - As held in the aforesaid judgements, the attachment of bank account entails serious consequences to the assessee, particularly in the case of a running concern such as the petitioner herein - The power to attach the bank account must, therefore, be exercised only in strict compliance with the statutory power, and cannot be extended to cover situations which are not expressly contemplated by the section - Absent the statutory precondition for exercise of the power of attachment, any order under Section 83 is wholly illegal and unsustainable - In the present case, without going into the merits of the allegations made against the petitioner, the admitted position is that no proceedings under any of the provisions mentioned in Section 83 of the Act were in fact initiated against the petitioner - In these circumstances, the impugned order dated 25.11.2020/01.12.2020 is ultra vires the statutory powers of the respondent no. 2, and is hereby quashed - Writ petition is allowed: High Court [para 8, 9, 10, 11, 14]
-Petition allowed :DELHI HIGH COURT
2021-TIOL-89-HC-DEL-GST
Dhruv Krishan Maggu Vs UoI
GST - Allegation of fraudulent IGST Refund of more than Rs.63 crores by opening a total of 23 bogus/fake firms in the name of persons who are labourers, drivers, cook, street-hawkers etc. - Petition has been filed seeking a declaration that Sections 69 and 132 of the CGST Act, 2017 are arbitrary, unreasonable and being beyond the legislative competence of the Parliament are ultra vires the Constitution - Interim protection was granted to the petitioner by the Court vide order dated 20 th August 2020 - 2020-TIOL-1401-HC-DEL-GST - Subsequently upon an application being filed by the respondents for vacation of the interim protection on the ground that the interim order in W.P.(Crl.) No. 184/2020 had been vacated by the Supreme Court vide order dated 31st August, 2020, this Court had issued notice vide order dated 06th November, 2020 -Court vide this order is deciding the common issues pertaining to interim protection in both the applications in the respective writ petitions -While the CM No. 32276/2020 has been filed by the Petitioner in W.P.(C.) No. 10130/2020 seeking interim protection, CM No. 28105/2020 has been filed by Respondent nos. 2 and 3 in W.P.(C.) No. 5454/2020 seeking vacation of interim protection granted vide order dated 20th August, 2020 = 2020-TIOL-1401-HC-DEL-GST .
Held:
+ There is always a presumption in favour of constitutionality of an enactment or any part thereof and the burden to show that there has been a clear transgression of constitutional principles is upon the person who impugns such an enactment. Also, whenever constitutionality of a provision is challenged on the ground that it infringes a fundamental right, the direct and inevitable effect/ consequence of the legislation has to be taken into account.
+ Further, laws are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is a remote possibility of abuse of power. In fact, it must be presumed, unless the contrary is proved, that administration and application of a particular law would be done "not with an evil eye and unequal hand".
+ Court is of the prima facie opinion that the Goods and Services Tax is a unique tax, inasmuch as the power as well as field of legislation are to be found in a single Article, i.e., Article 246A. Further, the scope of Article 246A is significantly wide as it not only empowers both Parliament and State Legislatures to levy and/or enact GST Act, but it also grants the power to make all laws 'with respect to' Goods and Service Tax.
+ It is settled law that unless the Constitution itself expressly prohibits legislation on the subject either absolutely or conditionally, the power of a Legislature to enact legislation within its legislative competence is plenary. Also, the words/expression in a constitutional enactment conferring legislative power have to be construed as words of widest amplitude, content and therefore the most liberal construction has to be placed upon them.
+ In fact, the power of arrest conferred by Section 69 of the Act is not a general power of arrest, but is restricted to certain offences which are specified under Section 69 of the Act namely some of the offences covered under Section 132 of the Act and the offences so specified are all offences relating to goods and service tax. Consequently, this Court is of the prima facie view that the expression 'with respect to' goods and services tax used in Article 246A, being a constitutional provision, must be given its widest amplitude and would include the power to enact criminal law with regard to goods and services tax.
+ There is also no conflict between the operation of Article 246A and Article 246 as a non-obstante clause has been added to Article 246A to clarify that both Parliament and the State Legislatures have simultaneous powers in relation to Goods and Services Tax. Accordingly, this power has to be liberally construed empowering the Parliament to make laws with respect to goods and services tax and it remains unaffected by the distribution of legislative power as provided in Articles 246 & 254.
+ It is equally well settled that when a law is challenged on the ground of being ultra vires to the powers of the legislature, the true character of the legislation as a whole has to be ascertained. This Court is of the view that when a law dealing with a subject in one list is also touching on a subject in another list, what has to be ascertained is the pith and substance of the enactment - the true object of legislation. If, on examination of the statute, it is found that the legislation is in substance on a matter assigned to the legislature enacting that statute, then it must be held valid, in its entirety even though it may trench upon matters beyond its competence. Incidental encroachment is not prohibited.In ascertaining the substance of the impugned legislation, one must have regard to the enactment as a whole, to its object and to the scope and effect of its provisions.
+ The justification of the doctrine of pith and substance is that in a federal Constitution, it is not possible to make a clear-cut distinction between the powers of the Union and the State Legislatures. There is bound to be an overlap and in all such cases, it is but reasonable to ask what in whole is the object or purpose of the law. A strict interpretation would result in a large number of statutes being declared invalid on the ground of overlapping. If the legislature is to have the full scope to exercise the powers granted to it, it is necessary to assume that the Constitution does not prevent a legislature from dealing with a matter which may incidentally affect any matter in the domain of the other legislature.
