The Hon'ble High Court of Bombay in Chotu Lal v. Union of india [WRIT PETITION NO.8631 OF 2023, August 26, 2024] dismissed a writ petition challenging an attachment notice under Section 83 of the CGST Act, finding that the petitioner had contradicted himself in various affidavits and was likely playing fraud on both the Revenue and the Court. The Court held that this was not a case for exercising jurisdiction under Article 226 of the Constitution of India.
Facts of the Case:
The petitioner, Chotu Lal, approached the High Court of Bombay claiming to be aggrieved by an attachment notice issued under Section 83 of the CGST Act. The notice had resulted in the provisional attachment of his bank account with Yes Bank Limited, in which substantial deposits of approximately Rs. 21 crores had been made.
On January 17, 2023, the petitioner made a representation under Rule 159(5) of the CGST Rules objecting to this provisional attachment. The petitioner contended that respondent no. 2 failed to consider this representation properly. However, the respondents presented a different sequence of events. They stated that a notice of personal hearing regarding the representation had been issued, and the petitioner was also summoned on January 18, 2023, to appear on January 30, 2023, along with documents supporting his business activities. The petitioner neither appeared for the hearing nor submitted any documents.
In their affidavit, the respondents revealed that the petitioner had written a letter dated January 10, 2023, claiming to be engaged in cryptocurrency trading, which he argued was conducted digitally and did not fall within the purview of GST. The respondents scheduled a personal hearing for January 30, 2023, regarding his representation against the attachment notice. When the petitioner failed to appear or communicate, they informed him through a letter dated February 3, 2023, that no further action could be taken on his representation.
A significant development occurred when CGST officers attempted to serve the decision of the Competent Authority at the petitioner's stated business address in Mumbai. They found no such firm or person operating from that location, and a Panchnama dated June 1, 2023, recorded this fact. Further investigation revealed that the shop had been vacant since August 2022 when one Veerpal Singh Banjara had vacated it.
The investigation then led to the petitioner's residential premises in Chhatarpura,
Baran, Rajasthan. During a visit on May 29, 2023, CGST officers recorded the petitioner's statement under Section 70 of the CGST Act. In this statement, the petitioner made several revealing admissions:
He was educated only up to 10th standard
His family was engaged in agriculture
He was unaware of any firm being run in his name in Mumbai
He had visited Mumbai in 2021 with his cousin Dileep Singh
He had opened a bank account for Rs. 10,000 in cash and returned to his village
He had never undertaken any work in Wisemax Enterprises
He did not know about the crores of rupees transacted in the bank account
He did not know how to operate a computer or understand cryptocurrency
He admitted to making a mistake by opening the bank account in greed for Rs. 10,000
The respondents took the investigation further by sending various documents bearing the petitioner's signatures for forensic examination. The forensic expert's report dated June 22, 2023, concluded that while the signatures on the May 29, 2023 statement and bank account opening form matched, those on the January 10, 2023 letter (containing objections under Rule 159(5)) and the verification form in a previous writ petition did not match.
In his affidavit in rejoinder, the petitioner attempted to explain these discrepancies by claiming that GST officers had harassed and abused him during their visit, forcing him to sign a prepared statement without explaining its contents. He claimed he signed under threat of arrest.
The court's examination revealed several additional inconsistencies:
The petitioner's age was stated as 22 years in the cause title but 24 years in the verification clause
He signed in Hindi in the petition but in English in the rejoinder
The verification clause stated "solemnly declared at Mumbai" but the notary public was from Palghar
His permanent address was stated to be in Rajasthan in the rejoinder, while the petition claimed he was carrying on business in Mumbai
Held by the Court:
The Hon'ble High Court of Bombay in Chotu Lal v. Union of india [WRIT PETITION NO.8631 OF 2023, August 26, 2024] held that:
The Court observed numerous inconsistencies and contradictions in the petitioner's statements and documents, which raised serious doubts about the authenticity of his claims. It noted that in the cause title of the petition, the petitioner's age was stated as 22 years, but in the verification clause, it was mentioned as 24 years. Furthermore, the petitioner had signed in Hindi in the petition, but there was no endorsement of anyone having read or translated the contents, suggesting that the petitioner did not understand English. The Court also pointed out that the verification clause stated "solemnly declared at Mumbai," whereas the notary public was from Palghar, adding another layer of inconsistency.
The Court held that the address given by the petitioner in the petition was found to be non-existent when CGST officers tried to serve a notice there. This fact, coupled with the petitioner's changing statements about his place of residence and business, significantly undermined his credibility. The Court observed that in the rejoinder, the petitioner stated his permanent address was in Rajasthan, whereas in the petition he claimed to be carrying on business in Mumbai.
The Court opined that these contradictions, when considered alongside the respondents' allegations of the petitioner being non-genuine, strongly indicated that the petitioner was playing fraud not only on the Revenue but also on the Court itself. The Court emphasized that such behavior was unacceptable and went against the principles of honest and truthful representation before the judiciary.
Based on these observations, the Court held that this was not a case where it should exercise its jurisdiction under Article 226 of the Constitution of India. It stated that the writ jurisdiction is a discretionary power of the High Court, meant to be exercised in cases where there is a clear violation of fundamental rights or statutory provisions, and not in cases where the petitioner approaches the Court with unclean hands.
Consequently, the Court not only dismissed the petition but also took the extraordinary step of directing the authorities to conduct a serious investigation into everyone involved in filing this petition, as well as three other related writ petitions. The Court stated that this investigation should aim to uncover the truth behind what it perceived as a comprehensive fraud scheme. To underscore the gravity of the matter, the Court ordered the petitioner to pay costs of Rs. 5 lakhs to respondent no. 2 within 30 days, a significant punitive measure rarely seen in such cases.
The Court concluded by emphasizing that the entire matter appeared to be a fraud on the judicial process and the tax authorities. It directed the relevant authorities to take all necessary legal actions against all individuals involved, including those who may have aided and abetted in forgery and fraud. This strong stance by the Court sends a clear message about the serious consequences of attempting to misuse the writ jurisdiction of the High Court, especially in matters related to taxation and financial impropriety.
Relevant Sections:
Section 83 of Central Goods and Services Tax Act, 2017/ Maharashtra Goods and Services Tax Act, 2017
Rule 159(5) of Central Goods and Services Rules, 2017/ Maharashtra Goods and Services Tax Rules, 2017
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