Bombay High Court
FOODLINK F AND B HOLDINGS INDIA PRIVATE LIMITEDversusUNION OF INDIA AND ORS
- Decided
- Disposal
- Disposed Off
Holding
A special audit under Section 66 of the CGST Act, once completed, is final and cannot be reopened; therefore the request for an additional audit report is denied and the writ petition is rendered infructuous.
Summary
Foodlink F&B Holdings filed a writ petition under Article 226 challenging the constitutionality of Section 83 of the CGST Act and seeking to quash eight attachment orders dated 27‑02‑2024 that froze 36 of its bank accounts. The High Court earlier ordered a special audit under Section 66 of the CGST Act, which was carried out by Chartered Accountant Sagar Shah, who authenticated over 99% of the credits but could not verify Rs 10.28 crore. The petitioner then moved an interim application for an additional audit report on the unverified amount. The respondents opposed, arguing that the audit was final, the attachment orders had been lifted, and no further audit was warranted. The Court held that a special audit under Section 66 is a final determination and cannot be reopened; consequently, the interim application was dismissed and the writ petition was declared infructuous as the attachments were already released.
Issues considered
- The validity and constitutionality of Section 83 of the CGST Act under Articles 14, 19 and 21 of the Constitution.
- Whether a fresh special audit report can be ordered after a special audit under Section 66 has been completed.
- Whether the attachment orders dated 27‑02‑2024 can be set aside when the accounts have already been de‑freezed.
- Whether the petitioner is entitled to an additional audit of the Rs 10.28 crore unverified amount.
Legislation cited
- Central Goods and Services Tax Act, 2017 — s. 66, 70, 83
- Constitution of India — s. Article 14, Article 19, Article 21
Subjects
- CGST Act
- Section 83
- Section 66
- special audit
- bank attachment
- writ petition
- Article 226
- interim application
- infructuous
Judgment
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.3406 OF 2024
WITH
INTERIM APPLICATION NO.1695 OF 2026
Foodlink F&B Holdings (India) Private Limited,
3rd floor, 301, Safal Pride, Sion Trombay Road,
Deonar Gaon, Chembur, Mumbai-400 088. Petitioner
versus
1. The Union of India through Ministry of Finance,
2. The Commissioner of CGST & E, Navi Mumbai,
3. The Superintendent of CGST & CE, Navi Mumbai,
4. State Bank of India, Branch at Corporate Park,
Sion-Trombay Road, Mumbai,
5. State Bank of India, branch at Nebula Apartment,
Andheri (W), Mumbai-400 058,
6. IDBI Bank Ltd; Branch at Deonar,
7. Kotak Mahindra Bank Ltd, Branch at
Chembur, Mumbai,
8. The Cosmos Co-op. Bank Ltd, Branch at
Percepolis premises COHS, Vashi, Navi Mumbai.
9. HDFC Bank Ltd, Branch at Chembur (HDFC 0000425),
10. HDFC Bank Ltd, Branch at Chembur (HDFC 0000013),
11. Yes Bank Ltd, Branch at New Link Road,
Andheri (W), Mumbai-400 053. Respondents
_______
Mr.Vikram Nankani, Senior Advocate, with Mr.Prakash Shah, Senior Advocate,
with Mr.Mihir Mehta, Mr.Vikas Poojary i/by PDS Legal for Petitioner.
Mr.Karan Adik with Ms.Megha Bajoria, Mr.Chirag Sawant, Ms.Sangeeta Yadav for
Respondents-State
_______
CORAM: G. S. KULKARNI &
AARTI SATHE, JJ.
Digitally signed by
DATE: 4th March 2026
MANISH MANISH
SURESHRAO
SURESHRAO THATTE
THATTE Date: 2026.03.27
17:20:24 +0530
M.S.Thatte
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P.C.
