Gail( INDIA) Limited vs. Directorate General Of GST Intelligence & Anr.

Held

The Court held that the impugned order dated 08.03.2018, directing GAIL to pay a sum of ₹13,13,07,485/-, is not sustainable. The Court reasoned that there was no material to show that any such amount was actually due and payable by GAIL to respondent no.2. GAIL and respondent no.2 themselves agreed that the only amount GAIL was required to pay was approximately ₹6.54 crores, contingent upon respondent no.2 issuing an invoice of approximately ₹1.01 crores. The Court found that the impugned order, being in the nature of a garnishee order, cannot compel GAIL to pay an amount that is not admitted as due and payable. The Court set aside the impugned order. However, it also restrained GAIL from making any payments to respondent no.2 for a period of four weeks from the date of the order to allow the revenue to take necessary steps. The Court clarified that respondent no.1 is not precluded from taking steps as available in law for securing the interests of the Revenue. The issue of returning bank guarantees was not a subject matter of the impugned order, and GAIL was free to return them.

Facts

GAIL (India) Ltd. (GAIL) is challenging an order dated 08.03.2018 issued by the Directorate General of GST Intelligence (DGGI) under Section 87(b) of the Finance Act, 1994, read with Section 174(2)(e) of the CGST Act, 2017. The order directed GAIL to pay ₹13,13,07,485/- to respondent no.2, claiming it was owed by GAIL. GAIL contended it had not admitted any amount was due to respondent no.2. GAIL had terminated a contract with respondent no.2 in 2014 due to alleged fabricated documents and blacklisted it. This led to arbitration proceedings where respondent no.2 sought interim measures. DGGI initiated proceedings for statutory dues owed by respondent no.2 and issued the impugned order. GAIL filed the present petition on 04.05.2018. Subsequently, GAIL and respondent no.2 reached a settlement where GAIL agreed to pay approximately ₹6.54 crores, subject to respondent no.2 furnishing an invoice of approximately ₹1.01 crores, and to return performance bank guarantees amounting to ₹4.25 crores.

Key Issues

1. Whether the impugned order dated 08.03.2018, directing GAIL to pay ₹13,13,07,485/- to respondent no.2, is sustainable in law, considering GAIL has not admitted any amount as due and payable to respondent no.2? (Question of law turning on the interpretation of Section 87(b) of the Finance Act, 1994 and Section 174(2)(e) of the CGST Act, 2017). Petitioner's arguments: GAIL argued that it cannot be treated as an 'assessee in default' as it has not admitted any amount as due to respondent no.2. Therefore, the DGGI cannot compel GAIL to pay an amount that is not definitively due and payable. The impugned order is in the nature of a garnishee order and cannot compel payment of an unascertained sum. Respondent's arguments: Respondent no.1 (DGGI) contended that its intention was to demand from GAIL any amount payable or that may become payable on account of settlement in light of Arbitral Awards, and the impugned notice was issued for this purpose. Respondent no.1 prayed for directions to GAIL to pay any amount held by GAIL on account of respondent no.2, as and when it becomes payable, to the government exchequer.