PB & HR HC Upholds GST Dept’s Right to Conduct Preliminary Inquiry into Accounting Records

The Punjab & Haryana High Court while dismissing the writ petition carried that the Good and Service Tax (GST) department could not be averted from performing the preliminary inquiry pertinent to the books of accounts of a registered individual.

The applicant/taxpayer MAG Filters And Equipments Private Limited, has contested the proceedings started via the respondents u/s 65 of the CGST Act, 2017, for doing audit. It was furnished that the notice asks for distinct documents which were made available at the time of performing the anti-evasion measure and notices were furnished before the applicant u/s 73 of the CGST Act, whereafter the tax demand from the duration 2017-18 up to 2021-22, to Rs.70,35,44,181/- and interest amounting to Rs.43,29,194/- was raised and deposited by the applicant.

A fresh proceedings post the finish of the proceedings u/s 65 of the GST Act must not have been started and it is a cause of harassment to the applicant who is ready to perform an audit for the year 2022-23.

A total demand of Rs 94,86,762 has been raised, which was dropped, and Rs 11,84,867 was confirmed for the excess Input tax credit. No chance was there for the respondents to start the audit afresh for the related FY 2017-18 to 2021-22.

The court while rejecting the taxpayer’s contentions claimed that the respondents had taken measure u/s 73 of the CGST act shall not be grounds to restrain the authorities from performing an audit since the audit might result in the detection of tax not filed or short filed or wrongly refunded or it might be even otherwise to the advantage of the related registered individual.

It was noted by the bench that the audit is pertinent to the preliminary inquiry and the department has not been averted from performing the preliminary inquiry concerned with the books of accounts of a registered individual and no prejudice could be cited to have been caused to the related registered individual.

It was carried by the division bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth that in the case it is discovered that the tax has been evaded fraud, the authority is available before the department to start the proceedings u/s 74 of the CGST Act, independent of the proceedings which might have been functioned u/s 73 of the CGST Act.