Search cannot be conducted until all the conditions u/s 67 of the CGST Act are fulfilled

The Hon’ble Delhi High Court in the case of M/s. Bhagat Ram Om Prakash Private Limited & Anr. v. The Commissioner Central Tax GST Delhi-East [W.P. (C) 12304/2023 dated September 19, 2023] stayed the proceedings pursuant to the search, conducted on the basis of the directions issued by the Special Judge, for checking the source of amount, and directed the proper officer to authorized the search only if all the conditions specified under Section 67 of the Central Goods and Service Tax Act, 2017 (“the CGST Act”) are fulfilled.

Facts:

M/s. Bhagat Ram Om Prakash Private Limited and other related parties (“the Petitioners”) have purchased a property from Mr. Rajesh Kumar Anand for a sum of Rs. 50,00,000/- which was later on deposited in a fixed deposit and then was offered as collateral for securing the bail.

The Petitioners contended that the search authorization issued by the proper officer (“the Respondent”) on August 22, 2023 was illegal as it was issued without determining the conditions specified under Section 67(1) of the CGST Act.

Further, the Petitioners contended that the search was conducted under the directions of the Special Judge to various departments to check the source Rs.50,00,000/- received by the Petitioners.

Aggrieved by the search authorization, petitioners have filed this writ petition before the Hon’ble Delhi High Court.

Held:

The Hon’ble Delhi High Court in W.P. (C) 12304/2023, held as under:

• Observed that, there are serious reservations about whether any such roving and fishing inquiry under the CGST Act could have been directed to be conducted by the Special Judge.
• Opined that, the respondent is authorized to conduct a search only if the conditions specified in Section 67 of the CGST Act are satisfied.
• Directed that, the Respondent shall also produce the relevant files containing the directions for conducting the search.
• The matter is listed on October 17, 2023.

Relevant Provision:

Section 67(1) of the CGST Act:

“(1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-

(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act,

He may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.”

(Author can be reached at info@a2ztaxcorp.com)

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

______________________________________________________________________________________________

🔰 FREE Webinar On: 📢 “Important changes in GST Law w.e.f. October 1, 2023” 🗓️ Date : October 09, 2023, Monday ⏰ Time : 7:30 PM to 9:00 PM (IST) 🎤 Speaker : Adv Bimal Jain 🔖 Registration Link:  https://zoom.us/webinar/register/WN_9T2fW11WRmimW4HiwWtNYQ 📝 Coverage: ✔️ New condition for Supply of services/goods to SEZ Developer/Unit ✔️ Input Tax Credit for CSR Expenses restriction ✔️ Input Tax Credit reversal under Rule 42 & Rule 43 with respect to Supplies from Bonded Warehouse ✔️ Filing returns/statements namely GSTR 1, GSTR 3B, TDS Statement, and Annual Return restriction ✔️ IGST applicability on Ocean Freight by the importer of goods ✔️ Can Suppliers of goods through an E-Commerce platform are eligible to opt for a composition scheme ✔️ Offenses have been decriminalized, and what is the new threshold amount for prosecution under GST Law ✔️ Important Changes under Online Gaming ✔️ Q&A and open discussion and many more Limited seats available Follow us on our social media for more updates: 🔹 WhatsApp Channel🔹 Facebook🔹 Twitter🔹 LinkedIn🔹 Instagram🔹 YouTube

The Hon’ble Delhi High Court in the case of M/s. Bhagat Ram Om Prakash Private Limited & Anr. v. The Commissioner Central Tax GST Delhi-East [W.P. (C) 12304/2023 dated September 19, 2023] stayed the proceedings pursuant to the search, conducted on the basis of the directions issued by the Special Judge, for checking the source of amount, and directed the proper officer to authorized the search only if all the conditions specified under Section 67 of the Central Goods and Service Tax Act, 2017 (“the CGST Act”) are fulfilled.

Facts:

M/s. Bhagat Ram Om Prakash Private Limited and other related parties (“the Petitioners”) have purchased a property from Mr. Rajesh Kumar Anand for a sum of Rs. 50,00,000/- which was later on deposited in a fixed deposit and then was offered as collateral for securing the bail.

The Petitioners contended that the search authorization issued by the proper officer (“the Respondent”) on August 22, 2023 was illegal as it was issued without determining the conditions specified under Section 67(1) of the CGST Act.

Further, the Petitioners contended that the search was conducted under the directions of the Special Judge to various departments to check the source Rs.50,00,000/- received by the Petitioners.

Aggrieved by the search authorization, petitioners have filed this writ petition before the Hon’ble Delhi High Court.

Held:

The Hon’ble Delhi High Court in W.P. (C) 12304/2023, held as under:

• Observed that, there are serious reservations about whether any such roving and fishing inquiry under the CGST Act could have been directed to be conducted by the Special Judge.
• Opined that, the respondent is authorized to conduct a search only if the conditions specified in Section 67 of the CGST Act are satisfied.
• Directed that, the Respondent shall also produce the relevant files containing the directions for conducting the search.
• The matter is listed on October 17, 2023.

Relevant Provision:

Section 67(1) of the CGST Act:

“(1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-

(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act,

He may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.”

(Author can be reached at info@a2ztaxcorp.com)

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

______________________________________________________________________________________________

🔰 FREE Webinar On: 📢 “Important changes in GST Law w.e.f. October 1, 2023” 🗓️ Date : October 09, 2023, Monday ⏰ Time : 7:30 PM to 9:00 PM (IST) 🎤 Speaker : Adv Bimal Jain 🔖 Registration Link:  https://zoom.us/webinar/register/WN_9T2fW11WRmimW4HiwWtNYQ 📝 Coverage: ✔️ New condition for Supply of services/goods to SEZ Developer/Unit ✔️ Input Tax Credit for CSR Expenses restriction ✔️ Input Tax Credit reversal under Rule 42 & Rule 43 with respect to Supplies from Bonded Warehouse ✔️ Filing returns/statements namely GSTR 1, GSTR 3B, TDS Statement, and Annual Return restriction ✔️ IGST applicability on Ocean Freight by the importer of goods ✔️ Can Suppliers of goods through an E-Commerce platform are eligible to opt for a composition scheme ✔️ Offenses have been decriminalized, and what is the new threshold amount for prosecution under GST Law ✔️ Important Changes under Online Gaming ✔️ Q&A and open discussion and many more Limited seats available Follow us on our social media for more updates: 🔹 WhatsApp Channel🔹 Facebook🔹 Twitter🔹 LinkedIn🔹 Instagram🔹 YouTube