Watermelon Management Services Private Limited vs. The Commissioner, Central Tax, GST Delhi(East) & Anr.

Facts

The petitioner, Watermelon Management Services Private Limited, challenged an order dated 03rd June, 2020, passed by the Commissioner, Central Tax, GST Delhi (East), which kept alive provisional attachment orders dated 05th March, 2020, and a corrigendum dated 01st June, 2020. The attachment was based on pending proceedings under Section 67 of the CGST Act. The respondent acknowledged that its investigation was handed over to the Directorate General of Goods and Services Tax Intelligence (DGGI), which had been investigating the matter since 05th December, 2018. The investigation involved searches of eight input suppliers suspected of providing only invoices without actual supply of goods/services, and statements from the petitioner's employees indicating non-receipt of services from these suppliers and non-maintenance of records for periods before April 2018. The bank accounts of the petitioner were provisionally attached under Section 83 of the CGST Act to safeguard government revenue.

Held

The Court noted that both the DGGI and the Commissioner of CGST, Delhi (East) stated that their investigations prima facie indicated wrongful availment of ITC by the petitioner. The DGGI officer mentioned that despite fifteen summons issued to the petitioner's Director, he appeared only thrice and did not furnish the requested documents. The petitioner's counsel countered that documents in three tempos had been filed with the DGGI. Considering the serious allegations, the Court directed the DGGI to conclude its investigation within three months. The writ petition was disposed of with this direction. The Court also stipulated that the petitioner and its Directors must cooperate with the investigation. If the DGGI was satisfied with the petitioner's stand upon conclusion, proceedings would be closed; otherwise, an appropriate show cause notice would be issued. All rights and contentions of the parties were left open.

Key Issues

1. Whether the provisional attachment orders dated 05th March, 2020, and the corrigendum dated 01st June, 2020, are without jurisdiction and illegal, given that the DGGI was already investigating the matter since 05th December, 2018, and no proceedings under Section 74 of the CGST Act had been launched against the petitioner? Petitioner's contention: The petitioner argued that since the DGGI was already investigating since December 2018 and had not passed any attachment orders, and as no proceedings under Section 74 of the CGST Act were initiated, the impugned provisional attachment order was without jurisdiction and illegal. The petitioner also contended that the raid and search concluded on 04th and 05th March, 2020. Revenue's contention: The respondent stated that the petitioner had not maintained records for FY 2017-18 and 2018-19, provided no evidence for the genuineness of the Input Tax Credit (ITC) availed, and its Directors failed to comply with summons. The respondent also highlighted that the provisional attachment was done under Section 83 of the CGST Act during the pendency of proceedings to protect government revenue, and that the investigation had been handed over to the DGGI.