1. This petition under Article 226 of the Constitution of India is filed
praying for the following substantive reliefs: -
“(a) this Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature
of Certiorari or any other writ, order or direction under Article 226 of the
Constitution of India declaring Section 83 of CGST Act, 2017 as it exists today, as
ultra vires of Articles 14, 19 and 21 of the Constitution of India, for being wholly
unreasonable, unguided, without any accountability for its misuse and manifestly
arbitrary; or in the alternative, this Hon'ble Court may please read down the extent,
scope and application of Section 83 by explaining, guiding and delineating the same
in a just manner with such cautions, pre-requisites and consequences for abuse
thereof, so as to save it from unconstitutionality;
(b) this Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature
of Certiorari or any other writ, order or direction under Article 226 of the
Constitution of India calling for the records pertaining to the Petitioner's case and
after going into the validity and legality thereof to quash and set aside the eight
impugned orders all dated 27.02.2024 passed by Respondent No. 2 purporting to
attach the bank accounts of the Petitioner under Section 83 of the Act (Exhibits Al
to A8);
(c) this Hon'ble Court be pleased to appoint Chartered Account or Costs
Accountant to conduct a Special Audit in terms of Section 66 of the CGST Act and
examine and verify the correctness of the Reconciliation submitted with
representations dated 25.10.2023, 29.11.2023, 20.12.2023, 15.01.2024, 23.01.2024,
and 15.02:2024 of the Petitioner with their GST returns, Bank Statements, Books of
Accounts, Electronic Credit Ledger and submit its report before this Hon'ble Court;
(d) That this Hon'ble Court be pleased to direct the Respondent No. I to hold an
inquiry into the conduct and role of the officials who were instrumental in
continuing to act on an information found to be false, and instrumental in draconian
attachment of bank account without even examining and verifying the correctness of
the Reconciliation submitted with representations dated 25.10.2023, 29.11.2023,
20.12.2023, 15.01.2024, 23.01.2024, and 15.02.2024 of the Petitioner in wholly
arbitrary manner;
(e)this Hon'ble Court be pleased to issue writ of Prohibition or any other
appropriate writ in the nature of Prohibition ordering and directing the Respondents
more particularly Respondent No. 2, not to debit any amount from the bank
accounts which are under attachment vide impugned orders dated 27.02.2024
passed by Respondent No. 2;
(f) that pending the hearing and final disposal of the above Petition and subject to
such terms and conditions as may deem just and expedient, this Hon'ble Court be
pleased to stay the effect and operation of impugned orders dated 27-02-2024
passed by Respondent No. 2”
M.S.Thatte
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2. This Petition was heard on the earlier occasions when orders have been
passed. A Co-ordinate Bench of this Court passed two detailed orders dated 14 th
March 2024 and 28th March 2024, whereby a special audit of the Petitioner’s
accounts was directed to be undertaken by a Chartered Accountant. The relevant
orders dated 14th March 2024 and 28th March 2024 are reproduced below: -
Order dated 14th March 2024
“1. Having heard the learned counsel for the petitioner for some time, and
considering the contention of the petitioner in respect of the 37 bank accounts,
whether the funds were transferred from different accounts and disclosure was made
in the G.S.T. return, and whether the amount which is objected by the department is
the amount in the hands of the petitioner on which the GST was not paid, will be
required to be verified. In our opinion, without prejudice to the investigation, such
verification be conducted with the assistance of an independent Chartered
Accountant to be appointed by the Department. The petitioner shall render all
cooperation, and all the material on which the petitioner intends to rely on to show
interse transfer in these bank accounts and any other material that may be produced
by the petitioner be gone into. The fees of the Chartered Accountant shall be borne
by the petitioner.
2. The Chartered Accountant shall form a prima facie opinion on the material which
would be placed for his consideration by the advocate for the petitioners in regard to
the observation as made in the order dated 11th March 2024 passed by the
Commissioner CGST and Central Excise, Navi Mumbai, Mr.Deepak Bhilegaonkar.
3. Let the Chartered Accountant submit a report to the Department, which be
placed before the court on the adjourned date of hearing.
4. Accordingly, stand over to 26th March 2024, High on Board.
5. All contentions of the parties are expressly kept open.
6. Parties to act on an authenticated copy of this order.”
Order dated 28th March 2024
“1. In the backdrop of our order dated 14 th March 2024, the independent Chartered
Accountant, Mr. Sagar Shah, has furnished a report dated 24 March 2024 addressed
to the Commissioner CGST and Central Excise, Navi Mumbai. The same is also
placed on record as annexure to the affidavit in reply dated 26 March 2024 of Mr.
Gurtesh Matharu, Deputy Commissioner, CGST and Central Excise, filed on behalf
of the Respondents.
M.S.Thatte
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2. We have heard the learned counsel for the parties on the said report. Some of the
relevant issues of discussion on the findings as recorded in the said report of the
Chartered Accountant can be noted from the following contents of the said report,
which reads thus:
"2.23 Given the limited scope of work for our appointment, we have not
verified transactions other than inter-bank transfers.
Our preliminary view with respect to "whether the amount which is rejected
by the department is the amount in the hands of the petitioner on which GST
was not paid" is as under –
Given that there are bank accounts other than 39 Bank Accounts
considered by the Department, the value of INR 722.18 Cr needs to
be re-calculated.
Given the inter-bank transfers within 59 bank accounts and other
credits on account of FD Closures, investments received, etc. we
cannot ascertain the source of funds for individual transactions. This
is in consonance with the discussions with the petitioner vide para
2.21.
