2023 (12) TMI 559 - HC - GST

Validity of search and authorization for conducting search - Recalling of records of the search authorization issued by the respondent for conducting the search at the premises of the petitioner - issuance of summons u/s 70 - HELD THAT - The record does not indicate that any further investigation was conducted prior to authorizing the inspection under Section 67(1) of the CGST Act. On 22.08.2023 the Commissioner Central Tax GST issued an authorization (in FORM GST INS-01) for conducting inspection under Section 67(1) of the CGST Act at the premises of the petitioners - It is clear from the record that apart from the directions issued in terms of the order dated 05.04.2023 there were no reasons for the respondent to initiate the search against the petitioners under Section 67(1) of the CGST Act. The authorization issued is thus patently erroneous as none of the grounds as set out in the said authorization are borne out from the information or material on the record of the respondent. Concededly the inspection was conducted pursuant to the order dated 05.04.2023 passed by the learned Special Judge. Petitioners prayer that the documents be returned to the petitioners - HELD THAT - It is stated on behalf of the respondent that no documents have been seized however certain photocopies of the documents / documents were collected. Clearly since the conditions for inspection under Section 67(1) of the CGST Act were not satisfied the said documents are required to be returned to the petitioners. It is so directed. Summons issued under Section 70 of the CGST Act - HELD THAT - It is not considered apposite to issue any directions. The GST authorities are not precluded from continuing or initiating proceedings in accordance with the provisions of the CGST Act. Thus if any information is available with the Department that requires an inquiry to be conducted against the petitioners the respondent authorities are not impeded to do so. However it is clarified that no further inquiries or action is required to be conducted or taken by the GST authorities for complying with the order dated 05.04.2023 passed by the Special Judge. Petition disposed off.

Summary

Issues:
The issues involved in the judgment are the validity of the search authorization under Section 67(1) of the Central Goods & Services Tax Act, 2017, and the return of documents seized during the search.

Validity of Search Authorization:
The petitioners challenged the search authorization issued by the respondent under Section 67(1) of the CGST Act. The inspection was conducted based on directions from a Special Judge regarding the source of funds received by the petitioners. The Court found that the authorization was erroneous as it lacked grounds specified in the form for initiating the search. The inspection was solely based on the Special Judge's directions without proper statutory basis for GST authorities to conduct such operations.

Legal Basis of Search Authorization:
The inspection authorization was issued without valid grounds as required by FORM GST INS-01. The Court noted that the Special Judge's directions did not align with statutory provisions of the CGST Act. The lack of proper reasons for initiating the search rendered the authorization erroneous, solely relying on the Special Judge's order without meeting the necessary criteria under the Act.

Return of Documents:
The petitioners requested the return of documents seized during the search. The Court confirmed that no documents were seized, only photocopies were collected. Since the conditions for inspection under Section 67(1) were not met, the Court directed the return of the documents to the petitioners.

Conclusion:
The Court held that the search authorization lacked valid grounds as per the CGST Act, being solely based on the Special Judge's directions. It directed the return of documents to the petitioners as no seizure was justified. The judgment clarified that no further action was required by GST authorities based on the Special Judge's order. The petition was disposed of without issuing any further orders.