TMI Blog2020 (8) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the person under investigation who witnesses every action of the inspection team. The allegations are also not substantiated which, we perfectly understand, are impossible of substantiation, especially in a petition under Article 226. Apart from the invalidity urged of the very search, inspection and seizure, we are not considering any of the issues so raised in the writ petition and in the appeal. Simultaneous proceedings of investigation having been commenced when already an audit was in progress - HELD THAT:- Audit under section 65 is a routine procedure to be carried out by the Commissioner in such frequency and in such manner as prescribed in the rules; which is independent of an investigation under Section 67. Section 67 is a more onerous procedure which can be initiated only on the satisfaction of an Officer not below the rank of a Joint Commissioner of, suppression of taxable transactions, excess claim of input tax credit, contravention of the provisions of the Act and Rules, keeping of goods and accounts in contravention of the provisions, escapement of tax, secreting of goods or material liable to confiscation or relevant or useful in any proceedings under the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the proceedings initiated under Section 67 is improper, illegal or that the actions projected before us were in any manner proceeded with, in an arbitrary or high-handed fashion. Appeal dismissed. - W.A.No.943 OF 2020 - - - Dated:- 14-8-2020 - Mr. Justice K. Vinod Chandran And Mr. Justice T.R. Ravi For the Appellants : Advs. Sri. Mathai M Paikaday(Sr.), Sri. Sandeep Gopalakrishnan, Smt. Jinnu Sara George, Shri.Zafar Antonio For the Respondents : Standing Counsel Sreelal N. Warrier, Senior Government Pleader Sri.Mohammed Rafiq. JUDGMENT VINOD CHANDRAN, J. The petitioners, the Managing Director and Director of a Company registered under the Companies Act,engaged in providing Cable Services as a Multi Service Operator (MSO) under the Telephone Regulatory of India (TRAI) Regulations, are in appeal. The appellants allege that illegal proceedings were taken against them, purportedly under the Central Goods and Services Tax Act, 2017 ['CGST Act' for brevity], and their residences and offices were raided, both of them kept under illegal custody and an amount of Rupees One Crore extorted from them. On the intervention of their Advocate at mid-nigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and ended only at Midnight. The appellants were taken into illegal custody and not provided even basic amenities during the entire period. The appellants were also coerced into parting with Rupees One Crore, which is evidenced by Exhibit P3. Exhibit P3 is made not voluntarily and was executed under duress. Exhibit P4 order of seizure is without jurisdiction for reason of the SIO, having entered into a satisfaction or rather arrived at reasons to believe that the documents annexed therein were required to be seized. Section 67 specifically mandates such reasons to believe to be entered into by an officer not below the rank of a Joint Commissioner, which the SIO is not. The summons issued against the appellants, as is seen at Annexures A2 and A3 prior to the inspection, does not have the Document Identification Number ['DIN' for brevity], which is an imperative requirement as per Annexure A6 issued by the Central Board of Indirect Taxes and Customs [hereinafter referred to as Central Board ]. There is also no substantiation as to a DIN having been generated subsequently, within 15 days, as has been provided under para 5 of Annexure A6. It is hence contended that Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng their comforts. After the conclusion of the investigation and seizure of documents, again in the presence of the appellants, they were directed to report to the departmental office for recording their statements. By that time, the Advocate had reached the site of inspection and he accompanied the Directors in their car. The recording of statement also took some time and there was no forceful detention or illegal arrest. The payment made was also voluntary and the cheque was not encashed, since there is a procedure contemplated, which was in process when the writ petition was filed. The officers hence desisted from encashing the cheque when the writ petition was pending and the writ appeal too. Even now the cheque is remaining with the Department un-encashed, is the submission. 