Given that there are inter-bank transfers and other receipts in the
nature of FD Closures, investments received, etc the value of INR
562.18 Cr derived as undeclared sale proceeds needs to be re-calculated
in case the source of funds and examination of movement of funds
from accounts outside Maharashtra can be ascertained
The summary of our view presented above is as under: -
Whether INR 512 Crores represent inter-bank transfers - Basis the bank
statements reviewed and our detailed comments provided in para 2.1 to
para 2.14, we believe that inter-bank transfers as mentioned by the
petitioner are reflected in the bank statements and INR 512 represents
inter-bank transfer of funds which are transferred from such different
accounts belonging to the petitioner. It is imperative to note that
individual source of funds for such inter-bank transfers could not be
ascertained;
Whether disclosure of said inter-bank transfers is made in GST Returns
- Basis our detailed comments provided in para 2.15 and 2.16, we
believe that said inter-bank transfers of INR 512 Crores are not
disclosed in GST returns; and
Whether the amount which is objected by the department is the amount
in the hands of the petitioner on which GST was not paid - Basis our
detailed comments provided in para 2.17 to para 2.23, we believe the
amount to be taxed in the hands of the petitioner needs to be re-
calculated after considering the additional bank accounts and such other
subtractions as may be deem fit in case the source of funds can be
ascertained which in the given case has not be ascertained and is in
consonance with the comments of the petitioner vide para 2.21."
M.S.Thatte
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3. Considering such apprehension as expressed in the report, Mr. Nankani, learned
Senior Counsel for the petitioner, on instructions, would fairly submit that the
petitioner is willing to show its bona fides and the said Chartered Accountant, Mr.
Sagar Shah, himself can undertake the exercise to check the credibility and
authenticity of the inter-bank transactions, which according to the petitioner are
amounts which are accounted for GST and which are the basis on which the
department has apprehension that the GST has been evaded.
4. We do not intend to dwell on such issues as it is agreeable to the parties that this
exercise could be undertaken by the same Chartered Accountant. Let the petitioner
furnish the materials to justify the inter-bank transactions.
5. We accordingly adjourn the proceedings for a period of four weeks. By such time,
the entire exercise can be undertaken by the Chartered Accountant. The petitioner
shall cooperate in providing every information which the Chartered Accountant
would require to ascertain such claim being made by the petitioner. The proceedings
before the Chartered Accountant shall be held in co-operation by both the sides. Let
the report of the Chartered Accountant be placed on record, so that further
appropriate orders can be passed on the adjourned date of hearing.
6. Accordingly, stand over to 29th April 2024.
7. Needless to observe that the petitioner shall, in the meantime, cooperate in any
investigation which is being undertaken by the department. In the event the
department is of the opinion that the petitioners are not co-operating, they are
entitled to approach this court by an appropriate application for any action, they
intend to take against the petitioner and its directors etc.”
3. Pursuant to the above orders, a special audit under Section 66 of the
Central Goods and Services Tax Act, 2017 (CGST Act) was undertaken and the
Chartered Accountant vide his email dated 26 th April 2024 submitted his report. It
is the Petitioner’s contention that the Chartered Accountant in his report has
opined that out of the total credits of Rs. 1197 Crores, he was able to triangulate Rs.
1185.39 Crores (more than 99%), and the same appears to be credible and
authentic. However, in regard to the balance credits of Rs. 10.28 Crores (less than
1% of the total credits), the Chartered Accountant was not able to authenticate the
same. The Petitioner has therefore filed the aforesaid Interim Application No.
1695 of 2026 praying for the following reliefs: -
“(a) this Hon'ble Court be pleased to direct the Respondents to call for an additional
M.S.Thatte
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report from the Learned Chartered Accountant Mr. Sagar Shah, at Petitioner's costs,
qua the entries relating to Rs. 10.28 crores referred in paragraph 15 of this IA and
explained in detail in the Petitioner's affidavit dated 29.04.2024 within 8 weeks
from the date of Order of this Hon'ble Court;
(b) For such further and other orders as this Hon'ble Court may deem fit and proper
in the facts and circumstances of the case;”
4. This Interim Application is placed on board for hearing today. Before
deciding the present Interim Application along with Writ Petition No. 3406 of
2024, it would be beneficial to set out certain relevant facts: -
i. The Petitioner is challenging in the Writ Petition the legality and
validity of eight purported orders, all dated 27 th February 2024, passed by
Respondent No. 2, (hereinafter collectively referred to as the impugned attachment
orders), issued under Form DRC-22, provisionally attaching the bank accounts of
the Petitioner maintained with Respondent Nos. 4 to 11, and directing Respondent
Nos. 4 to 11 not to allow debit from the bank accounts mentioned therein without
prior permission.
ii. On 8th August 2023, various teams from the office of Respondent
No. 2 carried out search at three premises of the Petitioner and a Panchanama to
that effect was drawn. On 23rd August 2023, the Petitioner submitted the list of its
49 bank accounts via email.
iii. On 24th August 2023, other details and documents were submitted
by the Petitioner, as required by Respondent No. 3. On 29 th August 2023, the
Petitioner submitted bank statements of operative accounts, non-operative
accounts and list of all bank account numbers maintained by the Petitioner. On
12th September 2023, on the instructions of the Respondents, the Petitioner also
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submitted details regarding IDBI bank account numbers and bank account
summary for the Financial Years (FY) 2021-2022 and 2022-2023.
iv. Between the period 15th September 2023 to 5th October 2023, the
Petitioner provided further additional details as sought by Respondent No. 3. On
11th October 2023, Respondent No. 3 issued letters to several clients or customers
of the Petitioner, as well as to their other investors informing them regarding the
investigations being conducted qua the Petitioner and seeking various details from
them purportedly under Section 70 of the CGST Act.
