2024 (12) TMI 871 - HC - GST

Challenge to proceedings initiated by the respondents under Section 65 of the CGST Act, 2017 for conducting audit - HELD THAT - From the perusal of the aforesaid provision, it is apparent that the Commissioner can conduct the audit at such frequency and in such manner as may be prescribed. There is no embargo on conducting audit of a registered person and there is also no time period prescribed therein. In the opinion of this Court, the audit is akin to a preliminary inquiry and the Department ought not been prevented from conducting preliminary inquiry relating to the books of accounts of a registered person and no prejudice can be said to have been caused to the concerned registered person. There are no reason to interfere with the audit proceedings - petition dismissed.

Summary

Issues:
Challenge to audit proceedings under Section 65 of the CGST Act, 2017.

Analysis:
The petitioner challenged the audit proceedings initiated by the respondents under Section 65 of the CGST Act, 2017, alleging harassment and duplication of efforts. The petitioner contended that the documents demanded during the audit were already provided in earlier proceedings under Section 73 of the Act, resulting in tax demands and interest payments. The petitioner argued that a fresh audit for the same period was unwarranted and burdensome. The court considered the provisions of Section 65, which empower tax authorities to conduct audits without specifying a time limit or restriction on frequency.

The court opined that audits serve as preliminary inquiries and are essential for verifying compliance with tax laws. It held that preventing the authorities from conducting audits would not prejudice the registered person. The court emphasized that audits could lead to the detection of tax evasion or benefit the registered person. Even if previous actions were taken under Section 73 of the Act, audits under Section 65 could reveal additional discrepancies or fraud, warranting separate proceedings under Section 74 if necessary.

Based on the above analysis, the court found no valid reason to interfere with the ongoing audit proceedings. It dismissed the writ petition challenging the audit under Section 65 of the CGST Act, 2017. The court clarified that previous actions under Section 73 did not preclude the authorities from conducting audits under Section 65. Any pending applications related to the matter were also disposed of accordingly.