Only Proper Officer Can Investigate Into GST Evasion: Karnataka HC Directs ₹50L Refund To Company Accused Of Supplying Arecanut To ‘Gutkha’ Manufacturers
Justice M.I.Arun, Karnataka High Court
The Karnataka High Court has directed refund of Rs. 50 lakhs to a transport company which was accused of supplying arecanut to various ‘Gutkha’ manufacturers.
The Court was dealing with a Writ Petition preferred by the accused company to quash the Show-Cause Notice issued by the Principal Commissioner of Central Tax.
A Single Bench of Justice M.I. Arun held, “… it is only a proper Officer who can investigate into evasion of GST and inspection, search and seizure and arrest can be done only by the proper Officer failing which the same will have to be held invalid and based upon the inspection, search and seizure if the proper Officer comes to the conclusion that there is mens rea involved as contemplated under Section 74 of the CGST Act, he can issue a notice under Section 74 and not otherwise.”
Advocate Pranay Sharma Y. represented the Petitioner while Advocate Jeevan J. Neeralgi represented the Respondents.
In this case, the Petitioner was involved in the transportation of goods and was registered under the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act) and the Karnataka Goods and Services Tax Act, 2017 (KGST Act). On the ground that the Petitioner along with several other persons had indulged in purchase of arecanut from several persons and supplying the same to various Gutkha manufacturers without payment of appropriate applicable GST, investigation was initiated against the Petitioner under the provisions of the GST Act, which culminated in the show-cause notice being issued from the Additional Commissioner of Central Tax. Aggrieved by the same, the Writ Petition was filed before the High Court.
The High Court in the above context of the case, observed, “In the instant case, admittedly, substantial part of the investigation including search and seizure of the materials has been done by respondent no.2 who is not the proper Officer and under the circumstances, the said investigation, inspection, search and seizure in respect of the petitioner herein has to be considered ab initio void.”
The Court added that, when the same is considered as ab initio void, notice issued under Section 74 of the CGST Act based upon search, seizure, and the statements recorded from the Petitioner, has to be considered illegal and that there is no satisfaction on part of the proper Officer for issuance of the notice under Section 74 of the CGST Act.
“If respondent no.2 after investigation has transferred the case to respondent no.3, for issuance of notice under Section 74, respondent no.3 was required to redo the investigation and come to an independent conclusion as contemplated under Section 74 of the CGST Act and only thereafter a fresh notice requires to be issued. Respondent no.1 cannot issue a notice under Section 74 on the 'borrowed satisfaction'. Under the said circumstances, the impugned notice is liable to be set aside”, it said.
The Court, therefore, directed the Respondents (authorities) to refund the sum of Rs. 50,00,000/- deposited by the Petitioner and return the seized documents and other goods.
Accordingly, the High Court disposed of the Writ Petition and set aside the impugned show-cause notice.
Cause Title- M/s. Vigneshwara Transport Company v. Additional Commissioner of Central Tax & Ors. (Neutral Citation: 2024:KHC:49045)
