Remark Flour Mills Pvt. Ltd. Versus State of Gujarat
GST
2018 (4) TMI 1292 – GUJARAT HIGH COURT – 2018 (12) G. S. T. L. 481 (Guj.)
GUJARAT HIGH COURT – HC
Dated:- 19-4-2018
Special Civil Application No. 4835 of 2018
GST
MR. AKIL KURESHI AND MR. B. N. KARIA, JJ.
For The Petitioner : B.N. Soparkar, Sr. Adv. and Kuntal A. Parikh
For The Respondent : Chintan Dave, AGP
JUDGMENT
Akil Kureshi, J. –
Petitioners have challenged three separate actions of the departmental authorities, though all of them arise out of one integrated set of facts.
2. Briefly stated the facts are as under:
Petitioner No.1 is a company registered under the Companies Act. Petitioner No.2 is one of its share holders. Petitioner-company is engaged in supply of wheat flour, meslin flour, cereal flour etc. Such activity would invite SGST and CGST at prescribed rates. However, even this is a matter of dispute between the two sides.
3. Case of the petitioners is that they are supplying such goo
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to Rs. 36,88,706/- not be recovered for the period between July 2017 and 20.02.2018; (ii) Simultaneously, on the same date, the department wrote to the petitioners' banks-Union Bank of India, Nizampura Branch, Baroda and IDBI Bank, Alkapuri Branch, Baroda provisionally attaching the petitioners' said bank accounts and instructed the banks not to allow the petitioners to operate the accounts without the prior permission of the department. The petitioners have challenged this provisional attachment orders of the departmental authorities.
6. On 19.03.2018, the adjudicating authority issued fresh notice under the purported exercise of powers under section 74(3) of the Central Goods and Services Tax Act calling upon the petitioners to show cause why a sum of Rs. 1,29,13,928/-towards CGST and SGST not be recovered from the period between July 2017 and 20.02.2018. This second show-cause notice, the petitioners have challenged on the ground of lack of jurisdiction.
7. We have heard
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. However, in our experience such instances are few and far between.
8. In the present case, there does not appear to be any justification of the departmental authorities to collect and the petitioners to voluntarily give cheques for the said amount. We would therefore, direct the department to return such cheques.
9. We now take the petitioners' second challenge for consideration viz. to the second show-cause notice dated 19.03.2018. We may recall, the Adjudicating authority had already issued a show-cause notice on 27.02.2018 asking the petitioner to show cause why for the period between July 2017 and 20.02.2018 unpaid CGST and SGST of Rs. 30,88,706/-not be recovered. The second impugned show-cause notice also pertains to the same period and same demand of unpaid taxes only the figure now proposes is Rs. 1,29,13,928/-. The crucial question is, could the department have issued such a notice in purported exercise of powers under section 74(3) of the CGST Act.
10. Chapter XV of t
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oper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.
(2) The proper officer shall issue the notice under sub section (1) at least six months prior to the time limit specified in sub-section (10) for issuance of order.
(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erro
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would authorize the proper officer to serve a statement containing the details of tax unpaid, shortly paid or erroneously refunded for a period other than i.e. covered under sub-section (1) where a notice has been issued for any period. Under sub-section (1) of section 74. In clear terms thus, powers under sub-section (3) of section 74 would be available where notice has already been issued against the person chargeable with tax under sub section (1) and the statement referred to in sub-section (3) of section 74 would be containing the details of tax unpaid, short paid etc. for purpose other than those covered under sub section (1). In other words, powers under sub-section (3) of section 74 cannot be exercised for expanding or enlarging the liability arising out of show-cause notice under sub-section (1) from the same period. Essentially, sub-sections (1) and (3) of section 74 are envisaged to cover separate periods.
12. In that view of the matter, the respondents are wholly incorrec
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alty liability on such tax amount. It prima facie appears that the department had issued second show-cause notice dated 19.03.2017 (which we propose to quash) including even the unbranded goods for recovery of GSTs. Having perused the relevant literature, we even otherwise find that GSTs on unbranded goods has been specifically exempted. As of now, thus, only notice for recovery of tax that survives is one seeking to recover GSTs of Rs. 30 lacs approximately with interest and penalty. At the same time, we must also realize that if the petitioners are not correct in contending that no service tax can be levied on branded goods because the brand belongs to the directors of the company, such liability may eventually arise with interest and matching penalty.
14. In this background, we may peruse the provisions of section 83 of the CGST Act which reads as under:
“83. Provisional Attachment to protect revenue in certain cases:
(1) Where during the pendency of any proceedings under secti
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ent shall cease to have effect after the expiry of a period of one year from the date of which such order has been made. Similar provisions contained in the VAT Act concerning provisional attachment came up for consideration before Division Bench of this Court in case of Automark Industries (I) Ltd v. State of Gujarat reported in 2014 SCC Online Gujarat 14217. The Court made following observations:
“8. Section 45 of the VAT Act empowers the Commissioner during pendency of any proceedings of assessment or reassessment of turnover escaping assessment, to attach provisionally any property belonging to any dealer, if he is of the opinion that for the purpose of protecting the interest of Government revenue, it is necessary to do so. As per subsection (2) of Section 45, 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 subsection (1). Few things emerge from these statutory provisions. Firstly, the po
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nding such consideration, it is necessary in the interest of Government revenue to pass order of provisional attachment. Such powers cannot be exercised in a routine manner in every case of reopening of assessment de hors the consideration noted above and in any case not merely because some assessment proceedings are pending. At that stage, it is merely a prima facie, exparte opinion of the assessing authority that a certain tax demand is likely to arise. This would be subject to biparte assessment proceedings. Even after the assessment is done, it is subject to further appeals, typically first before the Commissioner and thereafter before the VAT Tribunal and the High Court. At all such appellate stages there are powers for granting stay or waiving requirement of predeposit if statute so provides. Therefore, to contend that mere pendency of assessment or reassessment proceedings would clothe the authority to pass order of provisional attachment would be wrong. Pendency of such proceed
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equire a detailed scrutiny and examination of materials not fully before us. In any case, we do not intend to bypass the assessment proceedings. Suffice it to say that at this stage to pass an order of provisional attachment would neither be permissible nor be proper. To reiterate, when the petitioner's classification on the basis of which the tax has so far been collected, cannot be stated to be without any basis nor can it be stated that the petitioner has no prima facie case, and when the assessment proceedings are yet to be completed, resorting to such extreme power of attachment without anything further to suggest that the liability if ultimately finalized, the petitioner will not pay, would simply not be permissible. It is not the case of the Department placed before us through any material on record that if ultimately any additional tax liability is finalized, the petitioner would not pay or be in a position to pay such taxes.”
16. In the present case, nothing is demonstrat
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