v. On 20th October 2023, defamatory news articles were published in
Sprouts and News Today 24x7.com by one Mr. Unmesh Gujarati against the
Petitioner, which adversely affected the Petitioner's repute.
vi. On 19th December 2023 and 21st December 2023, Suit (Lodging)
No. 34269 of 2023, was filed by the Petitioner before this Court, and vide orders
of even date, this court was pleased to restrain the private defendants therein,
including the said Shri Unmesh Gujarati, from publishing information except
truthful reporting of the court proceedings.
vii. On 23rd October 2023, a firm of Chartered Accountant Jain Ambavat
& Associates LLP issued report on the inter-bank transfers within the accounts of
the Petitioner for FY 2021-2022 and FY 2022-2023. On 25 th October 2023,
Petitioner submitted details of all the bank accounts, bank statements and also
reconciliation of GST returns with bank statements and books of accounts and
other documents as desired by Respondent No. 3, along with the certificate issued
by the Chartered Accountant firm (Jain Ambavat & Associates LLP) certifying the
M.S.Thatte
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inter-bank transactions and list of all bank accounts maintained by the Petitioner
for FY 2021-2022 and FY 2022-2023.
viii. On 26th October 2023, the details of the inter-bank transfers in the
prescribed format as given by Respondent No. 3 were submitted by the Petitioner.
Later, on 29th November 2023 and 8th December 2023, upon instructions of the
Respondents, further details were provided by the Petitioner for FY 2020-2021.
The Chartered Accountant firm also issued a report on the inter-bank transfers
within the accounts of the Petitioner in FY 2020-21.
ix. On 11th December 2023, Mr. Mahesh Patil, an officer of the
Petitioner, was taken in custody and were not allowed to leave the office of
Respondent No. 3. It is the Petitioner’s contention that his statement was extorted
under threat and coercion, and as per the dictates of Respondent No. 3. Without
obtaining any authorization, arrest of Mr. Patil was made and he was detained
overnight. Thereafter, bail proceedings were initiated in so far as Mr. Patil was
concerned and Mr. Patil was enlarged on bail by the Magistrate on 30 th December
2023.
x. On 20th December 2023, the Petitioner, with supporting documents
duly submitted that the case sought to be made out by Respondent No. 3 against
the Petitioner was totally false. On 21st December 2023, the General Manager
Finance of the Petitioner, Shri Manoj Jain, who was asked to assist
Respondent No. 3 in verification of reconciliation, who had joined the Petititoner
in December 2022, submitted his resignation. It is the Petitioner’s contention that
he was immediately summoned to appear on 22 nd December 2023, and his
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statement was recorded. The Petitioner on 15th January 2024 once again made a
written representation before Respondent No. 2.
xi. On 18th January 2024, Respondent No. 3 issued summons seeking
appearance in his office on 19 th January 2024 at 11 AM of one Mrs. Priya Gogate,
Director, Public Relations, of the Petitioner. It is the Petitioner’s contention that
Respondent No. 3 in its malafide investigation carried out a search on 19 th January
2024, but pertinently at the time of search, Mrs. Gogate was not at the premises.
On 23rd January 2024, the Petitioner, upon instructions of Respondent Nos. 2 and
3, submitted various documents and made detailed representations.
xii. On 5th February 2024, vide summons, Mr. Vijay Punjabi was
directed to appear in person on 9 th February 2024 before Respondent No. 3 to give
his oral evidence. Again, on 9 th February 2024, Mr. Vijay Punjabi was directed to
appear in person on 22 nd February 2024 before Respondent No. 3 and give his oral
evidence. Further, again summons were issued to other employees of the Petitioner,
namely Ms. Priya Gogate and Mr. Prateek Patel, to appear before Respondent No.
3 on 20th February 2024 and 26th February 2024.
xiii. On 9th February 2024, 12th February 2024 and 13th February 2024,
the Petitioner requested for exemption of Mr. Mahesh Patil, Mr. Sanjay Vazirani,
Ms. Priya Gogate and Prateek Patel for appearance and reply to the summons. On
15th February 2024, the Petitioner submitted various documents and made detailed
representation. The employees of the Petitioner, namely Mr. Vijay Punjabi,
appeared before Respondent No. 3 and his statement was recorded.
