RCI INDUSTRIES AND TECHNOLOGIES LTD THROUGH ITS DIRECTOR RAJEEV GUPTA Vs COMMISSIONER DGST DELHI & ORS.
W.P.(C) 121/2021 Page 1 of 18
$~16
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 07.01.2021
+ W.P.(C) 121/2021
RCI INDUSTRIES AND TECHNOLOGIES LTD
THROUGH ITS DIRECTOR RAJEEV GUPTA .…Petitioner
Through: Mr. Ashok K. Babbar, Mr. Bharat
Kumar Tripathi and Mr. Surendra
Kumar, Advocate.
versus
COMMISSIONER DGST DELHI & ORS. .… Respondents
Through: Mr. Ramesh Singh, Standing Counsel
with Mr. Gautam Narayan, Additional
Standing Counsel for GNCTD, Ms.
Bhawna Kataria and Mr. Adithya
Nair, Advocates for R -1.
Mr. Harpreet Singh, Senior Standing
Counsel.
CORAM:
HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW
HON’BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J. (Oral)
CM APPL. 375/2021
1. Exemption allowed, subject to just exceptions.
2. The application is disposed of.
W.P.(C) 121/2021
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3. The present writ petition under Article 226 of the Constitution of India ,
1950 impugns the action of search carried out at the Petitioner’s business
premises on 30th September, 2020, under Section 67 of the Delhi Goods and
Services Tax Act, 2017 (hereinafter referred to as ‘DGST Act’) read with
Rule 139 of the DGST Rules , 201 7.
4. The factual matrix giving rise to the present writ petition is as follows:
The Petitioner company , duly registered under the CGST/ DGST Act ,
functions from its unit at Pitampura , North -West Delhi and has its
godown /warehouse at Shahbad, Daulatpur, Delhi. It also has units in other
states for which separate registration under the CGST Act exists at Rajasthan
and Himachal Pradesh . On 30th Septemb er, 2020 at 3:30 PM , the
Respondent No. 2 (Assistant Commissioner/VATO, Delhi) entered the
Petitioner’s place of business and godown , for the purpose of conducting a
search. Petitioner was handed over a notice by Respondent No. 2 under Rule
56(18) of DGST Rule s, 201 7, inter -alia asking to produce books of accounts
for the period 2017 -18, 2018 -19, 2019 -20, and 2020 -2021. Besides,
Respondent No. 2 also provided: (i) a copy of authorisation in Form GST
INS-01 dated 30th September, 2020, (ii) Deployment Order No. 119 dated
30th September, 2020 under Section 60 of the Delhi Value Added Tax Act,
2004 , as well as (ii) Grant of Authority dated 30.09.2020 in Form DVAT -50
under Rule 65 of DVAT Rules, 2004 . It is contend ed that at the end of
search , forced statement of the Managing Director was recorded and
Petitioner was pressurized to make payment of tax and interest under Form
DRC -03.
5. Mr. A. K. Babbar, learned counsel for the Petitioner complains that
Petitioner has been subjected to harassment at the hands of CGST
Authorities i.e. DGGI Gurugram who have searched them numerous times .
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He submits that in fact Petitioner has responded to the summons issued in
this regard , pursuant whereto statement of Petitioner company ’s director was
also recorded . The last search was conducted by the CGST authorities on 7th
March, 2020 at the director’s residence . This search a ction was challenged
by the petitioner in W.P.(C) No. 7145/2020 before the Punjab and Haryana
High Court. The said challenge was successful and consequently the search
action and the panchnama dated 7th March, 2020 were quashed. T he
Petition er’s grievance is that now the State GST Authorit y i.e DGST has
subjected the Petitioner to yet another search action in relation to the same
period, despite the Petitioner being earlier subjected to search action at the
hands of the Central Authorities , whic h was impugned before the Punjab and
Haryana High Court. It is argued that the action of the State authorities under
the DGST Act is illegal and unlawful and contrary to the provisions of the
CGST/DGST Act .
