The Hon’ble HC, MP in the matter of Som Distilleries Pvt. Ltd. V. Directorate General of GST Intelligence [W.P. No. 9650 of 2020 dated July 22, 2020] observed that during search and seizure operation, authorities projected a liability against the Som Distilleries Pvt. Ltd. (“the Petitioner”) on basis of certain figures and arrested two of its shareholders in exercise of power under Section 69 of the Central Goods and Service Tax Act, 2017 (“CGST Act, 2017”). It was held that , no recovery to be made by Revenue till the time demand is raised in accordance with law.
Facts:
The Petitioner is engaged in manufacturing sanitizers. Search and seizure operation was carried out by Revenue authorities (“Respondents”) at the premises of the Petitioner and it was noticed that 20 Lakh liters of sanitizer were manufactured by the Company.
Therefore, a liability was projected against the Petitioner (Som Distilleries Pvt. Ltd.) on basis of certain figures and two shareholders of the Petitioner Company were arrested in exercise of power under Section 69 of the CGST Act, 2017.
The Petitioner contended that there was no reasons to conduct search and also no adjudication regarding quantum of tax allegedly evaded was done. The Petitioner deposited amount of INR 8 Crores under protest as was required by the Respondents.
Further, other employees and directors etc. of the Petitioner were being threatened to be arrested.
Issue:
Whether recovery proceedings can be made without adjudication regarding quantum of tax.
Held:
The Hon’ble HC, MP in W.P. No. 9650 of 2020 dated July 22, 2020 held as under:
- The Court directed that no coercive action shall be taken against the Petitioner.
- The Respondent shall remain bound by their assurance that no further recovery shall be effected till the demand is raised in accordance with law and the matter is being kept for further hearing.
- However, the Court clarified that the grant of interim protection regarding coercive steps shall not debar the Respondents from carrying on the investigation till the next date of hearing.
- The matter is now listed on September 09, 2020 for further hearing.
Relevant Provision:
Section 69 of the CGST Act, 2017:
“69. Power to Arrest
(1) Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or under sub-section (2) of the said section, he may, by order, authorise any officer of the central tax to arrest such person.
(2) Where a person is arrested under sub-section (1) for an offence specified under sub-section (5) of section 132, the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a magistrate within twenty-four hours.
(3) Subject to the provisions of the Code of Criminal Procedure, 1973, ––
(a) where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate;
(b) in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station.”