Delhi HC: Roving Inquiry Per Order of Special Judge (PC Act) by GST Dept

The Delhi High Court has set aside the special judge’s instructions to carry out an extensive investigation by the GST department in the absence of any strict provisions.

The panel comprising Justice Vibhu Bakhru and Justice Amit Mahajan noted that, besides the directions given on April 5, 2023, there were no justifications for the respondent to initiate a search against the petitioners under Section 67(1) of the CGST Act.

The authorization issued in this regard is incorrect, as none of the grounds mentioned in the authorization are supported by the information or evidence available to the respondent. It is acknowledged that the inspection was conducted as per the order issued by the Special Judge on April 5, 2023.

The assessees/petitioners filing the petition requested that the search authorization records dated August 22, 2023, issued by the respondent for searching the petitioner’s premises, be revoked and invalidated. The petitioners challenged the summonses issued under Section 70 of the Central Goods and Services Tax Act, 2017 (CGST Act), along with the subsequent proceedings. The petitioners have urged the respondent or the department to return the petitioner company’s documents, as well as the photocopies collected during the search and inspection carried out on August 22, 2023.

The inspection took place as a result of the order issued by the Special Judge (P.C. Act). The Special Judge had instructed the Income Tax Department, GST Department, and Enforcement Directorate to investigate the source of the Rs. 50,00,000 received by the petitioners.

The petitioner argued that there was no evidence of additional investigation carried out before granting permission for the inspection under Section 67(1) of the CGST Act. Specifically, on August 22, 2023, the Commissioner, Central Tax GST, issued an authorization (in FORM GST INS-01) to inspect the petitioner’s permission under Section 67(1) of the CGST Act.

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The court determined that as the requirements for inspecting Section 67(1) of the CGST Act were not fulfilled, the documents must be returned to the petitioners.

The court clarified that the GST authorities are not prohibited from continuing or initiating proceedings under the provisions of the CGST Act. Hence, if the Department possesses any information that necessitates an inquiry against the petitioners, the respondent authorities are not retarded from doing so.