6. Mr Bab bar urges that no parallel enquiries on the same issues by the two
authorities (i.e. R -1 & R-2 under the State GST , and R-4 & R-5 under the
Central GST ) can take place under Section s 5 and 6 of DGST Act, 2017 . In
support of this submission, he refers to the foresaid provisions which read as
under:
“Section 5 : Powers of Officers –
(1) Subje ct to such conditions and limitations as the Commissioner may
impose, an officer of State tax may exercise the powers and discharge the
duties conferred or imposed on him under this Act.
(2) An officer of State tax may exercise the powers and discharge th e
duties conferred or imposed under this Act on any other officer of State
tax who is subordinate to him.
(3) The Commissioner may, subject to such conditions and limitations as
may be specified in this behalf by him, delegate his powers to any other
officer who is subordinate to him.
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(4) Notwithstanding anything contained in this section, an Appellate
Authority shall not exercise the powers and discharge the duties
conferred or imposed on any other officer of State tax.
Section 6 : Authorisation of office rs of central tax as proper officer in
certain circumstances –
(1) Without prejudice to the provisions of this Act, the officers appointed
under the Cent ral Goods and Services Tax Act, 2017 (Central Act 12 of
2017) are authorised to be the proper officers for the purposes of this
Act, subject to such conditions as the Government shall, on the
recommendations of the Council, by notification, specify.
(2) S ubject to the conditions specified in the notification issued under
sub-section (1), –
(a) where any proper officer issues an order under this Act, he
shall also issue an order under the Central Goods and Services
Tax Act, 2017 (Central Act 12 of 2017) as authorised by the said
Act under intimation to the jurisdictional officer of central tax;
(b) where a proper officer under the Central Goods and Services
Tax Act, 2017 (Central Act 12 of 2017) has initiated any
proceedings on a subject matter, no proceedi ngs shall be initiated
by the proper officer under this Act on the same subject matter. (3)
Any proceedings for rectification, appeal and revision, wherever
applicable, of any order passed by an officer appointed under this
Act, shall not lie before an off icer appointed under the Central
Goods and Services Tax Act, 2017 (Central Act 12 of 2017) ”
7. Mr. Babbar further impugns the search carried by the State Authorities on
several other grounds. He submit s that the search was conducted in the
absence of two independent witnesses and their signature s had not been
recorded , as mandated under Section 67(10) of the DGST Act , 2017 read
with Section 165(4) and 100(4) of the Code of Criminal Procedure, 1973. In
absence of the signatures, the search action is liable to be declared null and
void. Mr. Babbar also argues that the statement recorded during the search
was not voluntary and should not be given effect to. He further argues that
the Value Added Tax has sinc e been repealed by the GST laws and
accordingly the reference thereto on the search documents, also, vitiates the
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action. Next, Mr. B abbar argues that the reasons to believe for carrying out
the search and action do not meet the test as required under Section 67(2) of
the Act. Lastly, it is argued that the Form GST INS -01, which is the
authorisation for inspection for search, is in variance with the form
prescribed under Rule 139(1) of the DGST Rules, 201 7 inasmuch as the
signatures of the inspecting officers has not been appended.
8. Per contra, Mr. Ramesh Singh, learned Senior Standing Counsel
appearing on behalf of Respondent No s. 1 & 2 defends the actions and
submits that the search action is lawful and within the confines of the law.
He submits that the officers who have visited the business premises of the
Petitioner are duly authorised and competent to carry out the search . He
further submits that the recorded reasons to believe in terms of Section 67
justify the action. The same have been shared with us by Mr. Singh through
email and are extracted hereinbelo w:
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Observations: From the GST database as analysis above it has been
observed as under:
1.“High GTO – Rs. 939.44 crore in 2017 -18, Rs. 863.35 c rore in 2018 -19,
Rs. 219.24 crore in 2019 -20.
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2. The dealer is dealing in High Risk Commodities, taxable at 18 % GST.
3. The payment of tax in cash is negligible (and i.e. on account of Reverse
Charge) in comparison of GTO.
4. There is high difference in ITC claimed in GSTR -3B and accrued as per
GSTR -2A.
5. As per GST database the dealer is under the Overall Risk Score “04”.
6. As per GST Database return filed upto April 2020, thus the Dealer is
Return Defaulter also.
