2019 (8) TMI 1136 - HC - GST

Refusal by the Officers of the Director-General of GST Intelligence, Mumbai to supply documents to the Petitioner seized by the officers - handing over copies of the documents seized - input tax credit - affirmation and utilization of input tax credit by various firms on the strength of invoices allegedly issued by non-existing entities - power of the authorities to carry out an investigation, search and seizure - section 67 of CGST Act. HELD THAT - There are two facets of the opinion of the Proper Officer as contemplated under section 67(5) of the Act. Firstly, the opinion, which would be a decision, should be reflected in the record. The opinion cannot be a mere ipsi-dixit of the Proper Officer. There must be cogent reasons to withhold giving of copies to the person. A mere statement that it will prejudicially affect the investigation would be only chanting the language of the section. An offer is made by the Respondents that the Chartered Accountant of the Petitioner can visit the office of the Respondents, and there is no need to give such copies. Section 67(5) of the Act creates a right to receive the copies by a person from whose custody the documents are seized. The said person need not give justification why he needs the copies of the documents seized. Therefore, the argument that the Petitioner must show a cogent reason why the Petitioner needs copies and only an inspection by the Chartered Accountant will suffice has to be rejected. Tampering of evidence - HELD THAT - It is not explained how, when the originals are with the respondent-authorities, the said documents will be tampered by the Petitioner. Second, if the soft copies are available with the Petitioner, the argument that if the copies are given, now the Petitioner will alert its associates is also not explained - The Note states that giving of copies would prevent investigation. This is only a reproduction of the language of the section. Further, the Note is prepared on 7 August 2019, i.e. one month after the present writ petition was filed. Therefore, first, no reasons are given in the said note as to how giving of copies will prejudice the investigation and second, the record is created subsequently. In the light of the provision of section 67(5) of the Act creating right in the person, the denial of copies must be a reasonable action. The legislative intent is clear that the documents or books seized must not be kept in the custody of the officer for more than the period necessary for its examination and copies thereof need to be given to the person from whose custody the said documents or books are seized. The reasonableness of the action depends on the facts of each case. If the right to get copies of the documents and the power of the authorities to refuse the same has to be balanced, then the balance may shift by the passage of time and continuing withholding of copies can become unreasonable assuming it is justified at the inception. The documents were seized in January 2019, and the petition is being heard in the middle of August 2019. The prejudice to the Petitioner has been demonstrated. The refusal by the respondent- authorities to give copies of the documents to the Petitioner which are seized under Panchanama dated 9/10 January 2019 is not justifiable and the Petitioner is entitled to the mandatory direction as prayed for - petition disposed off.

Summary

Issues Involved:

1. Refusal to supply seized documents.
2. Compliance with SEBI regulations.
3. Impact on statutory compliance and penalties.
4. Legal provisions under the Central Goods and Services Act, 2017.
5. Right to receive copies of seized documents.
6. Reasonableness of withholding documents.

Issue-wise Detailed Analysis:

1. Refusal to supply seized documents:

The petitioner questioned the refusal by the Officers of the Director-General of GST Intelligence, Mumbai to supply documents seized during a search conducted on 9 and 10 January 2019. The petitioner requested these documents to comply with statutory requirements but was denied access.

2. Compliance with SEBI regulations:

The petitioner, a listed company, faced notices from the Bombay Stock Exchange and the National Stock Exchange for non-submission of financial results. As per Regulation 33 of the SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015, the company is required to submit quarterly, half-yearly, and yearly financial results within specified timeframes.

3. Impact on statutory compliance and penalties:

Due to the non-availability of the seized documents, the petitioner could not comply with the financial submission requirements, resulting in a penalty notice from the Bombay Stock Exchange. The penalty was ?1,06,200/- payable till 17 June 2019, and thereafter ?5,000/- per day.

4. Legal provisions under the Central Goods and Services Act, 2017:

The court examined the powers conferred under the Central Goods and Services Act, 2017, specifically Chapter XIV dealing with inspection, search, seizure, and arrest. Section 67 of the Act empowers officers to inspect, search, and seize documents if there is a reason to believe that a taxable person has suppressed transactions or claimed excess input tax credit.

5. Right to receive copies of seized documents:

The court noted that Section 67(5) of the Act provides the right for a person from whose custody documents are seized to obtain copies thereof unless it prejudicially affects the investigation. The legislative intent is to prevent needless harassment and ensure that businesses are not unduly burdened.

6. Reasonableness of withholding documents:

The court scrutinized the respondents' argument that providing copies would prejudice the investigation. It found the reasoning insufficient as the originals were with the authorities, and the petitioner had soft copies. The court emphasized that the opinion to withhold documents must be based on cogent reasons and not merely a reproduction of statutory language.

Conclusion:

The court concluded that the refusal to provide copies of the seized documents was unjustifiable. It mandated the respondent authorities to furnish copies of the documents within two weeks, recognizing the petitioner's right under Section 67(5) of the Act. The writ petition was disposed of with a directive to comply with this order.