xiv. Further on 22nd February 2024, another summons was issued to one
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Mr. Amit Jhaveri, who appeared before Respondent No. 2 and his statement was
also recorded. Another summons was also issued to Mr. Sanjay Manohar Vazirani,
calling upon him to appear before Respondent No. 3 for tendering his oral
evidence on 1st March 2024. Thereafter, on 27th February 2024, the impugned
attachment orders were issued by Respondent No. 2., and on 29 th February 2024,
the residential premises of one Mr. Prateek Patel, the finance head of the Petitioner,
were searched by the officers of the CGST Ahmedabad-South and the office laptop
of Mr. Patel was seized. Mr. Prateek Patel was arrested by Respondent No. 3 from
his house at Ahmedabad. Later on, applications were moved before the Additional
Chief Metropolitan Magistrate to release Mr. Patel and thereafter, an application
opposing the remand and consequential release of Mr. Patel from illegal arrest was
also filed before the Additional Chief Magistrate, and thereafter proceedings were
taken out for the release of Mr. Patel before the learned Court of 6 th Judicial
Magistrate, First Class, Vashi, Mumbai. Mr. Patel had also filed an application
seeking bail in learned Court of Judicial Magistrate, First Class, Vashi, Navi
Mumbai, who extended the remand.
xv. It is against the impugned attachment orders dated 27 th February
2024 that the present writ petition has been filed on various grounds as mentioned
in the aforesaid writ petition. By way of the impugned attachment orders issued in
Form GST DRC-22, 36 bank accounts of the Petitioner were provisionally
attached, which is the subject-matter of challenge in the present petition.
xvi. As stated aforesaid, detailed orders dated 14 th March 2024 and 28th
March 2024, reproduced in paragraph 2 above, appointing a special auditor have
M.S.Thatte
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been passed on the basis of prayers made by the Petitioner that considering the
complexity of accounts in so far as the Petitioner is concerned, and the fact that the
Petitioner holds number of bank accounts, and that there were inter-bank transfers,
specifically by way of prayer clause (c), a relief is sought that a Chartered
Accountant or Costs Accountant be appointed to conduct a special audit in terms
of Section 66 of the CGST Act and examine and verify the correctness of the
reconciliation submitted through representations dated 25 th October 2023, 29th
November 2023, 20th December 2023, 15th January 2024, 23rd January 2024 and
15th February 2024 of the Petitioner with its GST returns, bank statements, books
of accounts, electronic credit ledger and submit his report before this court.
xvii. The Petitioner, by way of affidavit dated 26 th March 2024 submitted
the details of the correspondence undertaken by it with the Chartered Accountant
appointed for the purposes of the special audit under Section 66 of the CGST Act.
The Respondents, by an additional affidavit of even date further placed on record
the report of the Chartered Accountant dated 24 th March 2024 pursuant to the
order of this Court dated 14th March 2024. Further, an affidavit-in-rejoinder dated
27th March 2024 was filed by the Petitioner in response to the additional affidavit
of the Respondents dated 26th March 2024.
xviii. The Petitioner, therefore, has filed the aforesaid Interim Application
No. 1695 of 2026 after the special audit has been conducted by the Chartered
Accountant. In the its Interim Application, it is the Petitioner's contention that the
Chartered Accountant has been able to verify only information or accounts in so
far as the amount of Rs. 1,197 crores is concerned, and he was able to triangulate
M.S.Thatte
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only Rs. 1,185.39 crores, which is more than 99% of the total credits, and the same
appeared to be credible and authentic. However, with respect to the balance credits
of Rs. 10.28 crores, i.e., less than 1% of the total credits, the Chartered Accountant
was not able to authenticate the same. Hence, it is the Petitioner's contention by
way of the Interim Application that this court be pleased to further direct the
Respondents to call for an additional report from the Chartered Accountant, Mr.
Sagar Shah at the Petitioner's cost qua the entries relating to 10.28 crores, referred
in paragraph 15 of the Interim Application, and explained in detail in the
Petitioner’s affidavit dated 29th April 2024, within eight weeks from the date of the
order of this Court.
5. We have heard learned counsel, Mr. Vikram Nankani, Senior Advocate,
along with Mr. Prakash Shah, Senior Advocate, Mr. Mihir Mehta, and Mr. Vikas
Poojary on behalf of the Petitioner. We have also heard Mr. Karan Adik, Ms.
Megha Bujaria, Mr. Chirag Sawant and Ms. Sangeeta Yadav on behalf of the
Respondents. With the assistance of learned counsel for the parties, we have
perused the record of both the proceedings, accordingly, we proceed to decide the
interim application and the Writ Petition.
6. It is Mr. Nankani’s contention, that since the Chartered Accountant has not
been able to match the entire entries, it would be in the interest of justice that
another additional report from the Chartered Accountant be called for. He has also
submitted that the Petitioner will cooperate and furnish all additional details as
required by the learned Chartered Accountant, if this additional report is called for
by this court. It is his contention that this exercise be carried out so that the entire
M.S.Thatte
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picture insofar as the special audit is concerned will be clear and the Petitioner will
be bound by the report as given in the special audit. It is therefore his contention
that the additional report from the special auditor will serve the aforesaid purpose.