7. The Deputy Director, Directorate General of GST Intelligence,
Gurugram Zonal Unit Gurugram vide letter dated 19/08/2020 which
was received through GSTO (131U ) Department of Trade and Taxes
vide letter 132 date 10.09.2020 (flag ‘A’) regarding investigation
conducted by them against the firm revealed prima facie that the firm
has wrongly availed Input Tax Credit for Rs. 183,69,07544/ – on the
basis of fake invoic es without concomitant supply of goods. The Credit
available in ECL of the dealer on 10.09.2020 amounting to Rs.
11,53,374 (CGST) and Rs. 1,43,81,061 under SGST has been blocked
by AC (Ward 201). ”
(Emphasis supplied)
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9. Mr. Ramesh Singh further argues that during the search action, no
independent witnesses were available but notwithstanding th is fact, the
search action is still valid . In support of his submission, Mr. Si ngh relies
upon three judgments being State Of P unjab v. Wassan Singh And Ors,
(1981 ) 2 SCC 1 ; Sahib Singh v. State Of Punjab , (1996 ) 11 SCC 685 ; and
Kalpnath Rai v. State (Through CBI) , (1997 ) 8 SCC 732 .
10. Mr. Singh clarifies that there is no parallel investigation being carried out
by the DGST authorities, as is portrayed by the Petitioner. To elucidate his
contention, he submits that although the earlier notice issued under Rule
56(18) of the DGST Rules, 2017 requisitioned the documents for the period
from 2017 -18 to 2020 -2021, but now the fresh notice is confined to 2020 -21.
As regards the contention of mentioning of the provisions of the Delhi Value
Added Tax Act, 2004, he submits that the said provisions are saved in terms
of Section 174 (2)(c) of the CGST Act , 2017 and therefore, the rules framed
thereunder and the DVAT Act can be resorted to for the purpose of
adjudication, insofar as the dues pertain to the period prior to the
promulgation of the CGST Laws . Lastly Mr. Ramesh Singh further states
that the ground of coercion in respect of the statement recorded during
search , is clearly an afterthought. He points out that Petitioner has never
taken any steps to retract the said statement , and that the Petitioner , availing
the benefit of Section 74(5) , has agreed to pay the amount which is in fact a
reduced amount and is instead paying only 15% of the entire penalty
amount.
11. Having perused the record and duly considered the rival contentions of
the learned counsel for the parties , we do not find any force in the grounds
urged by the Petitioner . The case set -up is not premised on any substantial
cause of action. Firstly and notably, there is no recovery during search. Thus
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the bone of contention is the statement of Mr. Rajeev Gupta ( director of
Petitioner company ) recorded on 30th September, 2020 during search action.
The proponent of the said statement categorically admitted his tax liabilit y
and stated that he would deposit the admitted tax/penalty amounting to Rs.
17,34,314/ – (CGST Rs.7,54,049.5 @9% + Penalty Rs. 1,13,107.5 @15%)
and (SGST Rs. 7,54,049.5/ – @9% + Penalty Rs. 113107.5 @15%). This
statement, as correctly pointed out by Mr. Singh , has not been retracted till
date. No convincing explanation is forthcoming from the learned counsel for
the Petitioner for not doing so, when concededly the alleged coercion
disappeared soon after the search action was complete. In our opinion, if
indeed the statement was coerced by the Respondents, it was expected that
the Petitioner would immediately , after the coercion ceased, take steps to
retract the same . Thus , it is palpably clear that the present petition put
forward to challenge the search action , is in an attempt to wriggle out of the
commitment made in the statement during the search action. Be that as it
may, we can also say that this statement , can only be an aid for the Revenue
to ult imately adjudicate the tax demand . In case the statement was not
recorded voluntar ily, it would have to be established during adjudication of
demand , for which we believe the action would follow the completion of
investigation. The admissibility of the statement cannot be securitized at
this stage . Therefore, we cannot permit the Petitioner to take recourse to
challeng ing the search proceedings in an endeavour to withdraw the apparent
admissions made in the said statement.
12. In this backdrop, we n ow com e to the other grounds urged by the
Petitioner. The primary ground concerns the assumption of jurisdiction by
the DGST authorities based on the plea of parallel investigation , the
contention is borne out of the notice dated 30th September, 2020 shown to
us, where by the documents for the period of 2017 -18 to 2020 -21 are being
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requisitioned. Mr. Ba bbar states that since DGGI has issued a show -cause
notice under Section 74 of the CGST Act, for the years 2017 -18 and 2018 –
19, then by virtue of Section 6 of CGST Act, the DGST authorities cannot
carry out the investigation for the said period . To our mind, t he request in
the notice dated 30th September, 2020 cannot ipso facto lead to the
conclusion that there is a parallel investigation for the same period by both
the Central and State Authorities.
