The Delhi High Court quashed the proceedings against the petitioner assessee, as the inspection under the Goods and Service Tax Act, 2017 as per the order of the special judge was without conducting any prior investigation. Bhagat Ram Om Prakash Agro Private Limited & Anr, the petitioners have filed the present petition, among other things, praying that the records of the search authorisation dated 22.08.2023 issued by the respondent, for searching the premises of the petitioner, be re-called and that the same be quashed. The petitioners also impugn summons dated 05.09.2023 issued under Section 70 of the Central Goods & Services Tax Act, 2017 (‘the CGST Act’) and the proceedings initiated pursuant thereto. A search under Section 67(1) of the CGST Act was conducted at the premises of the petitioners on 22.08.2023.
The inspection was conducted under the order dated 05.04.2023 passed by the Special Judge whereby the Special Judge had directed the Income Tax Department, GST Department and Enforcement Directorate to check the source of ₹50,00,000/- received by the petitioners. It was stated that petitioner no.2 – Prem Shankar Verma had purchased a property from one Mr. Rajesh Kumar Anand for a sum of ₹50,00,000/-. Mr. Rajesh Kumar Anand deposited the said consideration in a Fixed Deposit Receipt (‘FDR’). He furnished the FDR as collateral for securing the bail of one of the accused in another matter pending before the learned Special Judge. The Special Judge suspected the source of the funds that were furnished, in the form of an FDR, as a security. The record does not indicate that any further investigation was conducted before authorizing the inspection under Section 67(1) of the CGST Act. On 22.08.2023, the Commissioner, Central Tax GST issued an authorization (in FORM GST INS-01) for inspecting Section 67(1) of the CGST Act at the premises of the petitioners.
It was argued that the said directions were given without reference to the statutory provisions of the CGST Act and without being cognizant of the powers of the GST authorities to conduct inspection, search and seizure operations under the said Act. A division bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan “The GST authorities are not precluded from continuing or initiating proceedings by the provisions of the CGST Act. Thus, if any information is available with the Department that requires an inquiry to be conducted against the petitioners, the respondent authorities are not impeded to do so. However, we clarify that no further inquiries or action is required to be conducted or taken by the GST authorities, for complying with the order dated 05.04.2023 passed by the Special Judge.”