Valerius Industries VS Union Of India

In this writ application filed under Article 226 of the Constitution of India, a partnership firm has sought several reliefs from the court. The primary objective of the writ applicant is to challenge a series of orders and actions taken by tax authorities in Gujarat, which have resulted in significant financial demands and restrictions on the firm’s operations.

The main relief sought is the quashing of an order dated June 17, 2019, issued by the Commercial Tax Officer in Vadodara, Gujarat, demanding a payment of ₹1,60,79,302. This amount includes tax, interest, and penalties under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and the Gujarat Goods and Services Tax Act, 2017 (GST Act, 2017). The writ applicant argues that this order is unjust and seeks its cancellation through a writ of certiorari or any other appropriate order from the court.

Additionally, the writ applicant challenges the provisional attachment orders issued by the State Tax Officer in Vadodara. These orders, dated November 27, 2018, and November 20, 2018, have attached the firm’s stock of goods worth ₹1,60,00,000 and frozen its bank accounts with the Bank of Baroda, Alkapuri Branch, Vadodara. The petitioner asserts that these attachments, made under Section 83 of the GST Act, 2017, are unwarranted and should be set aside.

The writ applicant also contests the blockage of Input Tax Credit (ITC) by the tax authorities. This action, taken on February 13, 2019, has effectively restricted the firm’s ability to claim ITC under the GST Act, 2017. The applicant requests the court to lift this blockage, arguing that it is detrimental to the firm’s business operations.

Pending the final hearing and resolution of this petition, the applicant seeks an interim stay on the enforcement of the impugned orders. The petitioner argues that without such relief, the firm’s business would suffer irreparable harm. They also request ex-parte ad-interim relief, meaning immediate temporary relief without the other party being heard.

The writ applicant, a partnership firm engaged in the copper materials business, explains that it purchases copper scrap, melts it, and converts it into copper pipes for sale. The firm is registered under the GST regime and claims to have conducted its business in compliance with the law. However, it now faces significant challenges due to the actions of the tax authorities.

The firm purchased copper scrap materials worth ₹15,51,00,399 during the 2017-18 tax year, and it is from these transactions that the tax dispute has arisen. The applicant contends that the tax authorities have acted arbitrarily and without proper justification, leading to the financial demands and the freezing of its assets.

In summary, the writ application seeks judicial intervention to annul the tax demand, lift the provisional attachments, and unblock the ITC, which collectively have placed a severe financial strain on the firm’s operations. The petitioner believes that these actions are excessive and not in accordance with the law, and thus seeks appropriate relief from the court.

Mr. Deven Parikh, the senior counsel representing the writ applicant, vigorously argued that the order for the provisional attachment of property under Section 83 of the GST Act, 2017, is both jurisdictionally flawed and legally untenable. He contended that the authority to issue a provisional attachment to protect revenue under Section 83 is vested solely in the Commissioner. However, in this case, the impugned order was issued by the State Tax Officer – 1, Unit 44, Vadodara, rendering it inherently illegal.

Mr. Parikh further argued that the respondent’s action of blocking a credit balance of ₹30,55,680/- through a computer entry was also unlawful and legally unsustainable. He claimed that an order passed on June 17, 2019, by respondent No. 4 was illegal, arbitrary, and unjust, as it was issued without giving the writ applicant an opportunity to be heard, thus violating the principles of natural justice.

Additionally, Mr. Parikh asserted that the three impugned orders dated November 20, 2018, November 27, 2018, and February 13, 2019, were contrary to the provisions of Section 83 of the GST Act. He argued that the respondent’s action in seizing the input tax credit without issuing any show cause notice was illegal and violated Section 74 of the GST Act.