7. The learned Standing Counsel submits that Section 67 speaks of power of inspection, search and seizure, which is conferred on the officer not below the rank of Joint Commissioner, who has also been empowered to authorize in writing any other officer of the Department. An authorization is available in the files with DIN and the summons issued also has been regularized with issuance of a DIN, all of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in Mohinder Singh Gill v. Chief Election Commissioner [ (1978) 1 SCC 405 ]. Reference is made to paragraph 8, which speaks of an illegal order not being validated by subsequent actions, of filing of counter affidavits, explanations and so on and so forth. The order has to stand on the recitals therein or rendered invalid if the essential requirements are not followed. There can be no additional grounds brought out later to validate an invalid order. Reliance is also placed on paragraph 37 of the decision in Chandra Singh v. State of Rajasthan [ (2003) 6 SCC 545 ], where a three-Judge Bench has followed Mohinder Singh Gill , reiterating the principle that an order passed by a statutory authority must be adjudged on the face thereof as the reasons contained therein cannot be supplemented by an affidavit. Manohar v. State of Maharashtra [ (2012) 13 SCC 14 ] is relied upon to contend that when State action results in civil consequences, necessarily there should be afforded an opportunity of hearing. The learned Senior Counsel would argue that before attachment there should have been a hearing afforded to the appellants. The judgment of the Delhi High Court in W.P(C) No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity. The 1st paragraph is extracted hereunder: In keeping with the Government's objectives of transparency and accountability in indirect tax administration through widespread use of information technology, the CBIC is implementing a system of electronic (digital) generation of a Document Identification Number (DIN) for all communications sent by its offices to taxpayers and other concerned persons. To begin with, the DIN would be used for search authorization, summons, arrest memo, inspection notices and letters issued in the course of any enquiry. This measure would create a digital directory for maintaining a proper audit trail of such communication. Importantly, it would provide the recipients of such communication a digital facility to ascertain their genuineness. Subsequently, the DIN would be extended to other communications. Also, there is a plan to have the communication itself bearing the DIN generated from the system . [ underlining by us for emphasis ] Evidently there are communications which would not be covered by the very nature of it and all communications are not brought under the mandatory requirement. Exhibit P4 seizure order, by the nature of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation under Section 67. Section 67(1) and (2) reads as under: 67. Power of inspection, search and seizure (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that - (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place. (2) Where the proper officer, not below the rank of Joint Commissioner, either pursuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te General is an Officer above the rank of Joint Commissioner. The authorization has been issued after recording the fact that the Directorate General has reason to believe, on information presented, that goods liable to confiscation/documents relevant to the proceedings under the Act are secreted in the business/residential premises detailed therein. In the scheme of Section 67 and the empowerment of an officer not below the rank of Joint Commissioner who has further been empowered with the power to authorize any other officer to search and seize from the business or other premises of a taxable person, we do not find any infirmity in Exhibit P4 as has been alleged on the basis of the dictum of Mohinder Singh Gill or Chandra Singh. 15. The Hon'ble Supreme Court in Mohinder Singh Gill specifically found that a statutory order has to be judged by the reasons mentioned therein. The said dictum does not apply in the scheme of Section 67, which empowers an officer not below the rank of a Joint Commissioner not only to inspect, search and seize from the business premises of a taxable person, but also empowers to authorize another officer to carry out the search and seizure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rules; which is independent of an investigation under Section 67. Section 67 is a more onerous procedure which can be initiated only on the satisfaction of an Officer not below the rank of a Joint Commissioner of, suppression of taxable transactions, excess claim of input tax credit, contravention of the provisions of the Act and Rules, keeping of goods and accounts in contravention of the provisions, escapement of tax, secreting of goods or material liable to confiscation or relevant or useful in any proceedings under the Act and any act leading to evasion of tax. Investigation under Section 67 is no routine procedure as is an audit under section 65. In this context we cannot but observe that the appellants, on their own admission, were issued with notice dated 17.03.2020, Exhibit P2, calling for details of the LCOs. There is nothing stated in the writ petition as to how and in what manner the appellants responded to the said notice. Then by Exhibit P5 dated 15.05.2020 an audit under Section 65 was initiated and later in June the investigation under section 67. Though we are not going into the merits of the suppression alleged, the appellants