2021 (6) TMI 763 - HC - GST

Availment of illegal input tax credit - invoices issued by both the non-existent and fictitious firm - search and seizure operations under Section 67 of GST Act - HELD THAT - The power exercised under Section 67 of the Central Goods and Services Tax Act, 2017 is distinct, separate and independent of the power to be exercised by the competent authority under Section 71. The intent, purpose and scope of both the Sections are distinct, separate and independent and not subject to each other - It is true that notice dated 21.01.2021 (Annexure-5) under Section 71 stood issued to the petitioner, but then, upon subjective satisfaction of having reason to believe, the officer authorized to conduct the search and seizure operations under Section 67, did do per law. From the reading of the Panchnama Page-75 , it is evident that two independent witnesses were firstly associated; who volunteered to the authorities to be part of the search and seizure operations; and only thereafter in their presence, petitioner s premises was searched on 21.01.2021, wherefrom the material allegedly kept with an endeavour of evading the tax payable under the Act was recovered. The quantity is huge. Petitioner shall fully cooperate and participate in the passing of the order by the competent authority, so required to do so pursuant to the exercise of power under Section 67 of the Act - Petition disposed off.

Summary

Issues:
- Challenge to letter requesting reversal of Input Tax Credit (ITC)
- Legality of the letter dated 21.01.2021 under the GST Act, 2017
- Ex-parte relief against coercive actions
- Cooperation with competent authority for disposal of the matter
- Conduct of search and seizure operations under Sections 67 and 71
- Disposal of seized material
- Agreement on mutually agreeable terms for further proceedings
- Virtual mode hearing and exchange of documents
- Timelines for passing an appropriate order by the competent authority
- Appeal process and limitation period
- Cooperation and non-adjournment during proceedings
- Conducting proceedings during the Covid-19 pandemic
- Right to challenge the order in accordance with the law

Analysis:

The petitioner sought relief through a writ petition to quash a letter requesting the reversal of Input Tax Credit (ITC) based on invoices from non-existent and fictitious firms. The High Court noted that the power under Section 67 for search and seizure is distinct from that under Section 71 of the Central Goods and Services Tax Act, 2017. The court found the search and seizure operations to be legal, with two independent witnesses present during the search that led to the recovery of material aimed at evading taxes.

The court disposed of the petition by directing the petitioner to cooperate with the competent authority for the passing of an order under Section 67. The petitioner was required to appear before the Additional Commissioner (A.E.), CGST & CX, Patna-II, Bihar, for further proceedings. It was agreed that the proceedings would be conducted through virtual mode, with a timeline set for passing an appropriate order within three months.

The court allowed the petitioner to appeal the order within four weeks, without the issue of limitation affecting the decision on merits. The petitioner was instructed not to seek unnecessary adjournments and to cooperate fully during the proceedings. Additionally, the court emphasized conducting proceedings through digital mode during the Covid-19 pandemic and reiterated the petitioner's right to challenge the order in accordance with the law. The petition was disposed of based on these mutually agreeable terms, ensuring a structured approach to further legal proceedings.