The Hon’ble High Court of Jharkhand vide its order dated 09.06.2022 in the matter of M/s Sri Ram Construction Vs. The Union of India, Deputy Commissioner, Superintendent, Central Goods & Service Tax and Central Excise, Range-I, Ranchi in W.P. (T) No. 3402 of 2020, held that the Garnishee proceedings becomes infructuous on appeal being filed against the adjudication orders under Section 107 with mandatory deposit of 10% as required by the Statue.

The Petitioner filed the present Writ Petition seeking directions and praying for quashing/setting aside the Garnishee Notice dated 24.07.2020 issued under Section 79 of the Central Goods & Service Tax Act, 2017, by the respondents without carrying out any adjudication under Section 73 or 74 of the Act, to the bank of the Petitioner for alleged recovery of Government dues amounting to Rs. 4,28.86,464/-.  Further it was prayed to declare the determination of said Government dues, only on the basis of GSTR-1 without giving the benefit of Input Tax Credit, as claimed by it in GSTR -3B, is wholly arbitrary, illegal and contrary to the scheme of CGST Act.  It was also prayed to give directions to the respondent to recall the impugned garnishee order and to fix reasonable installments for the admitted tax due amounting to Rs. 1,14,93,646.91, keeping in view all mitigating factors pertaining to the Petitioner including its financial condition and the widespread COVID-19 virus in the country.

Facts: –

• The Hon’ble Court after considering the facts of the case, and the submissions from the both sides granted interim relief and stayed the recovery vide its order dated 21.01.2021, subject to deposit of Rs. 20 Lakhs. That on the day of hearing, when interim relief was granted. It was contested on the behalf of the petitioner that: –
• The impugned garnishee notice dated 24.07.2020 issued by the respondents upon the Petitioner’s Bank (United Bank of India) has been issued without any adjudication proceedings under Section 73 and 74 of the Act. Further the tax has been computed on the basis of GSTR 1 without giving benefit of ITC claimed through GSTR 3B.
• The Petitioner’s admitted liability is Rs. 1,14,53,646.91/- and the same has been withheld by one MC Nally Bharat Engineering Company Ltd. to the tune of Rs. 5,48,45,307/- even after completion of work awarded. Further the Petitioner has a credit of Rs. 3,04,15,359/- and with respect to dues from MC Nally Bharat Engineering Company, it has moved to NCLT under Section 9 of the Insolvency and Bankruptcy Code, 2016.  However, the said application was dismissed and the petitioner’s appeal against it is pending before NCLAT.
• For the garnishee order issued under Section 79, the petitioner made representations before the Deputy Commissioner, South Division, Ranchi, to submit that the claim of ITC of Rs. 3.04 Cr. cannot be denied without adjudication.
• Reliance was placed on CBIC circular dated 03.04.2020, whereby time limit for completion of compliances was extended to 30.06.2020, and, on Circular dated 01.09.2020, extending the time limit further up to 30.11.2020
• The Petitioner has already deposited Rs. 15 lacs towards tax dues. However, due to COVID -19 situation and the garnishee notice, his business is at a Stand Still.  Therefore, it was prayed to stay the impugned notice.
• Thereafter, two separate adjudication orders came to be passed, in respect of the subject matter of dispute in the writ petition being Order No. 07/GST/RSD/2021-22 dated 09.02.2022 and Order No. 08/GST/RSD/2021-22 dated 16.02.2022 and the Petitioner filed two appeals against said orders under Section 107 of the CGST Act, with the mandatory Pre-Deposit of 10% as required, and, the recovery of the balance amount is deemed to have been stayed.

It was submitted on the behalf of the petitioner that a fresh demand has to be raised in GST APL – 04, if the adjudication order is upheld while disposing of the appeal.  Thus, the impugned garnishee notice cannot be given effect and has become infructuous in view of the stay operating at the appellate stage.

On the other hand, it was admitted on the behalf of the respondents that the Garnishee notice cannot be given effect at this stage and a fresh demand has to be raised in case the adjudication orders are upheld at the disposal of the appeals filed by the Petitioner.

Held: –

The Hon’ble Court after considering the submissions from the both sides and facts of the case as well as the original cause of action raised in the writ petition and the subsequent developments, found that upon deposit of 10% of the disputed tax demand for filing the appeals by the Petitioner, the recovery of rest of the amount is deemed to have been stayed in terms of Section 107(6) & (7) of the CGST Act. Therefore, the Hon’ble Court disposed of the Writ petition holding that the impugned Garnishee notice cannot be given effect and has become infructuous and a fresh demand can be raised in GST APL -04 as per the decision of the Appellate Authority.

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