themselves say that it is with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly by the proper officer to verify its correctness. After scrutiny of returns notice is issued on the discrepancies noticed. If no satisfactory explanation is furnished within a period of thirty days or the registered person does not accept the discrepancies by making corrective measures, the officer can initiate appropriate action, including those under Sections 65, 66 and 67, and proceed to determine the tax and other dues under Section 73 or 74. Assessments in the event of non-filing of returns, unregistered persons as also special cases are spoken of in Sections 62, 63 and 64; 21. The determination of tax arises under Sections 73 and 74 under circumstances either of non-payment, short payment, erroneous refund, wrongly availed or utilized input tax credit etc. Section 74 is the determination contemplated when there is fraud, willful-misstatement or suppression of facts and Section 73 when such allegation is not there. Hence, when an investigation is initiated under Section 67, the assessee is immediately brought to notice of the proceedings initiated. Before proceeding under Section 74(1) for determination of tax, interest and penalty payable, at any point after initiation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y investigation or enforcement activity or any ad hoc deposit . An officer above the rank of a Joint Commissioner or one authorized by such officer carrying out the investigation or enforcement activity is so exempted and can deposit any amounts collected, by way of cash, cheque or demand draft, during the investigation or enforcement activity. This does not require generation of the Forms prescribed. The proper officer or the one authorized, hence is enabled to receive cash, cheque or demand draft in the course of an investigation or enforcement activity from the tax payer. We do not find any extortion having been effected against the statute and Exhibit P3 specifically indicates that it is a voluntary payment, although it is made under protest. 23. The learned Instructing Counsel had an argument with respect to Rule 142 that unless an intimation is served as provided under sub-rule (1A), there cannot be a deposit made or taken under Section 74(5). We are afraid, the argument cannot be countenanced. Rule 142, in fact, is in consonance with our interpretation of the payment of tax under sub-sections (5), (8) and (11) of Section 74. Sub-rule (1)(a) of Rule 142 speaks of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 74 and information to the proper officer in the prescribed form, which has to be acknowledged by the proper officer. By the amendment of 2019, the tax payer, as it was prior to that, could make own assessment and pay the tax, interest and penalty under sub-section (5) of Sections 73 or 74 and was given an additional opportunity, by way of an intimation issued by the proper officer of the ascertainment of the tax, interest and penalty prior to the notice under sub-section (1) of Sections 73 and 74 for the purpose of paying such amounts at the reduced rate of penalty of 15%. Rule 142 as it stands in 2019 does not at all speak of deposit under Section 74(5) being made only after an intimation is served by the proper officer. We have from the provisions of the statute clearly found otherwise. 24. We had, on the last date of hearing specifically informed the learned Senior Counsel as also the Instructing Counsel that if the appellants require the cheque back on the assertion of a coercion having been effected, we would so direct especially when the cheque is remaining unencashed. We also directed that an affidavit be filed to the said effect by the appellants themselves. No such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rfered with. Here, the Bank accounts attached are of the taxable person, against whom an enquiry is initiated under Section 67. 27. The learned Senior Counsel also argued based on Manohar that there is an implied requirement of hearing even where the Rules are silent, as a necessary concomitant of the principles of natural justice, which obviously has not been granted; prima facie vitiating the attachment. We are afraid, the said principle does not apply insofar as an attachment made to protect the interest of the revenue. If notice is issued before attachment, then the account holder could as well defeat the purpose, by withdrawing the amounts kept in such accounts. The rule for a hearing does not arise prior to attachment. Whether it arises before seeking disbursement of the amounts remaining in the account, we are not called upon to adjudicate as of now. We leave the matter to be adjudicated before the appropriate authorities or forum. We do not think that the proceedings initiated under Section 67 is improper, illegal or that the actions projected before us were in any manner proceeded with, in an arbitrary or high-handed fashion. We dismiss the appeal, leaving the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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