OCTOBER 30, 2019

By Vijay Kumar

THIS is how a recent GST raid took place as noticed by the Gujarat High Court.

The concerned officers authorised to carry out the search at the residential premises of the petitioner had stayed there from 11.10.2019 to 18.10.2019. A perusal of the record of the proceedings of the case reveals that on 11.10.2019 at 2:15, it has been recorded that after searching of the rooms in the premises, the records of the accounts were brought to the main room and gathered there which included the bank passbooks of the family members as well as cheque books and that verification thereof is continuing. The proceedings thereafter do not reveal any further search carried out at the premises but reveal that the officers had stayed at the premises and had examined the phone calls that were received by the family members and had recorded their phone calls. They had also recorded statements of the family members of the petitioner on 11.10.2019. The record further reveals that the officers who had arrived on the previous day as well as the panchas were relieved by new set of officers and panchas and this cycle continued till 18.10.2019. It appears that thereafter they have been questioning the family members of the petitioner on a day to day basis till 18.10.2019.

Fortunately, we have courts in India and fortunately, they have jurisdiction even over the exalted, powerful tax officers and sometimes these officers are kind enough to obey the orders of High Courts. In this case, after providing (forced) hospitality for a week to the GST officers and their retinue, the taxpayer had no option but to approach the High Court.

The High Court noted the powers of officers as:

Sub-section (2) of section 67 of the CGST Act empowers the authorised officer to search and seize goods, documents or books or things. Sub-section (4) of section 67 empowers the officer authorised under sub-section (2) to seal or break open door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied. Thus, the officers concerned were authorised to seize such books, goods, documents, or things which were found at the premises.

Officer, You don't have the Power to…..:

The High Court observed,

-  Sub-section (2) of section 67 does not empower the officer concerned to record statements of family members through force or coercion or to record their conversations in their mobile phones.

-  In exercise of powers under sub-section (2) of section 67 of the CGST Act, it is not permissible for the authorised officer to use coercive measures against family members to find out the whereabouts of the taxable person.

-  It is shocking to see that in a premises where there are three ladies, namely, the petitioner's mother, wife and young daughter, male officers together with a CRPF Officer have stayed throughout day and night despite the fact that the goods, articles and things were already seized on 11.10.2019.

-  The entire exercise carried out by the concerned officers from 12.10.2019 to 18.10.2019 was totally without any authority of law and in flagrant disregard of the provisions of the Act and the rules and in total abuse of the powers vested in them under the Act.

-  The manner in which the officers have conducted themselves by overreaching the process of law and acting beyond the powers vested in them under sub-section (2) of section 67 of the CGST Act needs to be deprecated in the strictest terms.

-  Therefore, a proper inquiry needs to be made in respect of the action of the respondent officers of staying day and night at the premises of the petitioner without any authority of law.

The Court directed the Commissioner of State Tax, Ahmedabad to carry out a proper inquiry in the matter and submit a report before the court on or before 13th November, 2019.

Registry was directed to forthwith forward a copy of the order to the Commissioner of State Tax as well as Chief Secretary of the State to look into the matter and do the needful to ensure that such incidents are not repeated.

Kindly see 2019-TIOL-2472-HC-AHM-GST

How lawless can these officers meant to enforce the law become?

And this happens when India has jumped to the 63 rd rank in the World Bank 'ease of doing business' rankings. The World Bank President is in India and addressing the Civil Services probationers, he said, " Yet to stay in the forefront, India's civil service needs to shift from a focus on enforcing compliance and meeting minimum requirements of service delivery to finding ways to ensure high-quality services and regulation. You need to build the institutional capacity to deliver broad-based growth and a thriving private sector. You will need skills in communications and negotiations, and to work across units and ministerial boundaries to address the complex challenges that you will face in your careers. Partnerships with the private sector and community organizations will be important for effective service delivery ."

DIWALI SALES – CONSUMERS GAIN – GOVERNMENT LOSES?

The Confederation of All India Traders (CAIT) has written to the Finance Minister Ms. Nirmala Sitharaman that the Government is losing GST revenue due to deep discounting by e-commerce firms like Amazon and Flipkart.

CAIT tells the Government -

1.  E-commerce companies sell goods much below their market value, thereby denying the government the legitimate GST revenue.

2.  E-commerce portals, particularly Amazon and Flipkart, where deep discounts ranging from 10-80% are being given... is quite abnormal and generally not available in offline market ...

3.  Online sales are made on a much lower price than the market value of the product and as such the GST is charged by them on the sale price.

4.  Under the GST Act, the government has the power to determine actual market value of the products if it appears to be under billed. ( Really? )

5.   By lowering the price artificially in order to capture market, these e-commerce companies are causing huge loss of GST revenue to the government and violating the FDI policy of the government.

CAIT wants the government to investigate into the business models of Amazon and Flipkart.

Okay, we have an anti-profiteering law. Do we also have a law against making losses or not earning profits? Should the government interfere when consumers are getting a good bargain? Yes, CAIT members are affected, but why bring in GST here?

ROTARY CLUB MEMBERSHIP IS LIABLE TO GST

In a recent case with the Maharashtra Authority for Advance Ruling, the question referred was:

"The amount collected by Rotary club is towards convenience of members and pooled together for paying meeting expenses, communication expenses, RI per capita dues, subscription fees to the Rotarian or Rotary regional magazine, district per capita assessment and the same is deposited in single bank account. As there is no furtherance of business in this activity and neither any services are rendered nor are any goods being traded, whether the above transaction can be considered as supply of goods or services to its Members under GST"?

The AAR answered,

The said transaction by the applicant to its members is a supply of goods/services and is liable to GST.

Kindly see 2019-TIOL-311-AAR-GST .

The Gujarat High Court had in 2013 held, that rendering of service by the club to its members is not taxable service under the Finance Act, 1994. Supreme Court had recently upheld this view. Is it taxable under GST? What happens to the 'Doctrine of mutuality' ?

Until Next Week