13. To counter the claim of the Petitioner, Mr. Singh has , during the course
of the hearing, screen -shared the recent notice issued by the State Authorities
dated 16th November, 2020, which was not brought to our notice by the
Petitioner. This notice is evidently making a requisition for documents
pertaining to 2020 -21. The said letter reads as under: –
“OFFICE OF THE ASSISTANT COMMISSIONER, (KCS WARD -201)
GOVT OF NCT OF DELHI: DEPTT. OF TRADE & TAXES: 13TH FLOOR
VYAPAR BHAWAN I.P. ESTATE : NEW DELHI -110002.
F.NO. AC/KCS/WARD -201/2020 -21/67 Dated: 16 -11-2020
To,
M/s. RCI Industries & Technologies Ltd.
GSTN: 07AAACI45727Q2ZT
421, 4th Floor Pearl Omaxe,
Netaji Subhash Place, Pitampura, Delhi -110034.
Subject: – Notice for personal hearing and submitting of record reg .
Sir,
Kindly refer to this office communication no AC/KCS/WARD –
201/2020 -21/62 dated 05/11/2020 send to the official email ID
[…]@rciind.com of the taxpayer M/s RCI Industries & Technologies Ltd
on 05/11/2020 in connection with Enforcement Survey of M/s RCI
Industries & Technologies Ltd. GSTN: 07AAACR5727Q2ZT held on 30 –
09-2020 conducted by the Enforcement Team of AE -1 of the Department
of Trade & Taxes. The Enforcement team has submitted its report to
assess the case further. Vide the notice dated 05/11/2020, the taxpayer
was direct ed to appear before the undersigned on 12/11/2020 at 11 AM
and produce all the relevant record/clarifications/documents point -wise
in support of the above discrepancies as pointed out by the Enforcement
Survey team in its report and the Taxpayer was also d irected to produce
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all the relevant record/books of account as prescribed in Rule 56 of
CGST/DGST Rules 2017 for the Tax period 2020 -21 for the period
01.04.2020 to 30.09.2020 i.e. till date of survey (Copy enclosed)
But no response/appearance/communica tion has been received till
date from the taxpayer
Therefore, the taxpayer is provided one more opportunity to
produce the documents/details/submissions as mentioned below and the
details is once again re -iterated
The Enforcement Team has raised the fol lowing discrepancies in
its report which arc as under: –
1. The Enforcement Team has intimated in its report that the stock
difference of Rs. 11,29,555/ – as value of stock as per stock summary was
Rs. 45184.49/ – whereas as per physical verification the stoc k found, for
Rs. 11,74,739/ -.
2. The Enforcement Team has intimated in its report that the cash as per
Cash Book was for Rs. 2227878/ – whereas cash found at the time of
inspection was Rs. 0 therefore the short cash was reported by the
enforcement team was Rs. 2227878/ -. It has also been reported by the
Enforcement Team that of late, on arrival, the director has disclosed
possession of Rs. 6 lakhs.
3. The Enforcement Team has intimated in its report that as per the list
provided by the firm/company on the date of visit an amount of Rs.
55,90,897/ – was pending for payments in contravention of Section 37 of
GST Rules which attract ITC reversal along wi th penal Interest.
4. The Enforcement Team has intimated in its report that as per the stock
submission receipt dated 14/11/2017 available on DVAT portal for the
stock details as on 30/06/2017, the stock declared was amounting to Rs.
21,40,99,505/ – whereas the stock details furnished in form TRAN -I is Rs.
16,95,31,736/ -. Hence, the difference in stock of Rs. 4,45,67,769/ – .
5. The Enforcement team has inti mated in its report that there is a
difference between tax liability declared in GSTR 3b and ITC available
in GSTR 2A and the same wa s not discharged by payment of tax. An
explanation was called for in this regard but no reply/explanation has
been received till the date of submission of report.