7. Per contra, learned Advocate on behalf of the Respondents, Mr. Adik, has
submitted as follows.:-
i. It is submitted that the Interim Application filed by the Petitioner to
direct the Respondents to call for an additional report from the learned Chartered
Accountant Mr. Sagar Shah at the Petitioner's cost deserves to be dismissed in so
far as the said prayer for submitting an additional report qua the entries relating to
Rs. 10.28 crores referred in para 15 of the Interim Application. It is his contention
that the Petitioner has suppressed vital details and facts in the aforesaid Interim
Application inasmuch as the Petitioner has not disclosed in the said Interim
Application that the Petitioner intends to come out with an Initial Public Offering
(IPO).
ii. He has further submitted that the Petitioner ought to have disclosed
true, full and clear purposes for the present Interim Application, which has been
taken out almost after a gap of two years from the date the orders dated 14 th March
2024 and 28th March 2024 passed by this Court. It is also his submission that the
present writ petition is rendered infructuous inasmuch as the present petition has
been filed to challenge the legality and validity of eight orders dated 27 th February
2024, i.e. the impugned attachment orders in Form DRC-22, provisionally
attaching the 36 bank accounts of the Petitioner, and the said attachment has now
been lifted as the Petitioner’s bank accounts stand defreezed as per emails of the
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Department to the banks dated 10th February 2026 and 12th February 2026.
iii. It is further his submission that the Chartered Accountant's appointment
as per Section 66 of the CGST Act was agreed upon by both sides to:
a. Form a prima facie opinion,
b. To reflect a cooperative approach adopted by both the parties, namely the
Revenue authorities and the taxpayer,
c. For the purposes of bank attachments, and
d. Without prejudice to the investigation.
The said audit report was not for the purposes of giving a clean chit to the
Petitioner and the Petitioner was under a mistaken belief that he was getting a
special SIT or a special court-monitored investigation.
iv. He has further submitted that the Chartered Accountant’s report was
primarily for the purposes of the bank attachment proceedings and since now the
bank attachment itself does not survive, the additional report is not called for. He
has also submitted that a lot of other material has been gathered and unearthed
during the investigation and the Chartered Accountant, Mr. Sagar Shah, is not a
substitute for investigation, nor is he an adjudicating authority as tried to be
portrayed by the Petitioner.
v. The relevant paras of the affidavit in reply dated 25th February 2026
filed on behalf of the respondents by one Mr. Ranbir Bose, Joint Commissioner of
CGST and Central Excise are reproduced below.
“8. Hence it can be seen that the CA's appointment was by both sides, for (i) a
prima face opinion, and (ii) to give a picture in cooperation by both sides i.e.
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revenue & tax payer, (iii) for the purposes of bank attachments, (iv) without
prejudice to the investigation. I say that the petitioner is in some form of a mistaken
belief, or an erroneous assumption, that he is getting a special S.I.T., or a Special
Court Monitored Investigation. I say and submit that there is no special treatment
for this Petitioner, nor is he deserving the same. I say that the lst or 2nd C.A report is
not a carte blanche to the Petitioner and can be considered during the adjudication
of the SCN if the Petitioner wishes to contest the proceedings.
9. Further, it would not be out of place to mention that the financial
managers/ accounts heads of the Petitioners were arrested basis several transactions
undertaken by them some of which were also found with unauthorised transaction,
(Forex). The petitioner has filed Criminal WRIT Petitions, wherein no relief as
prayed for is granted by this Hon'ble Court and over 2 hearings have taken place.
12. I say that the matter has moved forward and the investigation in the case
has been concluded. Basis the reply of the petitioner to the DRC-01A and any
further investigation, a Show Cause Notice may be issued to the party and it can rely
on any documents, it so chooses for adjudication. The C.A. report was for the
purposes of Bank Attachment proceedings. A lot of further and other materials has
been gathered and unearthed during investigation and the C.A Mr. Sagar Shah is not
a substitute for investigation nor is an adjudicating authority as tried to be portrayed
by the Petitioner.
13. This Hon'ble court vide order dt. 28.03.2024 directed the department
that C.A. Mr. Sagar Shah himself should undertake the exercise to check the
credibility and authenticity of the interbank transactions, which according to the
petitioner are amounts which are accounted for GST and which are the basis on
which the department has apprehension that the GST has been evaded. To proceed
further in the investigation letter's dt. 06.09.2024 and reminder dt. 19.04.2024
were written to the petitioner (Exhiblt B) where-in the petitioner was requested to
submit all taxable invoices i.r.o. turnover declared since 2020 till March 2023 for
verification as complete compliance in this regard has not been made after repeated
request.
14. The petitioner vide letter dt 24.09.2024 (Exhibit C) submitted their reply
where-in they have categorically stated that "Chartered Accountant, Shri Sagar Shan
had undertaken the detailed exercise to check the credibility and authenticity of the
inter-account transactions and to ascertain - (i) Source of funds for all Bank
Accounts in India, and (ii) verification of Sale Invoices"
15. First request letter dt 01.10.2024 (Exhibit D) was written to CA Sagar
Shah where-in he was requested to provide the following point wise details to this
office:
a. As to whether M/s Foodlink F&B (Holdings) Put Ltd have submitted all
Taxable and Non-Taxable invoices in respect of the total aggregate turnover
mentioned in the report at. 26.04.2024, if so, please provide the copies of
such invoices submitted to you for verification.
b. Hon'ble Bombay High Court has categorically asked to undertake the
exercise to check the credibility and authenticity of interbank transactions
from GST point of view which according to the petitioner are amounts
which are accounted for GST) for such verification the amount which is
claimed as inter account transfer should have origin in a taxable or non-
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taxable Invoice. Hence you are requested to clarify as to whether each
taxable or non-taxable invoice in this regard have been verified by you or
not and further submit the copies of invoices verified by you.
