2022 (2) TMI 656 - HC - GST

Validity of action of the respondent GST Department and its officials in conducting search and seizure of the petitioner s premises - coercion on petitioner to deposit a huge sum of ₹ 11.5 crores during the course of search operations - gross contravention of the mandatory requirement of Section 74 of the CGST Act - HELD THAT - Prima facie, it appears that the impugned action has been resorted to without adhering to the procedure provided under Section 74 of the CGST Act. As the petitioner s representative claims to have retracted from the confession, the voluntary nature of deposit of GST pursuant to the search proceedings dated 05-06.01.2022 is seriously disputed, there is merit in the contention of Mr. Balia that the procedure provided under Section 74 of the CGST Act would have to be followed. Once this procedure is adopted, the respondent authorities would not be able to procure allegedly short paid GST amounts by branding it to be a voluntary deposit and that is why a dubitable procedure of issuing summons to petitioner under Section 70 of the CGST Act is being adopted even though the petitioner s/representative s statement had already been recorded on the date of inspection/search itself. The matter requires consideration - Issue notice of the writ petition as well as the stay petition to the respondents. Rule is made returnable on 10.03.2022.

Summary

Issues:
Challenge to search and seizure by GST Department without adhering to Section 74 of CGST Act.

Analysis:
The petitioner filed a writ petition challenging the actions of the respondent GST Department and its officials in conducting a search and seizure at the petitioner's premises. The petitioner was coerced to deposit a substantial sum of ?11.5 crores during the search operations, alleging a violation of Section 74 of the CGST Act. The petitioner's counsel argued that the search operation was conducted without prior intimation, and the confession obtained from the petitioner's representative was extracted forcibly. Despite the representative retracting the statement, repeated notices were issued under Section 70 of the CGST Act, creating apprehension of arrest if the demanded payment was not made. The petitioner disputed the liability for GST evasion and contended that the amount deposited was not voluntary. The counsel emphasized the need to follow the mandatory procedure under Section 74 of the CGST Act for determining liability and seeking refunds if necessary.

The High Court examined the submissions, statutory provisions, and cited judgments. It noted that the impugned action seemed to disregard the prescribed procedure under Section 74 of the CGST Act. As the petitioner's representative retracted the confession, the voluntariness of the GST deposit was disputed. The Court agreed with the petitioner's argument that the statutory procedure under Section 74 must be followed. By doing so, the authorities would not be able to treat the alleged short payment of GST as a voluntary deposit. The Court observed a questionable practice of issuing summons under Section 70 of the CGST Act despite the representative's statement being recorded during the search itself. Consequently, the Court found merit in the petitioner's contentions and deemed the matter needing further consideration.

The Court issued notice of the writ petition and stay petition to the respondents, setting the returnable date for further proceedings. Additionally, it directed that no coercive steps should be taken against the petitioner or its representatives in relation to the search and seizure operations. The petitioner was also instructed not to be compelled to deposit any GST amount without following the procedure outlined in Section 74 of the CGST Act until the next hearing date. The case was listed for further hearing on 10.03.2022.