In the legal dispute under consideration, Mr. Deven Parikh, the senior counsel for the writ applicant, argued that the provisional attachment of property under Section 83 of the GST Act, 2017, is without jurisdiction and legally untenable. He emphasized that the authority to issue such an order rests solely with the Commissioner, as the power is granted to protect revenue. However, in this case, the impugned order was issued by the State Tax Officer of Unit 44, Vadodara, which Mr. Parikh claimed is illegal. He further argued that the action of blocking a credit balance of ₹30,55,680 through a computer entry is also illegal and not justified by law. Additionally, Mr. Parikh contended that an order dated 17th June 2019 was passed without giving the writ applicant an opportunity for a hearing, thus violating the principles of natural justice. He asserted that all the challenged orders, including those dated 20th November 2018, 27th November 2018, and 13th February 2019, are contrary to the provisions of Section 83 of the GST Act, and the seizure of input tax credit without issuing a show cause notice is illegal under Section 74 of the Act.

On the other hand, Ms. Mehta, representing the respondents, opposed the writ application. She argued that there was no legal error in the actions taken by the respondents. Ms. Mehta explained that Section 83 of the GST Act does indeed allow the Commissioner to order provisional attachment during the pendency of proceedings under various sections of the Act to protect government revenue. However, she clarified that the Commissioner of State Tax, Gujarat, had delegated this power to Deputy Commissioners, Assistant Commissioners, and State Tax Officers through an order dated 15th January 2018. Therefore, she contended that the State Tax Officer acted within his jurisdiction when issuing the impugned order and when ordering the provisional attachment of bank accounts.

In the case presented, Mr. Deven Parikh, senior counsel for the writ applicant, strongly argued that the order of provisional attachment of property under Section 83 of the GST Act, 2017 is unlawful and without jurisdiction. Mr. Parikh emphasized that the power to order provisional attachment to protect revenue is vested in the Commissioner, but in this instance, the order was issued by the State Tax Officer, which he claimed is illegal. He further contended that the action taken by the respondent in blocking a credit balance of Rs. 30,55,680 through a computer entry was also illegal. Additionally, Mr. Parikh argued that the order passed by the respondent on June 17, 2019, was arbitrary, unjust, and violated the principles of natural justice since it was issued without giving the writ applicant an opportunity to be heard. He maintained that the three orders dated November 20, 2018, November 27, 2018, and February 13, 2019, were illegal and contrary to the provisions of Section 83 of the GST Act, and that seizing input tax credit without issuing a show cause notice was unlawful under Section 74 of the GST Act.

On the other hand, Ms. Mehta, the learned Assistant Government Pleader (A.G.P.), opposed the writ application, arguing that no legal error was made by the respondents. She explained that Section 83 of the GST Act, 2017 allows the Commissioner to order provisional attachment during ongoing proceedings if necessary to protect government revenue. However, she noted that the Commissioner had delegated this power to officers including the State Tax Officer, by an order dated January 15, 2018, thus justifying the latter’s authority to issue the provisional attachment order. Ms. Mehta argued that the provisional attachment, including the freezing of bank accounts, was within the jurisdiction of the State Tax Officer.

Ms. Mehta also referenced statements and evidence indicating that a raid conducted from November 20 to November 27, 2018, uncovered bogus billing transactions by the petitioner. The raid and subsequent investigation revealed that the petitioner had engaged in fraudulent activities to evade taxes and illegitimately claim input tax credit. This led to the provisional attachment of the petitioner’s bank account and blockage of input tax credit, which Ms. Mehta asserted was legally justified under the GST Act.

In conclusion, the debate centers on the legality of the provisional attachment orders issued by a State Tax Officer under delegated authority, with the writ applicant challenging the jurisdiction and due process, while the respondents defend the actions as lawful and necessary to protect government revenue.

