2020-TIOL-NEWS-195, Dated: Tuesday, August 18, 2020

GST - Appellants allege that illegal proceedings were taken against them, purportedly under the Central Goods and Services Tax Act, 2017 , and their residences and offices were raided, both of them kept under illegal custody and an amount of Rupees One Crore extorted from them; that on the intervention of their Advocate at mid-night, they were released, allege the appellants - Single Judge found that the writ petition is premature and there was no evidence produced by the petitioners to substantiate the contention of harassment perpetrated on them - Single Judge refused exercise of discretion under Article 226 and the reliefs sought for were declined - petitioners are in appeal against this order of the Single Judge - in the meantime, their bank accuonts were attached after disposal of the petition by the Single Judge.

Held:

+ Circular Exhibit A6 at its beginning refers to the requirement of DIN, to ensure transparency and accountability - Bench does not think, Exhibit P4 issued to the appellants, which is also an order of seizure of documents, made in the presence of the appellants, to effectuate seizure requires a DIN or even subsequent generation of the same - As far as summons at Annexures A2 and A3, there is proper generation of DIN, which has been verified by the Senior Counsel and the Instructing Counsel: High Court [para 10]

+ The allegations raised of harassment and high-handedness cannot be considered in a petition under Article 226 of the Constitution - An operation carried out by a statutory authority invested with the powers of search, inspection and seizure, by reason only of such activities having been carried out in the residences and offices of any person under investigation for a long time, cannot be labeled as harassment or high-handed - Nor could the inconvenience caused to the person under investigation, especially of remaining in the premises for the entire duration, termed to a detention pursuant to an arres -. A search and seizure operation necessarily brings with it certain discomforts, which are to be endured in the best interest of the person under investigation who witnesses every action of the inspection team - The allegations are also not substantiated which, we perfectly understand, are impossible of substantiation, especially in a petition under Article 226 - Apart from the invalidity urged of the very search, inspection and seizure, we are not considering any of the issues so raised in the writ petition and in the appeal - We do not express any opinion and the appellants, if desirous, could take appropriate proceedings with substantiating material. [para 11]

+ Section 67 is a more onerous procedure which can be initiated only on the satisfaction of an Officer not below the rank of a Joint Commissioner of, suppression of taxable transactions, excess claim of input tax credit, contravention of the provisions of the Act and Rules, keeping of goods and accounts in contravention of the provisions, escapement of tax, secreting of goods or material liable to confiscation or relevant or useful in any proceedings under the Act and any act leading to evasion of tax. Investigation under Section 67 is no routine procedure as is an audit under section 65 - Looking at the various proceedings it cannot be, for a moment, believed that the appellants were taken off guard by the abrupt proceedings taken under Section 67 as they would allege. We do not find any infirmity in the audit and investigation proceeding being continued simultaneously [para 17]

+ When an investigation is in progress and the premises of any person is being searched and seizure effected; again at any time, in the course of the proceedings, the person is enabled payment of tax, interest and penalty at the reduced rate of penalty so as to save himself from a higher penalty. In the course of inspection, often a generation of the prescribed form and deposit in accordance with the Rules may not be possible. This is why Section 87(3) proviso speaks of the restriction for deposit upto ten thousand rupees per challan, in case of over the counter payments being exempted in situations under clauses (a), (b) and (c) of that proviso. An officer above the rank of a Joint Commissioner or one authorized by such officer carrying out the investigation or enforcement activity is so exempted and can deposit any amounts collected, by way of cash, cheque or demand draft, during the investigation or enforcement activity. This does not require generation of the Forms prescribed. The proper officer or the one authorized, hence is enabled to receive cash, cheque or demand draft in the course of an investigation or enforcement activity from the taxpayer. We do not find any extortion having been effected against the statute and Exhibit P3 specifically indicates that it is a voluntary payment, although it is made under protest. [para 22]

+ We have also found that the issuance of the cheque is voluntary and its receipt by the SIO, is sanctioned by the statute and the rules prescribed there under. Hence, the Department could proceed for encashment of the cheque in accordance with the procedure prescribed. [para 24]

+ Principles of Natural justice before ordering attachment of bank accounts - Said principle does not apply insofar as an attachment made to protect the interest of the revenue. If notice is issued before attachment, then the account holder could as well defeat the purpose, by withdrawing the amounts kept in such accounts. The rule for a hearing does not arise prior to attachment. Whether it arises before seeking disbursement of the amounts remaining in the account, we are not called upon to adjudicate as of now. We leave the matter to be adjudicated before the appropriate authorities or forum. We do not think that the proceedings initiated under Section 67 is improper, illegal or that the actions projected before us were in any manner proceeded with, in an arbitrary or high-handed fashion. [para 27]

GST - Petitioner Association seeks quashing of show cause notices issued by the Taxation authorities to the manufacturers of the "AUS ingredients based sanitizer" for depositing the GST at the Tariff Rate of 18% under the HS Code 3808-94 instead of 12% - Petitioner submits that the impugned SCNs have been wrongly issued by the respondent-authority by misclassifying the same as "alcohol based sanitizer" whereas the sanitizers being manufactured by them are Ayurvedic/ Unani/ Sidha (AUS) ingredient based sanitizers and thus different from alcohol based sanitizers - It is further argued that the sanitizers manufactured by them come within the 12% GST bracket and not 18% as levied by the authorities; that a comprehensive representation in this regard has already been made to respondents on 27.07.2020, however, no action on said representation has been taken till date - Counsel for Revenue submits that the representation dated 27.07.2020, if already submitted, shall be forwarded to the establishment of the GST Council for appropriate consideration in accordance with law.

Held: Bench hopes that the same (representation) shall be taken up for consideration by the GST Council at the earliest, considering the issue involved - Petition disposed of accordingly: High Court

GST - Petition is filed seeking quashing of the impugned penalty order dated 25.11.2019 in Form GST MOV 09 by the respondent No.1 under Section 129 (3) of the CGST Act and for other reliefs - Petitioner submitted that the impugned order is violative of principles of natural justice inasmuch as without giving any personal hearing to the petitioner and without affording sufficient and reasonable opportunity to the petitioner, the respondent NO.1 has proceeded to pass the impugned order at Annexure-E placing reliance upon several documents which were never brought to the notice of the petitioner prior to passing of the impugned order - Counsel for Revenue submits that there is no merit in the petition, particularly in the light of the remedy by way of appeal available to the petitioner and as such, the writ petition is liable to be dismissed.

Held: It is not in dispute that no opportunity of personal hearing was given to the petitioner before passing the impugned order - The material on record also indicates that several documents relied upon by the respondent No.1 in the impugned order at Annexure-E were neither brought to the notice of the petitioner nor was he permitted to cross-examine the witnesses with reference to the said documents - aforesaid facts and circumstances will indicate that in the absence of sufficient and reasonable opportunity being granted in favour of the petitioner, the impugned order is clearly in contravention of principles of natural justice and that the same deserves to be set aside on this ground alone and the matter deserves to be remitted back to the respondent No.1 to consider and dispose of the same afresh in accordance with law after providing sufficient and reasonable opportunity to the petitioner - respondent No.1 is directed to dispose off and conclude the proceedings within a period of one month: High Court [para 5 to 7]