Ravindra Muthavarapu vs. The Superintendent Of Central Tax

Counsel for the Petitioner; SRI KARAN TALWAR Counsel for the Respondent Nos.1 to 3 : SRI KUNUKU DURGA PRASAD (STANDING COUNSEL FOR CBIC) DEPUTY SOLICITOR GENERAL OF INDIA Counsel for the Respondent No.4 : SRI P. PONNA RAO WRIT PETITION NO: 17997 OF 2024 Between: Potiuri Venkataratnam, Former Director, M/s. Kusalava Batteries Private Cdhm'PmdesrindJa Vijayawada,

The Principal Commissioner of Central Taxes, Office of the D Taxes, GST Bhavan, Central Revenue Buildings, Kanavari Thota, Guntur, Andhra Pradesh - 522004. 4. Union of India, represented by its Secretary, Ministry of Finance Department of Revenue, New Delhi. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court be pleased to issue a Writ, Order, or direction particularly one in the nature of a Writ of Mandamus or any other appropriate writ (i) to declare as illegal and set aside the Notice O.C.No.12712024 dated 24.07.2024 issued by the Respondent No. 1 as being without juri iction, violative of the principles of natural justice and contrary to the provisions of Central GST Act, 2017 may (ii) to declare that the Petitioner is not liable to pay dues of Rs.39,02,10,114/- (Duty of Rs.13,00,70,038 plus Penalty of Rs.13,00,70,038 11AC plus Penalty of Rs.13,00,70.038 under Rule 25) plus Interest thereon confirmed against the Company along with other Directors Personal Penalty of Rs.l,30,00,000/- as being illegal, arbitrary, and violative of Article 14 and Article 19(1)(g) of the Constitution of India under Section and with a (iii) to declare as illegal and set aside the Order in Original No. GUN-EXCUS-OOO-COM- 003-20-21 dated 20.11.2020 and Corrigendum to the Order in Original dated 20.11.2020 issued by Respondent No. 3 as being illegal, without juri iction, and violative of the principles of natural justice.

The Assistant Commissioner of Central Taxes and Customs, Amaravati CGST Divisional Office, Central Revenue Buildings, M. G. Road Vijayawada - 520002. Andhra Pradesh

The Principal Commissioner of Central Taxes, Office of the Commissioner of Central Taxes, GST Bhavan, Central Revenue Buildings, Kanavari Thota, Guntur, Andhra Pradesh - 522004. 4. Union of India, represented by its Secretary, Ministry of Finance, Department of Revenue, New Delhi. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ, Order, or direction particularly one in the nature of a Writ of Mandamus or any other appropriate writ (i) to declare as illegal Respondent No. 1 as being without juri iction, violative of the principles of natural Justice and contrary to the provisions of Central GST Act, 2017 (ii) to declare that the Petitioner is not liable to pay dues of Rs.39,02,10,114/- (Duty of Rs.13,00,70,038 plus Penalty of Rs.13,00,70,038 under Section 11 AC plus Penalty of Rs. 13,00,70,038 under Rule 25) plus Interest thereon, confirmed against the Company along with other Directors and with Personal Penalty as being illegal, arbitrary, and violative of Article 14 and Article 19(1)(g) of the Constitution of India (iii) to declare as illegal and set aside the Order in Original No. GUN-EXCUS-000- COM-003-20-21 dated 20.11.2020 and Corrigendum to the Order in Original dated 20.11.2020 issued by Respondent No. 3 as being illegal, without Juri iction, and violative of the principles of natural Justice. lA NO: 1 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the writ petition, the High Court may be pleased to order stay of recovery of demand of Rs.39,02,10,11 4/- plus Interest and Personal Penalty to be paid along with other Directors pursuant to the Impugned Notice dated 24.07.2024 issued by the Respondent No.

The Assistant Commissioner of Central Taxes and Customs Amarayati COST Divisional Office, Central Revenue Buildings Road, Vijayawada - 520002. Andhra Pradesh.