+ Consequently, this Court is of the prima facie opinion that the pith and substance of the CGST Act is on a topic, upon which the Parliament has power to legislate as the power to arrest and prosecute are ancillary and/or incidental to the power to levy and collect Goods and Services Tax.
+ This Court is of the prima facie opinion that even if it is assumed that power to make offence in relation to evasion of goods and services tax is not to be found under Article 246A, then, the same can be traced to Entry 1 of List III. The term 'Criminal Law' used in the aforesaid entry is significantly wide and includes all criminal laws except the exclusions i.e. Laws made with respect to matters in List-II.
+ Court is of the prima facie opinion that even if Sections 69 and 132 of the Act could not have been enacted in pursuance to power under Article 246A, they could have been enacted under Entry 1 of List III, as laying down of a crime and providing for its punishment is 'criminal law'. Consequently, this Court is of the prima facie view that in either option both Sections 69 and 132 of the Act are constitutional and fall within the legislative competence of Parliament.
+ Court, at the interim stage, cannot ignore the view taken by the Gujarat high court with regard to application of Chapter XIICrPC to the CGST Act.
+ Consequently, this Court at the interim stage, cannot ignore that another High court has taken a view contrary to the contention raised by the Petitioner. At this interim stage, therefore, we cannot ignore the view of the Gujarat High Court [ Vimal YashwantgiriGoswami Vs. State Of Gujarat, R/Special Civil Application No. 13679 of 2019 = 2019-TIOL-1746-HC-AHM-GST ].
+ In view of the Supreme court judgment in directorate of enforcement vs. Deepak Mahajan (1994) 3 SCC 440 ) and the aforesaid Gujarat High court judgment, the arguments that prejudice is caused to the petitioners as they are not able to avail protection under Article 20(3) of the Constitution and/or the provisions of CrPC do not apply even when CGST Act is silent, are untenable in law.
+ Also just because CGST Act provides for both adjudication of civil liability and criminal prosecution doesn't mean that the said Act is unfair or unreasonable.
+ Reliance on "no coercive orders" by counsel for the petitioners are untenable as the Supreme Court in Union of India vs. Sapna Jain &Ors., SLP (Crl.) 4322-4324/2019 dated 29th may, 2019 has 'spoken its mind'.
+ This court prima facie finds force in the submissions of the learned ASG that the Central Tax officers are empowered to conduct intelligence-based enforcement action against taxpayers assigned to State tax administration under section 6 of the CGST Act.
+ What emerges at the prima facie stage is that it is the case of the respondents that a tax collection mechanism has been converted into a disbursement mechanism as if it were a subsidy scheme.
+ In view of the serious allegations, this Court is not inclined to interfere with the investigation at this stage and that too in Writ proceedings. At the same time, innocent persons cannot be arrested or harassed. Consequently, the applications for interim protection are dismissed with liberty to the parties to avail the statutory remedies.
+ Consequently, with the aforesaid observations and liberty, the CM No.32276/2020 in WP(C) 10130/2020 for interim relief as well as the prayer for interim relief in WP(C) 5454/2020 are dismissed with liberty to the petitioners to avail the statutory remedies and the CM No. 28105/2020 filed by respondent nos. 2 and 3 in WP(C) 5454/2020 is allowed and the interim order dated 20th August, 2020 passed in W.P.(C) 5454/2020 = 2020-TIOL-1401-HC-DEL-GST is vacated.
+ It is clarified that the observations made herein are prima facie and shall not prejudice either of the parties at the stage of final arguments of the present writ petitions or in the proceedings for interim protection.
-Interim order passed :DELHI HIGH COURT
2021-TIOL-81-HC-AHM-GST
Aashiward Marketing Vs State of Gujarat
GST - Assistant Government Pleader to seek information on the questions mentioned by the Bench and assist the Court on the next date of hearing on 13.01.2021: High Court
- Matter listed: GUJARAT HIGH COURT
2021-TIOL-77-HC-DEL-GST
Mahavir Transmission Ltd Vs Directorate General of GST Intelligence (HQRS)
GST - s.83 of the Act, 2017 - Petition impugns the freezing of bank accounts of the petitioner - It is stated that the bank accounts of the petitioner have been frozen without any notice u/s 74 of the CGST Act, 2017; that the bank accounts which have been frozen are current bank accounts in which only the overdraft limit from the bank is received and disbursed - Petitioner further states that once admittedly no notice exists and a year has passed since the search, there was no need for the emergent action of freezing of bank accounts.
Held: On request of the counsel for respondents, list on 11.01.2021 - It is clarified that petitioner shall be entitled to use the overdraft facility enjoyed from ICICI Bank, Standard Chartered Bank and Allahabad Bank: High Court [para 9, 10]
- Matter listed:DELHI HIGH COURT
2021-TIOL-76-HC-DEL-GST
Rajesh Kumar Patawa Vs UoI
GST - Challenge in both the petitions is to the orders whereby the Branch Manager of the Bank where the petitioners have accounts have been directed to attach the accounts of the petitioners and mandamus for de-freezing of the accounts is sought.
Held: Prima facie opinion is that communication of the notice u/s 74 to the noticee is essential before a proceeding under Section 74 can be said to be pending within the meaning of Section 83(1) of the Act - Counsel for the petitioners seeks time to respond - Matter to be listed on 15.01.2021: High Court [para 7, 10]
- Matter listed: DELHI HIGH COURT
