Delhi High Court - Orders
M/S. Indo International Tobacco Ltd vs Shri Vivek Prasad, Additional Director ... on 26 October, 2021
Author: Manmohan
Bench: Manmohan, Navin Chawla
$~3 & 17 to 19
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CONT.CAS(C) 751/2021 & C.M.No.35806/2021
M/S. INDO INTERNATIONAL TOBACCO LTD. ..... Petitioner
Through Mrs. Anjali J.Manish, Mr.Priyadarshi
Manish and Ms.Kinjal Shrivastava,
Advocates.
versus
SHRI VIVEK PRASAD, ADDITIONAL DIRECTOR GENERAL,
DGGI & ORS. ..... Respondents
Through Mr.N.Venkataraman, ASG with
Mr.Ravi Prakash, CGSC,
Mr.Chandrashekhar, Ms.Shruti
Shivkumar, Mr.Ram Narayan and
Ms.Mallika Joshi, Advocates.
+ W.P.(C) 2420/2021
M/S INDO INTERNATIONAL TOBACCO PVT. LTD...... Petitioner
Through Mr.S.Ganesh, Sr.Advocate with Mrs.
Anjali J.Manish, Mr.Priyadarshi
Manish and Ms.Kinjal Shrivastava,
Advocates.
versus
ADDITIONAL DIRECTOR GENERAL, DIRECTORATE
GENERAL OF GOODS AND SERVICE TAX INTELLIGENCE &
ORS. ..... Respondents
Through Mr.N.Venkataraman, ASG with,
Mr.Ravi Prakash, CGSC,
Mr.Chandrashekhar, Ms.Shruti,
Mr.Ram Narayan and Ms.Mallika
Joshi, Advocates.
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT Page 1 of 9
Signing Date:28.10.2021
07:31:39
+ W.P.(C) 4036/2021 & C.M.No.12202/2021
M/S. SSM EXPORTS ..... Petitioner
Through Mrs. Anjali J.Manish, Mr.Priyadarshi
Manish and Ms.Kinjal Shrivastava,
Advocates.
versus
COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
AND CGST DELHI WEST. & ORS. ..... Respondents
Through Mr.Harpreet Singh, Standing Counsel
with Ms.Suhani Mahtur, Advocate for
R-1.
Mr.Satish Kumar, Sr.SC for R-2, 5, 6
& 7.
+ W.P.(C) 5816/2021 & C.M.Nos.32633/2021, 37412/2021,
37406/2021
M/S. TIRUPATI INTERNATIONAL ..... Petitioner
Through Mrs. Anjali J.Manish, Mr.Priyadarshi
Manish and Ms.Kinjal Shrivastava,
Advocates.
versus
UNION OF INDIA & ORS. ..... Respondents
Through Mr.Ajay Digpaul, CGSC with
Mr.Kamal R.Digpaul, Advocate for
UOI.
Mr. Harpreet Singh, Sr.Standing
Counsel with Ms.Suhani Mathur,
Advocate for R-7, 8, 10 & 11.
Mr. Aditya Singla, Adv. for R-3 to 6
and 12 to 16.
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
HON'BLE MR. JUSTICE NAVIN CHAWLA
ORDER
% 26.10.2021 Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 2 of 9 Signing Date:28.10.2021 07:31:39