6. The Enforcement Team has intimated in its report that the dealer has
undertaken in writing to submit the following information/documents
with its clarification in the office but the same has not been submitted by
the dealer till finalization of this report.
i. Write up on the TRAN -1 credit availed.
ii. Documents regarding search and seizure by DGGI Gurugram and
Anti Evasion CGST Delhi.
iii. Difference between ITC credit in GSTR 3B and tax liability in GSTR
313.
iv. Details of inward and outward ITC.
7. It has also been intimated by the Enforcement Team in its report that
Sh. Rajiv Gupta, Director in his statement dated 30/09/2020 has
undertaken to deposit admitted tax/penalty amounting to Rs. 1734314/ –
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arisen on acc ount of variation of cash/stock and payment made beyond
180 days to Sundry creditors, through DRC -03, which has not been
submitted, till date.
The taxpayer is hereby once again directed to appear before the
undersigned and produce all the relevant record/ clarifications/
documents point -wise in support of the above discrepancies as pointed
out by the Enforcement Survey team in its report . In addition to above,
The Taxpayer is also directed to produce all the relevant record/books
of account as prescribed in Rule 56 of CGST/DGST Rules 2017 for the
Tax period 2020 -21 for the period 01.04.2020 to 30.09.2020 i.e. till date
of survey .
Therefore the taxpayer is hereby provided one more opportunity to
appear before the under signed/Proper Officer (State GST) in KCS Ward –
201, 13th Floor, Deptt. of Trade & Taxes, GNCT of Delhi on 23 -11-2020
at 11:00 AM alongwith all the relevant records. Failing which, it will be
presumed that you have nothing to submit in respect of the discrep ancies
pointed out by the Enforcement Survey Team regarding business
activities of your above Firm/Company and Ex -Parte assessment/
determination of Tax, penalty and interest liability will be made without
affording any further opportunity .
Yours faithfull y,
Assistant Commissioner/ Proper Jurisdictional Officer
Ward -201/KCS
Encl: Copy of notice dated 05/11/2020 ”
(emphasis supplied)
14. On the strength of the aforesaid notice, Mr. Singh firmly states that there
is no overlap regarding the period under investigation between the State and
Central Authorities. Mr. Singh is however unable to state with conviction the
precise period for which the State Authorities will ultimately launch action
for recovery. However , as rightly contended by Mr. Singh , a mere request
for documents for a period which may be preceding the period under
investigation, cannot also lead to the conclusion that period to which the
document s pertain is al ready under investigation. Further, we may note that,
since the investigation is presently underway , so we need not delve deeper
on this issue. We can also observe that in the event the notice issued by the
DGST a uthorities pertains to a period which is covered by the investigation
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carried out by the Central GST authorities, the Petitioner can take recourse
to the appropriate remedies in that regard.
15. Since contentions have been raised w ith respect to the cross –
empowerment of the Central and the State authorities, and it is asserted that
there are no guidelines prescribed under the Act or the Rules, it would be
profitable to throw some light on the issu e. In this context, the letter issued
by the Central Board of Indirect Taxes and Customs dated 5th October, 2018
which also finds mentions in the order of the Gujarat High Court in
R/Special Civil Application No. 23279 of 2019 dated 27th December, 2019
titled Sureshbhai Gadhecha v. State of Gujarat , relied upon by the
Petitioner , reads as under:
“LETTER D.O.F. NO. CBEC/20/43/01/2017 -GST(FT.)
CLARIFICATIONS ON AMBIGUITY REGARDING INITIATION OF
ENFORCEMENT ACTION BY CENTRAL TAX OFFICERS IN CASE OF
TAXPAYERS ASSIGNED TO STATE TAX AUTHORITY AND VICE VERSA
LETTER D.O.F. NO. CBEC/20/43/01/2017 -GST(PT), DATED 5 -10-2018
It has been brought to the notice of the Board that there is ambiguity
regarding initiation of enforcement action by the Central tax officers in
case of taxpayer assigned to the State tax autho rity and vice versa.
