Ideal Unique Realtors Private Limited And Another vs. Union Of INDIA And Ors.
Original PDF →Facts
The appellants, Ideal Unique Realtors Private Limited & Anr., filed an intra-court appeal against an order dated November 22, 2021, in a writ petition. They challenged two communications dated March 22, 2021, issued by the Sr. Audit Officer / SSCA-FAP-4, which enclosed "spot memos." The appellants argued that the audit department lacked jurisdiction to issue these notices, citing the Bombay High Court's decision in Kiran Gems Private Limited. They also highlighted that for the same TRAN-1 issue, multiple proceedings had been initiated since May 2018 by different wings of the department, including CGST Department and DGGI, Kolkata, involving summons and notices, to which the appellants had responded by submitting documents. Despite these responses, the proceedings were not brought to a logical conclusion.
Held
The Court allowed the writ appeal to the extent indicated. It held that the spot memos enclosed with the communications dated March 22, 2021, could not be enforced. The reasoning was that the department had initiated multiple proceedings since 2018 for the same TRAN-1 issue, but none had been taken to a logical conclusion. The Court found this to be unfair treatment of the appellants. The Court explicitly stated that it was not delving into the issue of whether CERA audit could be conducted against a private entity, deeming it premature as the authorities had not concluded their earlier proceedings. The Court directed the 5th respondent (Additional Assistant Director, DGGI, Kolkata, Zonal Unit) to consider the appellants' replies submitted on January 14, 2020, June 15, 2018, and July 24, 2018. The appellants' authorized representative was to be afforded a personal hearing, and a decision was to be taken on merits and in accordance with law. The spot memos were quashed.
Key Issues
1. Whether the Sr. Audit Officer / SSCA-FAP-4 had the jurisdiction to issue the communications dated March 22, 2021, enclosing spot memos, given the prior multiple proceedings initiated by different departments for the same issue. 2. Whether the appellants were subjected to unfair treatment by being repeatedly summoned and issued notices for the same TRAN-1 issue without any of the earlier proceedings being concluded. Appellants' Arguments: The appellants contended that the audit department lacked jurisdiction to issue the impugned communications, relying on the Bombay High Court's decision in Kiran Gems Private Limited, which held that Central Excise Revenue Audit (CERA) cannot audit private entities. They further argued that the repeated initiation of proceedings for the same issue since 2018, without bringing any to a logical end, constituted unfair treatment. They pointed out that the communications dated March 22, 2021, did not refer to any prior proceedings. Revenue's Arguments: The judgment does not record any specific arguments made by the revenue or respondent authorities.
Sections Cited
Section 73
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT (Judgment of the Court was delivered by T.S. SIVAGNANAM, J.)
This intra Court appeal is directed against the order dated 22nd November, 2021 in W.P.A. No.15695 of 2021. The appellants /writ petitioners challenged the juri iction of the 7th respondent, the Sr. Audit Officer / SSCA-FAP-4 in issuing two communications both dated 22nd March, 2021 enclosing a memo called as “spot memo”. The appellants questioned the action of the 7th respondent in the writ petition, firstly, on the ground that there is no juri iction for the audit department to issue such a notice and in this regard, places reliance on the decision of the High Court of Bombay in Kiran Gems Private Limited – Vs. – Union of India reported in 2021 SCC OnLine Bom
This decision was relied on for the proposition that the Central Excise Revenue Audit (CERA) cannot conduct audit of records of a private entity apart from stating that the appellants have pointed out that for the self-same reason three earlier proceedings were commenced firstly by CGST Department, Park Street Division, Kolkata vide letter dated 15th May, 2018 for which the appellants had submitted their reply on 15th June, 2018 along with the documents called for. For the very same purpose, the Director General of Goods and Services Tax, DGGI, Kolkata, Zonal Unit had issued summons dated 11th July, 2018 for which the appellants had submitted their reply on 24th July, 2018. Thereafter, DGGI issued notice dated 15th November, 2019 and thereafter another notice dated 18th November, 2019 was 2
issued by the 5th respondent and summons dated 2nd January, 2020 for which the appellants have responded and submitted the requisite documents.
The appellants appeared before the authority in response to the summons on 14th January, 2020 and stated to have submitted the requisite documents. In spite of the same, the Superintendent, Range – III, Park Street Division, CGST & CX, Kolkata South Commissionerate had issued two communications dated 22nd March, 2021 enclosing two spot memos.
The question would be whether the appellants can be dealt with in such a fashion by the respondents department. From the records placed before us, we find that none of the proceedings initiated by the department has been shown to have been taken to the logical end. If, according to the respondents department, there is an irregularity in the availabilment of credit, then appropriate proceedings under the Act should be initiated and after due opportunity to the appellants, the matter should be taken to the logical end. 3
We find that such a procedure had not been adopted in the instant case and the appellants appears to have been dealt with in a most unfair manner in the sense that from the year 2018 for the very same TRAN – 1 issue the appellants have repeatedly been summoned, issued notices etc. The spot memos, which have been communicated to the appellants along with the communications dated 22nd March, 2021 is also for the very same purpose.
Thus, it is not clear as to why different wings of the very same department have been issuing notices and summons to the appellants without taking any of the earlier proceedings to the logical end.
Therefore, on that ground, we are of the view that the spot memos, which have been furnished along with the communications dated 22nd March, 2021 cannot be enforced. However, we make it clear that the issue whether CERA audit can be conducted against a private entity as contended by the appellants is not gone into as this Court is of the view that it is too premature for the Court to give a ruling on the said issue. This is more so because the authorities have not taken forward the proceedings, which they have initiated earlier from May, 2018. 4
Therefore, it is appropriate for the concerned authority to take the proceedings to the logical end after affording an opportunity of personal hearing to the appellants.
From the records placed before us, we find that there is no allegation against the appellants that they have not cooperated with the department in not responding to the summons issued earlier. Conveniently, the communications dated 22nd March, 2021 issued by the Superintendent, Range – III, Park Street Division, CGST & CX does not refer to any of the earlier proceedings, which have been initiated against the appellants.
For the above reasons, the writ appeal is allowed to the extent indicated. The spot memos enclosed with the communications dated 22nd March, 2021 are quashed and there will be a direction to the 5th respondent, namely, Additional Assistant Director, DGGI, Kolkata, Zonal Unit to consider the reply submitted by the appellants dated 14th January, 2020 along with the earlier reply given by the appellants dated 15th June, 2018 and 24th July, 2018. The authorised representative of the 5
appellants shall be afforded an opportunity of personal hearing and a decision be taken on merits and in accordance with law.
The appeal along with connected application are disposed of.
No costs.
Urgent photostat certified copy of this order, if applied for, be furnished to the parties expeditiously upon compliance of all legal formalities.
(T.S. SIVAGNANAM, J)
I agree,
(HIRANMAY BHATTACHARYYA, J.)
6
NAREN/PALLAB(AR.C) 7
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.