1. The petitions have been heard by way of video conferencing.
2. Learned ASG has explained in detail the constitutional architecture of CGST Act, 2017, IGST Act 2017, SGST and UGST Acts as well as widt h , ambit and application of Section 6 of CGST and SGST Acts, appointment of Central Tax and State Tax officers. He further states that in the case of M/s M/s Indo International Tobacco Pvt. Ltd. being, WP(C) 2420/2021, the petitioner firm appears to be involved in availment an d u tilization of fake ITC of more than Rs.100 crores, supply of low-grade t obacco products in the garb of "smoking mixture for pipes and cigarettes", and overvaluation of its products to pass on huge fake ITC to certain entities, locat ed all across Delhi NCR region, which are inter-connected and it is not possible for t h e jurisdictional CGST Commissionerate to carry out a thorough investigation due to its limited territorial jurisdiction. He has referred to thirteen investigations being carried out by different authorities as mentioned in t he additional affidavit filed on behalf of respondents No. 1, 3, 4, 5, 6, 7 an d 9. In particular, he has referred to the following investigations bein g carried out by DGGI, Ahmedabad Zonal Unit:-
S.NO Name of authority Date of Scope of investigation who conducted search search
7. DGGI, 13.02.2021 During investigation of certain Ahmedabad non-existent/non-functional Zonal Unit firms, viz. (I) Garuda Enterprise (GSTN- 06DWAPK45 10C 1Z6) (2) Shiva Enterprise (GSTN-
07BBHPS6200B 1Z1)(3) Tirupati Exports (GSTN-
09CCIPP4229C1ZL) (4) Paria Trading (GSTN-Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 3 of 9 Signing Date:28.10.2021 07:31:39
07AYGPH3832B1 ZV) (5) Balaji Exports (GSTN-
09FDZPP5520H1ZT) (6) Royal Trading, Alwar (GSTN-
08DWAPK4510C1Z2) (7) Mahadev World Trade, Alwar (GSTN- 08CAJPK8236P1ZX) etc. were identified by the DGGI, Ahmedabad Zonal Unit. It was found that "Smoking mixture for pipes and cigarettes" was one of the major items shown as supplied in the paper transactions by the nonexistent entities. The subject goods "Smoking Mixture for pipes and cigarettes", a tobacco product falling under CTH 2403 19 10, is highly sensitive from tax evasion angle as it is subject to GST @ 28% and Compensation Cess @ 290% (Total 318%) and any fictitious paper transaction in "Smoking Mixture" is highly rewarding for availment of ITC unlawfully. The evidences available on record indicated a deeprooted conspiracy by some persons who were the masterminds behind this modus operandi to defraud the public exchequer. Investigations also revealed that the petitioner firm M/s Mridul Tobie Inc, Noida is also one of the beneficiaries of fake ITC generated in the name of some of the nonexistent entities by paper transactions Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 4 of 9 Signing Date:28.10.2021 07:31:39 without corresponding supply of goods, including "smoking mixture for pipes and cigarettes". Further, investigation also includes the issue of Overvaluation and Misclassification of the product by M/s Mridul Tobie Inc. Remarks: During search operation, it was observed that the goods seized by the DGGI, Delhi Zonal Unit under panchanama dated 14.01.2021 were not available at the premises. This search was conducted by DGGI, Ahmedabad Zonal Unit with the help of DGGI, Delhi Zonal Unit so the officers of Delhi Zonal Unit were also present during the said search
3. Mr. Satish Kumar, learned counsel for Directorate General of Goods and Service Tax Intelligence in writ petition being SSM Exports vs. Commissioner of Central Excise and Service Tax and CGST Delh i West & Ors., WP(C) 4036/2021 states that domestic tariff area suppliers have shown supply of low valued tobacco and tobacco related produ cts t o cert ain SEZ units in Kandla, Special Economic Zone, at highly over-valued rates so as t o avail ineligible refund of Input Tax Credit sourced fraudulently from m any non-existent entities. The relevant portion of t h e counter affidavit, relied upon by him, is reproduced hereinbelow:-
"5.1 It is most respectfully submitted that specific intelligence was received by Directorate General of GST Intelligence, Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 5 of 9 Signing Date:28.10.2021 07:31:39 Ahmedabad Zonal Unit (hereinafter referred as 'DGGI, AZU' for sake of brevity) that certain entities based in Delhi NCR region of Domestic Tariff Area (hereinafter referred as 'DTA' for sake of brevity), had shown supply of low value tobacco and tobacco related products to certain SEZ units in Kandla Special Economic Zone (hereinafter referred to as 'KASEZ') at highly over valued rates so as to avail ineligible refund of Input Tax Credit (ITC) sourced fraudulently from many non-existent entities.
5.2 On the basis of the said information searches were carried out initially at the premises of M/ s Palmon Export (GSTIN- 24AAHFP4369G2Z3), M/ s Sugandha Exports (GSTIN- 24AJEPB3156B2ZZ) and M/s Shivam Betelnuts Pvt Ltd. (GSTIN- 24AAUCS0489A1Z9) on 18/ 19.09.2019, 24/25.09.2019 and 21.09.2019 respectively, all located in KASEZ and at the premises of certain Domestic Tariff Area suppliers. To verify the contents of intelligence, searches were also conducted at the premises of certain entities from whom these DTA suppliers had claimed to have purchased the goods. The action by the respondents taken initially is pictorially depicted as under:
A B C
Entities Supply to Delhi NCR Supply to SEZ
making based units in
supplies to suppliers Kandla
Delhi NCR
based
suppliers
5.3 M/s SSM Exports, the petitioner firm, is one of such entities, depicted as 'A' having GSTIN 07 AERPG2791R2ZK, from whom certain DTA suppliers namely M/s. SH Exports (07AQIPG3048E1Z4), M/s. J J Dyeing Private Limited (09AADCJ8927H1Z6), M/s. Kumar Sales (09AYEPS1722R1ZS), M/s. Premier Solutions (07 Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 6 of 9 Signing Date:28.10.2021 07:31:39 AJMPB6556D3Z8) and M/s. Shriniwas Exports (07 AWBPK3048B2Z0) etc. have purchased, either directly or through intermediaries, the suspected low value tobacco and tobacco related products falling under HSN 2403. These DTA suppliers have further shown supply of tobacco and tobacco products to the SEZ units. The details of GST /ITC involved in the outward supplies shown to the aforesaid DTA suppliers by the Petitioner directly are as below:
Table : 1 GSTIN of the DTA Name of the DTA Tax involved Supplier Supplier (in Rs.) 07AQIPG3048E1Z4 SH Exports 104311030 09AADCJ8927H126 J J Dyeing Private 66742500 Limited 09AYEPS1722R1ZS Kumar Sales 112161960 07AJMPB6556D3Z8 Premier Solutions 30926000 07AWBPK3048B2Z0 Shriniwas Exports 29700000 TOTAL 34,38,41,490 The DTA suppliers in turn, have claimed ITC of said amount and have claimed/ attempted to claim refund of such ITC against supplies made to KASEZ.