The Principal Commissioner of Central Taxes, Office of the Commissioner of Central Taxes, GST Bhavan, Central Revenue Buildings, Kanavari Thota, Guntur, Andhra Pradesh - 522004. 4. Union of India represented by its Secretary, Ministry of Finance Department of Revenue, New Delhi. M. G. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court be pleased to issue a Writ, Order, or direction particularly one in the nature of a Writ of Mandamus or any other appropriate writ (i) to declare as illegal and set aside the Notice O.C.No. 127/2024 dated 24.07.2024 issued by the Respondent No. 1 as being without juri iction, violative of the principles of natural Justice and contrary to the provisions of Central GST Act may 2017 (ii)to declare that the Petitioner is not liable to pay dues of Rs.39,02,10,114/- Duty of Rs.13.00,70,038 PLUS Penalty of Rs. 13,00,70,038 under Section PLUS Penalty of Rs. 13,00,70,038 under Rule 25 plus Interest thereon 11 AC confirmed against the Company along with other Directors and with V' Personal Penalty as being illegal, arbitrary, and violative of Article 14 and Article 19(1)(g) of the Constitution of India (iii) to declare as illegal and set aside the Order in Original No. GUN-EXCUS-000- COM-003-20-21 dated 20.11.2020 and Corrigendum to the Order in Original dated 20.11.2020 issued by Respondent No. 3 as being illegal, without Juri iction, and violative of the principles of natural Justice. lA NO: 1 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the writ petition, the High Court may be pleased to order stay of recovery of demand of Rs.39,02,10,11 4/- plus Interest and Personal Penalty to be paid along with other Directors pursuant to the Impugned Notice dated 24.07.2024 issued by the Respondent No.

The Assistant Commissioner of Central Taxes and Customs, Amaravati CGST Divisional Office, Central Revenue Buildings, M. G Road Vijayawada - 520002. Andhra Pradesh

The Principal Commissioner of Central Taxes, Office of the Commissioner of Central Taxes, GST Bhavan, Central Revenue Buildings, Kanavari Thota, Guntur, Andhra Pradesh - 522004. 4. Union of India, represented by its Secretary, Ministry of Finance Department of Revenue New Delhi. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith the High Court may be pleased to issue a Writ, Order, or direction particularly one in the nature of a Writ of Mandamus or any other appropriate writ (i) to declare as illegal Respondent No. 1 as being without juri iction, violative of the principles of natural justice and contrary to the provisions of Central GST Act 2 017 (li) to declare that the Petitioner is not liable to pay dues of Rs.39,02,10,114/- Duty of Rs.13,00,70,038 plus Penalty of Rs.13,00,70,038

The details of the orders of assessment, notices of demand and the amounts claimed in each of the Writ f^etitions given below:- against the petitioners are S. Writ Petition Name of the Petitioner (Director of the company) Impugned Order Number & Date Demand Notice Number and Date Penalty Amount N No. o. 1. 17995 of Mr. Ravindra Muthavarapu, Former Additional Director, M/s. Kusalava Batteries Private Limited, Residing at; A-6, Venkata Balaji Towers, Near Jammi Chettu, Mogalrajpuram, Vijayawada,Andhra Pradesh, India - 520010 Mr. Potiuri Venkataratnam, Former Director, M/s. Kusalava Batteries Private Limited, Residing at; FI.No.8-67 Srinivasa Nagar, Poranki, Vijayawada, A.P, 521137. 010 No: GUN- EXCUS-000- COM-003-20- 21., Dated 20.11.2020. O.C.Mo.127/ 2024, dated 24.07.2024. Rs.39,02,10,114/- 2024 2. 17997 of 010 No: GUN- EXCUS-000- COM-003-20- 21., Dated 20.11.2020. 0,C.No.127/ 2024, dated 24.07.2024. Rs.39,02,10,114/- along with Personal liability of Rs. 1,30,00,000/- 2024 3. 18001 of Mr. Chukkapalli Siddharth, Former Director, M/s. Kusalava Batteries Private Limited, Residing at: D.No.60-28- 3, Gayatri Nagar, Vijayawada, Andhra Pradesh - 520008 Mr. Chukkapalli Venkateswara Rao, Former Director, M/s. Kusalava Batteries Private Limited, Residing at: H. No. 40-15/2-10, Brindavan Colony, Labbipet, Vijayawada, Andhra Pradesh, India- 520010 Mr. Chukkapalli Chakravarthi, Former^ Director, M/s Kusalava 010 No: GUN- EXCUS-000- COM-003-20- 21., Dated 20.11.2020. O.C.No.127/ 2024, dated 24.07.2024. Rs.39,02,10,114/- 2024 4. 18018 of 010 No: GUN- EXCUS-OOO- COM-003-20- 21., Dated 20.11.2020. O.C.No.127/ 2024, dated 24.07.2024. Rs.39,02,10,114/- 2024 5. 18019 of 010 No: GUN- EXCUS-000- COM-003-20- O.C.No.127/ 2024, dated 24.07.2024. Rs.39,02,10,114/- 2024