Mr. Deven Parikh, the learned senior counsel for the writ applicant, argued vehemently against the provisional attachment of property under Section 83 of the GST Act, 2017, asserting that it was without jurisdiction and legally untenable. He contended that only the Commissioner has the authority to order such attachments to protect revenue, but in this case, the order was issued by the State Tax Officer, making it illegal. Mr. Parikh also criticized the freezing of a credit balance of Rs. 30,55,680/- by a computer entry as illegal. He further argued that the order dated 17th June 2019 was passed without providing the writ applicant an opportunity for a hearing, thus violating natural justice principles. Additionally, he contended that all the orders in question were illegal and contrary to the provisions of Section 83 and Section 74 of the GST Act, particularly because no show cause notice was issued before seizing the input tax credit.

Ms. Mehta, the learned Assistant Government Pleader, opposed the writ application, defending the legality of the orders. She argued that Section 83 of the GST Act permits the Commissioner to order provisional attachment during proceedings under specific sections of the Act to protect government revenue. She pointed out that the Commissioner had delegated this power to Deputy Commissioners, Assistant Commissioners, and State Tax Officers, making the State Tax Officer’s actions within legal jurisdiction. Ms. Mehta emphasized that the provisional attachment, including the freezing of bank accounts, was therefore legally justified. She supported her argument by citing the affidavit-in-reply filed by the State Tax Officer, detailing the raid conducted on the petitioner’s premises, which revealed bogus billing transactions. The raid led to the seizure of goods and documents, with findings suggesting fraudulent input tax credit claims and fictitious transactions.

After hearing both sides and reviewing the evidence, the central issue to be resolved was whether the State Tax Officer had the authority under Section 83 of the GST Act to order the provisional attachment of the writ applicant’s property. The court also examined the relevant provisions of the GST Act, particularly focusing on the legality of the actions taken by the tax authorities.

In the matter at hand, Mr. Deven Parikh, the senior counsel representing the writ applicant, has raised several legal challenges against the provisional attachment of the applicant’s property under Section 83 of the GST Act, 2017. Mr. Parikh argues that the provisional attachment order, which was issued by the State Tax Officer – 1, Unit 44, Vadodara, is beyond the officer’s jurisdiction and legally unsound. He asserts that the power to issue such orders is vested solely with the Commissioner, not subordinate officers. Mr. Parikh also contends that the blocking of the applicant’s credit balance of Rs.30,55,680 through a computer entry is unlawful and that the impugned orders, including the one dated 17th June 2019, were issued without providing an opportunity for a hearing, thereby violating principles of natural justice. Furthermore, he claims that the seizure of input tax credit without a show cause notice contravenes Section 74 of the Act.

On the other hand, Ms. Mehta, the learned Assistant Government Pleader, defends the actions of the respondents. She argues that the delegation of power under Section 83 to the State Tax Officer by the Commissioner of State Tax, Gujarat State, Ahmedabad, through an order dated 15th January 2018, was valid. This delegation allows the State Tax Officer to issue provisional attachment orders, making the impugned order within the officer’s jurisdiction. Ms. Mehta supports this position by referencing affidavits and documents showing that the provisional attachment was carried out following proper procedures and rules, including the seizure of bank accounts and blocking of input tax credit. She also points out that the petitioner has alternative remedies available under the GST Act, which can address their grievances.

The core issue for the court’s consideration is whether the State Tax Officer had the authority to exercise powers under Section 83 of the GST Act, 2017, for the provisional attachment of the property in question. This inquiry involves examining the provisions of the GST Act related to provisional attachments and the delegation of powers by the Commissioner to subordinate officers.

Relevant sections of the Act include:
– **Section 62:** Addresses the assessment of non-filers of returns.
– **Section 63:** Concerns the assessment of unregistered persons.
– **Section 64:** Provides for summary assessment in special cases where immediate action is needed to protect revenue interests.

In summary, Mr. Parikh challenges the legality of the provisional attachment orders on jurisdictional and procedural grounds, while Ms. Mehta defends the validity of these actions based on the delegation of powers and adherence to procedural requirements. The resolution of this matter hinges on the interpretation of the statutory provisions related to the powers of the State Tax Officer and the validity of the delegation of authority.

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