4. Mr. Harpreet Singh, learned counsel for Commissioner of Central Excise and Service Tax and CGST Delhi West, states that enquiry in itiated by his client against M/s Pawanputra Exim, in which the petitioner's premises were also searched, has been forwarded to DGGI, Ahmedabad. In fact, a categorical averment has been made in the said counter affidavit t hat CGST Delhi West Commissionerate is no longer conducting any investigation against the petitioner. The relevant portion of the said affidavit is reproduced hereinbelow:-Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 7 of 9 Signing Date:28.10.2021 07:31:39
"8. That it is most respectfully submitted, since the answering respondent conducted enquiry against M/s Pawanputra Exim who received goods less invoices from the petitioner firm and DGGI, Ahmedabad was already conducting investigation against the petitioner who supplied bogus Bills not only to M/s Pawanputra Exim India but also to various other suppliers falling outside the jurisdiction of CGST Delhi West Commissionerate. Therefore, enquiry against M/s Pawanputra Exim India was forwarded to DGGI Ahmedabad to avoid duplicacy of work vide office letter F.No. DW/GST/AE/PE/Delta/Pawan/621/2019-20/21487 dated 13.08.2020. A copy of the said letter dated 13.8.2020 is annexed here as Annexure R/1.
9. That, the office of the deponent is no longer conducting any investigation against the petitioner."
5. Today, Mrs. Anjali J. Manish, learned counsel states that she be allowed to first argue on facts in W.P.(C) 5816/2021 & W.P.(C) 4036/2021. It is pertinent to mention that Mr. Ganesh, learned sen ior counsel in h is opening arguments in W.P.(C) 2420/2021 h ad argu ed a pu re qu estion of law, namely, whether Ahmedabad Unit of GST Intelligence can claim t o be the proper officer notwithstanding the Circular dated 5th October, 2018 an d claim the right to carry out investigation in respect of t h e pet itione rs even when the enforcement action had already been in itiated by t h e St ate GST authorities at Gautam Budh Nagar. Mr. Ganesh, learned senior counsel clarifies that he is not appearing in W.P.(C) 4036/2021 and W.P.(C) 5816/2021. He reiterates that he in his rejoinder argument will st ick t o h is question of law that he argued in his opening arguments.
6. Right from the day the final hearing commenced all the aforesaid matters were taken up for hearing together. This Court did n ot advice an y counsel to argue in a particular manner or not to argue at all. It is only wh en Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 8 of 9 Signing Date:28.10.2021 07:31:39 the petitioner concluded their arguments that this Court called upon learned counsel for respondents to argue. Today to st ate t hat learned counsel for respondents should confine their arguments to the issue of law or the petitioner should be allowed to argue first in W.P.(C) 5816/2021 and 4036/2021 would amount to 'derailing' the hearing. Moreover, qu estion of law cannot be decided in a vacuum. The facts put forward by the respondents would help the Court in determining the question of law correctly.
7. However, as today learned counsel for the petitioners in W.P.(C) 4036/2021 and W.P.(C) 5816/2021 states that sh e wou ld like t o argu e on facts at some length, list the matter on 22nd November, 2021 for argu ments on behalf of the petitioners.
8. Since, in the interim, investigation by DGGI Ah medabad h as been stayed and in effect no investigation is taking place, this Court, t o balan ce the equities, directs that till further orders, no refunds shall be released to the petitioners.
9. The order be uploaded on the website forthwith. Copy of the order be also forwarded to the learned counsel through e-mail.
MANMOHAN, J NAVIN CHAWLA, J OCTOBER 26, 2021/KA Signature Not Verified Digitally Signed By:JASWANT SINGH RAWAT Page 9 of 9 Signing Date:28.10.2021 07:31:39