Sri Karan Talwar, learned counsel for the petitioners would contend that three reliefs were sought in the Writ Petitions. He would submit that the third relief relates to the order-in-original passed, under the Act, 1944. He submits that appeals had been filed against these orders before the CESTAT under the Act, 1944 and money could not have been recovered against these orders, on account of the pendency of the appeals before the CESTAT. He further submits that the respondents, in their counter affidavits have clearly stated that they have withdrawn the notices against the amounts which had been levied against the directors, in their personal capacity and that the relief sought against the order-in-original is being withdrav/ri in all the Writ Petitions. He submits that the petitioners would pursue tiheir remedies under 5 4 the Act, 1944. Learned counsel for the petitioners withdraws the relief sought against the orders-in-original, given above in all the Writ Petitions. Sri Kunuku Durga Prasad, Learned Standing Counsel appearing for the official respondents would also contend that the notices are not notices for recovery and are only issued for ascertaining whether there is any misfeasance on the part of the petitioners, as directors of the liquidated private and the submissions made before this Court could very well 10. limited company be made before the authority. CONSinFRATIQN OF THE:; COURT;- Section 88 of the COST Act, reads as follows:- 11. “Section- 88:- LiabiUty in case of company in liquidation:— (1) When any company is being wound up whether under the orders of a court or Tribunal or otherwise, every person appointed as receiver of any assets of a company (hereafter in this section referred to as the “liquidated”), shall, within thirty days after his intimation of his appointment to the appointment, give Commissioner. (2) The Commissioner shall, after making such inquiry or calling for such information as he may deem fit, notify the liquidated within three months from the date on which he receives intimation of the appointment of the liquidated, the amount which in the opinion of the Commissioner would be sufficient to provide for any tax, interest or penalty which is then, or is likely thereafter to become, payable by the company. (3) When any private company is wound up and any tax, interest or penalty determined under this Act on the company for any period, whether before or in the course of or after its liquidation, who was a director of cannot be recovered, then every person such company at any time during the period for which the tax was due shall, jointly and severally, be liable for the payment of such tax, interest or penalty, unless he proves to the satisfaction of the Commissioner that such r)on-recovery cannot be attributed to any neglect, misfeasance or breach of duty on his part in relation gross to the affairs of the company.

This would leave the question of how the taxes due to the State are to be recovered, in relation to liabilities raising under the Act, 1944. Section 174 of the CGST Act, provides for that situation.

Section-174 of the CGST Act, reads as follows;- “Section-174:- Repeal and saving:— (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), and the Central Excise Tariff Act, 1985 (5 of 1986) (hereafter referred to as the repealed Acts) are hereby repealed. (2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994) (hereafter referred to as “si.ich amendment" or "amended Act", as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not— (a) revive anything not in force or existing at the time of such amendment or repeal; or (b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts: Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or 7 (d) affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or (e) affect any investigation, inquiiy, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation. Inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed; (f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed. (3) The mention of the particular matters referred to in sub sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal." Section-174(2)(e) of the COST Act, provides for institution or 15. continuation of the proceedings for recovery of tax, surcharge, penalty, fine, interest or forfeiture arising out of the Act, 1944, by utilizing the provisions of the Act, 1944. In the circumstances, it would be open to the respondents to 16. initiate action, if permissible, under the provisions of the Act, 1944, against the petitioners. However, the provisions of the COST Act would not be available for such recovery. Accordingly, these Writ Petitions *are allowed setting aside the 17. impugned notices mentioned above in ail these Writ Petitions by leaving it open to the respondents to avail of such remedies as may be available for 8 recovery of the amounts for which the petitioners may become liable. There shall be no order as to costs. As a sequel, pending miscellaneous petitions, if any, shall stand P.U.V.BHASKAR RAO ASSISTANT REGISTRAR .A.' SECTON closed. //// To OFFICER 1 ■The Superintendent of Central Tax Revenue Buildings, M.G. Road, COST Divisiona°Officy Central Revenli?R^wrf'''^ Customs, Amaravati Vijayawada - 52000Z Andh^fprS Sm&r''orCentSTa;es''GS^^^ Buildings, Kanavari Krishnalanka COST Range, Central Vijayawada - 520002. Andhra Pradesh

The Secretary, Union of India Revenue New Delhi. Ministry of Finance, Department of 5. One CC to Sri Karan Talwar, [OPUC^

One CC to Sri P. Ponna Rao

Three C.D. Copies. Advocate [OPUC] I (Standing Counsel for CBIC) Deputy Solicitor General of India (OPUC) Cnr