M/S Kalokhe Constructions And Infrastructure LLP vs. The Union Of INDIA Thr. The Assistant Commissioner Of CGST And Central Excise Division 1 And Anr

Held

The Court found that the respondents' action could not be said to be in gross breach of natural justice, as the petitioner was given notice of discrepancies, a scrutiny was conducted, and a demand notice dated 2 May 2024 informed the petitioner of the interest liability of Rs. 2,46,28,162/- with a payment deadline of 10 May 2024. The petitioner neither paid nor disputed the demand during this period. However, the Court noted that the direction for attaching the bank account was not communicated to the petitioner, which was considered unfair. The Court reiterated that simultaneous or immediate communication of attachment decisions to the account holder is expected. The Court directed the respondent to hear the petitioner and pass a reasoned order indicating the precise liability to pay interest within 15 days. The attachment was permitted to continue until the order was made and communicated, but the respondent was restrained from recovering any amount beyond the admitted sum of Rs. 9,76,299/- until the reasoned order was passed. The petitioner was granted liberty to challenge the respondent's order if aggrieved.

Facts

The petitioner, M/s Kalokhe Constructions and Infrastructure LLP, challenged an attachment notice dated 22 May 2024 and the subsequent attachment of its HDFC Bank account. The petitioner argued that the attachment was made without prior communication and in violation of natural justice. The respondents contended that a notice of discrepancies was issued on 4 July 2023, followed by a demand notice dated 2 May 2024, informing the petitioner of an interest liability of Rs. 2,46,28,162/-. The petitioner was directed to pay this amount by 10 May 2024, failing which action under Section 79 of the CGST Act would be initiated. The petitioner neither paid nor protested the demand by the deadline. The attachment was effected on 22 May 2024. The petitioner protested on 29 May 2024, claiming only Rs. 9,76,299/- was payable.

Key Issues

1. Whether the attachment of the petitioner's bank account was made in gross breach of the principles of natural justice, specifically concerning the lack of prior communication of the attachment order to the petitioner? (Question of law) Petitioner's contention: The attachment was made without jurisdiction as it was not preceded by minimum compliance with natural justice principles, and the order was not communicated to the petitioner. The action was taken without affording an opportunity to make alternative arrangements. Revenue's contention: The petitioner was duly notified of discrepancies on 4 July 2023 and subsequently informed of the interest liability of Rs. 2,46,28,162/- by a demand notice dated 2 May 2024, with a deadline of 10 May 2024. As the petitioner neither paid nor protested within this period, action under Section 79 of the CGST Act was justified. The petitioner only protested after the attachment.