16. CA Sagar Shah vide letter dt 08.10.2024 (Exhibit E) have submitted his
reply where-in he only confirmed that only 250 Invoices on sample basis were
verified by him further clarification as per the Hon ble High Court mandate given
to him was not forth coming from his reply.
17. Second letter dt 17.10.2024 was written to CA Sagar Shah to provide
further clarification in line with the Hon ble High Court Mandate where-in he was
categorically asked to undertake the exercise to check the credibility and
authenticity of interbank transactions from GST point of view which according to
the petitioner are amounts which are accounted for GST)
18. CA Sagar Shah vide his letter dt 23.10.2024 (Exhibit F) submitted his
reply where-in he restricted himself and did not clarify/offer his comments as to
whether he has verified credibility and authenticity of inter-account transfers
which according to the petitioner are the amounts which are accounted for GST
and chose to remain silent on the most relevant part of the Hon'ble Court Order
and the actual case of the department where-in till date sources of Such Inter-
account Transfers were not provided by the petitioner.
19. Accordingly, Statement dt 04.11.2024 (Exhibit G) of CA Sagar Shah under
Section 70 of the CGST Act, 2017 was recorded to examine the facts relevant from
GST point of view where-in he deposed as under:-
a. He did not find source of fund of such inter-account transfers during the
course of his first verification report at 24.03.2024 (Exhibit H)
b. He confirmed that to the best of his knowledge & understanding
Source of fund of inter-account transactions at individual transaction
level can't be determined & thus not verified during course of second
verification report dt 26.04.2024 (Exhibit I)
c. He confirmed that in his view the entire 517 Crores cannot qualify
to be treated as "not taxable". To identify the source of funds for
individual transactions and determining the taxability in respect of
said inter-account transfer all the invoices will have to be verified to
categorize the inter-account transfer as "Non-Taxable" or otherwise.
d. He confirmed that he had verified only 250 Invoices on sample
basis shared by the advocates of the petitioner vide email dated 20th
April 24 & 24th April 2024.
e. He confirmed that the source of Funds for the Inter-account
transactions for Rs.517 Cr at individual transaction level can't be
determined as per his understanding, view & not explained to his
team by Food Link during the course of verification.
f. He confirmed that Rs.517.22 Cr have a debit & corresponding
credit effect & qualify as bank transfers and his view is restricted to
transfer & movement of funds. Further he confirmed that in his view
& understanding source of fund of Inter-account transactions at
individual transaction level can't be determined & thus not verified.
M.S.Thatte
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g. He confirmed that the source of funds of FD was not required nor
verified by him during verification. Original documents for the
investment agreement of Rs.60 Cr, were not provided to him, he had
verified the scan copies of the same. Here it is pertinent to note that
during the course of the investigation Shri Sanjay Vazirani, the
Chairman Managing Director of the company had under taken to
submit the original registered agreement copy in respect of Rs 60
Crores investment done by an individual investor.
h. He confirmed and agreed that to provide a holistic & detailed GST
Point of View & Ascertain the Source of Funds for all the Inter-
account transactions credits at transaction level for GST transactions,
all the invoices will have to be verified & positions will have to be
reviewed accordingly.
20. On the basis of the above stated facts it is humbly submitted that
complete compliance of this Hon'ble Court dt 28.03.2024 (Exhibit J) has not been made as
regard the Mandate given there-in where-in CA Sagar Shah was categorically asked to
undertake the exercise to check the credibility and authenticity of interbank transactions
from GST point of view (which according to the petitioner are amounts which are
accounted for GST) and the same has not been done during the verification process under
taken by CA Sagar Shah by his own admission detailed above.
21. Thus, it appears by this Application the Petitioner is trying to make the
assistance/help availed by both parties mutually of C.A. Mr. Sagar Shah, as a clean chit to
itself. There is no clean chit and neither is the C.A. qualified to give any clean chit for
investigation purposes.”
8. We have heard learned counsels on behalf of the Petitioner and the
Respondents. After hearing both sides and after perusing the documents and
papers, we are of the view that the present Interim Application does not make out a
case for appointing, or for directing another special audit in so far as the Petitioner
is concerned qua the amount of Rs. 10.28 crores as contended by the Petitioner.
This in view of the fact that the special audit once conducted, is a final
determination and consistently asking for fresh reports is not what the mandate of
the audit is.