2. In this regard, GST Council in its 9th meeting held on 16 -1-2017 had
discussed and made recommendations regarding administrative division
of taxpayers and concomitant issues. The recommendation in relation to
cross -empowerment of b oth tax authorities for enforcement of
intelligence based action is recorded at para 28 of Agenda note no. 3 in
the minutes of the meeting which reads as follows: –
“viii. Both the Central and State tax administrations shall have the power
to take intellig ence based enforcement action in respect of the entire
value chain”.
3. It is accordingly clarified that the officers of both Central tax and
State tax are authorized to initiate intelligence based enforcement action
on the entire taxpayer’s base irrespec tive of the administrative
assignment of the taxpayer to any authority. The authority which initiates
such action is empowered to complete the entire process of investigation,
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issuance of SCN, adjudication, recovery, filing of appeal etc. arising out
of such action.
4. In other words, if an officer of the Central tax authority initiates
intelligence based enforc ement action against a taxpayer
administratively assigned to State tax authority, the officers of Central
tax authority would not transfer the said case to its Sate tax counterpart
and would themselves take the case to its logical conclusions.
5. Similar position would remain in case of intelligence based
enforcement action initiated by officers of State tax authorities against a
taxpayer administrative assigned to the Central tax authority.
6. It is also informed that GSTN is already making cha nges in the IT
system in this regard.”
Further clarity on the issue of cross -empowerment of State GST and Central
GST officers is also visible in a recent letter issued by the Central Board of
Indirect Taxes and Customs being No. CBEC -20/10/07/2019 -GST da ted 22th
June, 2020 which reads as follows –
“F. No. CBEC -20/10/07/2019 -GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes Customs
GST Policy Wing
***
Dated: 22nd June, 2020
The Principal Director General,
Directorate General of GST Intelligence,
2nd Floor. Wing – VI, West Block – VIII
R.K. Puram,
New Delhi – 110066
Sir,
Subject: Reference form DGGI on Cross empowerment under GST.
reg.
I am directed to refer to DGGI letter F.No.574/CE/66/2020/Inv./15308
dated 26.05.2020 on the issues related to cross empowerment of officers
in terms of provisions of section 6 of the Central Goods and Services Tax
Act, 2017 (hereinafter referred to as “th e CGST Act”).
2. Issue raised in the reference is whether intelligence based enforcement
actions initiated by the Central Tax officers against those taxpayers
which are assigned to the State Tax administration gets covered under
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section 6(1) of the CGST A ct and the corresponding provisions of the
SGST/UTGST Acts or whether a specific notification is required to be
issued for cross empowerment on the same lines as notification No.
39/2017 -CT dated 13.10.2017 authorizing the State Officers for the
purpose or refunds under section 54 and 55 of the COST Act.
3.1 The issue has been examined in the light of relevant legal provisions
under the CGST Act, 2017. It is observed that Section 6 of the CGST Act
provides for cross empowerment of State Tax officers and Central Tax
officers and reads as: –
“6. (1) Without prejudice to the provisions of this Ac t, the officers
appointed under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act are authorised to be the proper
officers for the purposes – of this Act, Subject to such conditions as the
Government shall, on the recomm endations of the Council, by
Notification specify. ”
3.2 Thus in terms of sub -section (1) of section 6 of the CGST Act and sub –
section (1) of section 6 of the respective State GST Acts respective State
Tax officers and the Central Tax officers respectively are authorised to be
the proper officers for the purposes of respective Acts and no separate
notification is required for exercising the said powers in this case by the
Central Tax Officers under the provisions of the State GST Act. It is
noteworthy in th is context that the registered person in GST are
registered under both the C GST Act and the respective SGST /UTGST Act.
3.3 The confusion seems to be arising from the fact that, the said sub –
section provides for notification by the Government if such cros s
empowerment is to be subjected to conditions. It means that notification
would be required only if any conditions are to be imposed. For example,
Notification No. 39/2017 -CT dated 13.10.2017 restricts powers of the
State Tax officers for the purposes of refund and they have been specified
as the proper officers only under section 54 and 55 of the C GST Act and
not under rule 96 of the C GST Rules, 2017 (IGST Refund on exports). If
no notification is issued to impose any condition, it means that the
officers of State and Centre have been appointed as proper officer for all
the purpose of the CGST Act and SGST Acts.”
