GIST OF JUDICIAL PRONOUNCEMENTS ON ‘SEARCH’ UNDER GST

[Dr. Sanjiv Agarwal]

The provisions relating to search and seizure are contained in sub-sections 2 to 8 of section 67. The rules relating to search and seizure are contained in Rules 139, 140, 141 of CGST Rules, 2017.

Search and seizure provisions contained in tax statutes are provided to act as a restraint on evasion of taxes. Such powers are within the constitutional frame work and can not be considered as violative of Article 19 of Constitution of India.

Power of search and seizure in any system of jurisprudence is an overriding power of the State to provide security and that power is necessarily regulated by law – MP SHARMA VERSUS SATISH CHANDRA. DISTRICT MAGISTRATE - 1954 (3) TMI 1 - SUPREME COURT.

In BABOO RAM HARI CHAND VERSUS UNION OF INDIA - 2014 (9) TMI 144 - GUJARAT HIGH COURT, it has been held that powers to seize and confiscate are quite drastic powers, such that authority exercising the same should have reasons to believe that goods were liable therefor. It was held that passing of a composite order, i.e. panchnama –cum-seizure order is impermissible in law.

This article offers gist of judicial pronouncements on Search under GST law:

• In M/S. BHUMI ASSOCIATE VERSUS UNION OF INDIA THROUGH THE SECRETARY - 2021 (2) TMI 701 - GUJARAT HIGH COURT, it was directed to CBIC and Chief Commissioner of Central Tax / State tax to issue guidelines to the effect that no recovery in any mode by cash, cheque, e-payment or adjustment of input tax credit should be made during the search or inspection proceedings under section 67 of the CGST Act, 2017. Further, even if the assessee comes forward to make voluntary payment by filing Form DRC-03, the assessee should be asked/advised to file such Form DRC-03 on the next day after the end of search proceedings and after the officers of the visiting team have left the premises of the assessee. Facility of filing complaint/grievance after the end of search proceedings should be made available to the assessee if the assessee was forced to make payment in any mode during the pendency of the search proceedings. If complaint/grievance is filed by assessee and officer is found to have acted in defiance of the afore-stated directions, then strict disciplinary action should be initiated against the concerned officer.
• In M/S. AGARWAL FOUNDRIES PRIVATE LIMITED RAMA TOWERS AND 3 OTHERS VERSUS UNION OF INDIA AND 9 OTHERS - 2020 (11) TMI 269 - TELANGANA HIGH COURT, where request was made for change of officer for physical torture, it was observed that transfer of investigation to another officer is normally not done but since the allegations were not denied by way of affidavit, it was directed that enquiry shall be transferred to another official and such officer on whom allegation we made will not participate in any proceedings so initiated. Further, it was directed that interrogation shall be conducted between 10.30 AM and 5.00 PM on week days in the visible range of an advocate appointed by the petitioner, who shall not be in hearing range.
• In RAMAKRISHNA ELECTRO COMPONENTS PVT. LTD. VERSUS UNION OF INDIA & ANR. - 2021 (1) TMI 847 - DELHI HIGH COURT, where writ petition was filed for quashing search proceedings under section 67 of the CGST Act, 2017 and attachment of bank accounts but later on, petitioner withdrew the petition in order to avail alternative remedy of filing objection under Rule 159(5) of CGST Rules, 2017, it was held that said writ petition be dismissed as withdrawn with the liberty to petitioner to file objections under rule 159(5) and directions to Commissioner to dispose of the objections by way of an order in writing.

• In RCI INDUSTRIES AND TECHNOLOGIES LTD THROUGH ITS DIRECTOR RAJEEV GUPTA VERSUS COMMISSIONER DGST DELHI & ORS. - 2021 (1) TMI 702 - DELHI HIGH COURT, it was held that for search under Section 67 of Central Goods and Services Tax Act, 2017. Courts can interfere and hold exercise of power to be bad in law only if grounds on which reason to believe founded have no rational connection between information or material recorded; or are non-existent; or are such on which no reasonable person can come to that belief Article 226 of Constitution of India. While exercising writ jurisdiction, we cannot adjudge or test the adequacy and sufficiency of the grounds. We can only go into the question and examine the formation of the belief to satisfy if the conditions specified under the statutory provision invoked are met.

Further, on allegation of parallel investigation by CGST and SGST authorities for requisitioning the documents, it was held that request in notice cannot ipso facto lead to conclusion of parallel investigation for same period by both Authorities. Also, mere request for documents for period preceding period under investigation, cannot also lead to conclusion that period to which documents pertain is already under investigation.

• In SURESH KUMAR P.P. AND ANR. VERSUS THE DEPUTY DIRECTOR, DIRECTORATE GENERAL OF GST INTELLIGENCE (DGGI) AND ORS. - 2021 (1) TMI 971 - SC ORDER, apex court dismissed the SLP filed by assessee against Kerala High Court order in SURESH KUMAR P.P., MR. ABOOBACKER SIDHIQUE VERSUS THE DEPUTY DIRECTOR, THE ASSISTANT COMMISSIONER, MR. RENN ABRAHAM AND OTHERS - 2020 (8) TMI 418 - KERALA HIGH COURT, High Court held that if an officer not below rank of Joint Commissioner has reason to believe that any material, useful or relevant to any proceedings under Act, are secreted in a place, then he is empowered to carry out by himself or authorize in writing any other officer to carry out search and seizure and said operation carried out by a statutory authority by reason only of such activities having been carried out in residences and offices of any person under investigation for a long time, cannot be labelled as harassment or high-handed; nor could inconvenience caused to person under investigation, especially of remaining in premises for entire duration, termed to be a detention pursuant to an arrest.