9. It will be beneficial to reproduce the provisions of Section 66 of the CGST
Act, pursuant to which special audit is conducted. Section 66 read thus-
66. Special audit.— (1) If at any stage of scrutiny, inquiry, investigation or any other
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proceedings before him, any officer not below the rank of Assistant Commissioner,
having regard to the nature and complexity of the case and the interest of revenue, is
of the opinion that the value has not been correctly declared or the credit availed is
not within the normal limits, he may, with the prior approval of the Commissioner,
direct such registered person by a communication in writing to get his records
including books of account examined and audited by a chartered accountant or a
cost accountant as may be nominated by the Commissioner.
(2) The chartered accountant or cost accountant so nominated shall, within the
period of ninety days, submit a report of such audit duly signed and certified by him
to the said Assistant Commissioner mentioning therein such other particulars as may
be specified: Provided that the Assistant Commissioner may, on an application made
to him in this behalf by the registered person or the chartered accountant or cost
accountant or for any material and sufficient reason, extend the said period by a
further period of ninety days.
(3) The provisions of sub-section (1) shall have effect notwithstanding that the
accounts of the registered person have been audited under any other provisions of
this Act or any other law for the time being in force.
(4) The registered person shall be given an opportunity of being heard in respect of
any material gathered on the basis of special audit under sub-section (1) which is
proposed to be used in any proceedings against him under this Act or the rules made
thereunder.
(5) The expenses of the examination and audit of records under sub-section (1),
including the remuneration of such chartered accountant or cost accountant, shall be
determined and paid by the Commissioner and such determination shall be final.
(6) Where the special audit conducted under sub-section (1) results in detection of
tax not paid or short paid or erroneously refunded, or input tax credit wrongly
availed or utilised, the proper officer may initiate action under section 73 or section
74.
Thus, on a plain reading of Section 66 of the CGST Act, it is clear that a special
audit can be conducted if the assessee’s case is complex in nature and any officer
not below the rank of Assistant Commissioner is of the view that in the interest of
revenue value has not been correctly declared or credit availed is not within normal
limits, then with the approval of the Commissioner, such a special audit can be
conducted.
10. As rightly pointed out by Mr. Adik this special audit has been conducted on
mutual basis, and to form a prima facie opinion and give a picture in cooperation
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by both sides, and also for the purposes of bank attachments vide the impugned
attachment orders, which bank attachments do not survive anymore. It is therefore
our view that by calling for an additional report for an already completed special
audit, no purpose would be served in so far as the Petitioner is concerned.
11. We have noted the contentions as made by Senior Counsel Mr. Vikram
Nankani, that the audit report which has been submitted pursuant to the orders of
this Court dated 14th March 2024 and 28th March 2024, would not culminate into
an order as there would be no hearing or show-cause notice which would be issued
to the Petitioner, and hence the amount of Rs. 10.28 Crores which the Chartered
Accountant was unable to authenticate will prejudice the Petitioners in subsequent
proceedings and in view thereof the Interim Application has to be allowed. This to
our mind cannot be the ground to ask or pray for a supplementary audit report,
inasmuch as Section 66 of the CGST Act is very clear that the special audit is
prepared after giving an opportunity of hearing to the concerned person whose
accounts are being audited and on the basis of the material gathered, including
books of accounts examined and audited by the Chartered Accountant or a Cost
Accountant as may be, nominated by the Commissioner. It is our view that once a
special audit has been conducted as per the mandate of Section 66 of the CGST
Act, and a report has been given by the auditor, then to once again allow for a
supplementary audit report would be against the mandate of Section 66 and would
amount to reopening of the exercise which has already been carried out by the
special auditor.
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12. Hence, considering the aforesaid submissions and also the objections
raised by the Department by way of Affidavit-in-reply dated 25 th February 2026 to
the Interim Application, we are of the view that this interim application deserves to
be dismissed. Further, the audit report was only for the purpose of bank attachment
of the 36 accounts which were attached by the impugned attachment orders dated
27th February 2024. However, the said attachment has been lifted and the
Petitioner’s accounts have been de-freezed, as per the emails dated 10 th February
2026 and 12th February 2026 to the banks by the Department, and hence nothing
survives to once again reopen the audit report.
13. Further, we are also of the view that Writ Petition No. 3406 of 2024,
which was filed in respect of the attachment of 36 accounts of the Petitioner by the
impugned attachment orders dated 27 th February 2024 has also been rendered
infructuous as the attachments have been lifted and the Petitioner’s accounts have
been de-freezed. Hence nothing survives in the writ petition. Further, none of the
prayers as ought for by the Petitioner in the writ petition survive inasmuch as a
Charted Accountant has already been appointed for conducting a special audit
under Section 66 of the CGST Act and he has accordingly submitted his report,
and the bank accounts which were subject to attachment by way of the impugned
attachment orders have already been de-freezed.
14. In view of the aforesaid Interim Application No. 1695 of 2026 is
dismissed and Writ Petition No. 3406 is disposed of as infructuous. No Costs.
(AARTI SATHE, J.) (G. S. KULKARNI, J.)
M.S.Thatte
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