4. Further, it may kindly be noted that a notification und er section 6(1) of
the CGST Act would be part of subordinate legislation which instead of
empowering the officer under the Act, can only be used to impose
conditions on the powers given to the officers by the section. In the
absence or any such conditions, the power of Cross – empowerment under
section 6(1) of the CGST Act is absolute and not conditional. ”
16. It is thus apparent that if an officer of the Central GST initiates
intelligence – based enforcement action against a taxpayer administratively
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assigned to State GST , the officers of the former would not transfer the said
case to their counterpart s in the latter department and they would themselves
take the case to its logical conclusion. At this stage, we are only conc erned
with the search action initiated and the ultimate logical conclusion would
have to be gone into at the appropriate stage , when the Revenue proceeds for
determination of tax . The Respondents would be bound by the aforenoted
circulars and we reiterate that in case the action of the State and Central
Authorities is overlapping, the Petitioner would be at liberty to take action to
impugn the same in accordance with law.
17. As regards the absence of the two independent witnesses, we may first
note that the re is no panchnama on record. In essence, the main thrust of
Petitioner’s argument is that the statement of Mr. Rajeev Gupta does not
record the presence of the two independent witnesses or signatures, making
the search action illegal . We have already dealt with the contention of the
Petitioner regarding the alleged involuntary /forced statement and in view of
our observations ma de hereinabove, t his issue , is rendered insignificant.
Further, n o specific provision is shown to us that deals with recording of
statement in search action. The only relevant section is Section 70, which
does not entail signatures of witnesses. Be that as it may, determination of
tax liability, has to be in accordance within the confines of statutory
provisions of the GST laws. We reiterate that t he evidentiary value of the
aforenoted statement, and the effect of payment of tax and interest made
pursuant thereto , are issues which would have to be gone into at the stage of
adjudication.
18. We also do not find merit in the contention of the Petitioner that absence
of the signature of the authorised person on Form GST INS -01 would render
the sear ch action to be non -est. Mr. Ba bbar does not dispute that the persons
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who carried out the search were indeed those whose name s has been
mentioned in the said autho risation, and they had displayed their i dentity
cards at the time of search. It is also not the case of the Petitioner that the
officers who car ried out the search did not properly discharge their official
duty or otherwise acted in furtherance of some extraneous purpose. The
absence of signatur es does not manifest an absence of delegation of power in
favour of the team which conducted the search action. Further, t he
provisions of DVAT Act quoted in the documents also cannot render the
proceedings as illegal. The erstwhile Act is saved by the rep eal and saving
provisions of the DGST Act , 2017 (See: Vianaar Homes Private Limited v.
Assistant Commissioner (Circle -12), Central Goods & Services Tax, Audit –
II & Ors. , 2020 [43] G.S.T.L. 479 ).
19. As regards the reasons to believe to inspect and search the premises of
the Petitioner, we have been shown that such reasons exist with the
Respondents. Under Section 67 of the CGST Act, when an authorized
officer carries out an inspection, search and seizure, the sa me is on the basis
of the satisfaction arrived at by the proper officer not below the rank of the
Joint Commissioner that reasons to believe as specified under the said
provision. Our scrutiny is limited because of the well settled principles of
law relati ng to ju dicial review of search action . While exercising writ
jurisdiction, w e cannot adjudge or test the adequacy and sufficiency of the
grounds. We can only go into the question and examine the formation of the
belief to satisfy if the conditions specified under the statutory provision
invoked are met. The Courts can interfere and hold the exercise of power to
be bad in law o nly if the grounds on which re ason to believe is founded have
no rational connection between the information or material recorded ; or are
non-existent ; or are such on which no reasonable person can come to that
belief . The reasons to believe shown to us demonstrate that the Appropriate
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W.P.(C) 121/2021 Page 18 of 18
authority had the reasons , as per mandate of Section 67(2) of the DGST Act
alongwith relevant Rules, for formation of belief to carry out the search .
Applying the test of reasonable man, we cannot say that there is no
application of mind while issuing sea rch warrant. Thus, we would not like to
countermand the action taken against the Petitioner . Accordingly, the present
petition is dis posed of in the above terms. We clarify that we have not
expressed any opinion on the merits of the case.
SANJEEV NARULA, J
RAJIV SAHAI ENDLAW, J
JANUARY 7, 202 1
nd
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