TMI Blog2021 (1) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that there is a remote possibility of abuse of power. In fact, it must be presumed, unless the contrary is proved, that administration and application of a particular law would be done not with an evil eye and unequal hand . This Court is of the prima facie opinion that the Goods and Service Tax is a unique tax, inasmuch as the power as well as field of legislation are to be found in a single Article, i.e., Article 246A. Further, the scope of Article 246A is significantly wide as it not only empowers both Parliament and State Legislatures to levy and/or enact GST Act, but it also grants the power to make all laws with respect to Goods and Service Tax - It is settled law that unless the Constitution itself expressly prohibits legislation on the subject either absolutely or conditionally, the power of a Legislature to enact legislation within its legislative competence is plenary. Also, the words/expression in a constitutional enactment conferring legislative power have to be construed as words of widest amplitude, content and therefore the most liberal construction has to be placed upon them. This Court is of the prima facie opinion that the pith and substance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been filed by Respondent nos. 2 and 3 in W.P.(C.) No. 5454/2020 seeking vacation of interim protection granted vide order dated 20th August, 2020. 2. It is pertinent to point out that when W.P.(C.) No. 5454/2020 was listed before this Court for the first time on 20th August, 2020, Mr. Chetan Sharma, learned Additional Solicitor General had fairly stated that in a similar matter the Supreme Court had directed that no coercive action be taken against the petitioner therein. On the basis of the said statement, this Court had granted interim protection to the petitioner. The relevant portion of the order dated 20th August, 2020 passed by this Court in W.P.(C.) No. 5454/2020 is reproduced hereinbelow:- Present writ petition has been filed seeking a declaration that Sections 69 and 132 of the CGST Act, 2017 are arbitrary, unreasonable and being beyond the legislative competence of the Parliament are ultra vires the Constitution. xxxx xxxx xxxx xxxx Mr.Chetan Sharma, learned ASG candidly states that the Supreme Court in a similar case being W.P.(Crl.) No.184/2020 has issued notice and directed that no coercive action be taken against the petitioner therein. Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss on account of arrest. They emphasized that in the present cases no Show Cause Notice had been issued to the Petitioners either under Section 73 or Section 74 of the CGST Act by the Respondents for any unpaid tax, short paid tax, or erroneous refunds or where input tax credit had been wrongly availed or utilized. 10. They stated that the Respondents have erroneously claimed that since they are not the police officers and CGST Act is a special act containing provisions for arrest, search and seizure etc, Respondents are not bound by Chapter XII or any provision of the Code of Criminal Procedure, 1973 (for short Cr.P.C. ) governing commencement of investigation, maintaining case diary, etc. They submitted that despite the CGST officers being vested with powers of police officers as well as those of a civil court while investigating an offence, still the proceedings are termed as an inquiry and the person summoned is not an accused . They pointed out that as CGST officers are not police officers, no protection under Article 20(3) is available to the summoned persons thereby causing them immense prejudice. 11. Learned counsel for Petitioners also contended that the Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State Legislatures. He further submitted that Article 246 does not enumerate the subject matter of the laws to be made by Parliament or the State Legislatures as the same have been enumerated in the three lists in the Seventh Schedule. He also submitted that the expression make laws in Article 246 provides plenary powers of legislation to the Parliament and the State Legislatures includes the power to make laws with respect to offences with regard to the subject matters. In support of his submission, he relied upon the judgment of the Supreme Court in UOI v. Mohit Minerals, (2019) 2 SCC 599. 16. Learned ASG submitted that if the power to enact Sections 69 and 132 of the CGST Act is not provided by Article 246A of the Constitution of India, then the said power to legislate would be deemed to have been conferred upon the Parliament by virtue of Entries 1 and 2 of List III read with Article 246(2). He pointed out that parliament s power to make offences is not limited to Entry 93 of List I as otherwise no offences can be provided in enactments made under the concurrent list. 17. Learned ASG further submitted that CGST Act is a special enactment and in the absence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner, CGST-Delhi North vide DIN No: 20201151ZI000041414B in the name of Inspector of CGST-Delhi North to search the registered office premises of the petitioner at Shop No. 313, 3rd Floor, 1170, Kucha Mahajani, Chandani Chowk, Delhi-110006 on 23rd November, 2020. The said warrant was also served on the petitioner at the time of search. Therefore, according to him, the claim of the petitioner in WP(C) No.10130/2020 that the searches were conducted by non-jurisdictional officers was completely false. 23. He emphasized that the present cases involve several non-functional and bogus firms that had fraudulently availed IGST refunds and/or ITC credits and had caused substantial loss to the Union of India. He stated that as per the investigation conducted till date, the fraudulent IGST refund was more than ₹ 63 crores in the case of WP(C) 5454/2020 and the fraudulent ITC claimed in the case of WP(C) 10130/2020 was more than ₹ 6.35 crores. He further stated that in W.P.(C) 10130/2020, the investigation has revealed that the petitioner therein has raised sale invoices of ₹ 211.89 crores while having stock worth only ₹ 2.95 crores, which indicates that the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stated that this is the norm in cases where search is to be conducted in other jurisdictions. Further, the learned ASG drew our attention to page 78 of the writ petition which indicates that both CGST Delhi and CGST-North come under the command of the Principal Chief Commissioner Delhi. Therefore, he submitted that it did not matter as to which division issued the search authorization as no prejudice had been caused to the Petitioner. 27. The second argument put forth by Mr. Mittal was countered by the learned ASG on the ground that there was in fact, cross-empowerment of the GST officers in accordance with the Circular No. 01/2017 dated 20 th September, 2017. Pursuant to the aforementioned circular, the Central Board of Excise and Customs issued a notification being No. 39/2017- Central Tax dated 13th October, 2017 which cross-empowers State and Union Territory GST officers to act as proper officers for the purpose of refund under CGST Act, 2017. This position was clarified by letter no. F. No. CBEC-20/10/07/2019GST dated 22nd June, 2020 issued by the Central Board of Excise and Customs wherein it was stated that no separate notification would be needed to cross-empower Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of a delegated legislation and it is only when there is clear violation of a constitutional provision beyond reasonable doubt that the court should declare a provision to be unconstitutional .. (emphasis supplied) 31. Further, laws are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is a remote possibility of abuse of power. In fact, it must be presumed, unless the contrary is proved, that administration and application of a particular law would be done not with an evil eye and unequal hand . The Supreme Court in Maganlal Chhagganlal (P) Ltd. Vs. Municipal Corporation of Greater Bombay Ors., (1975) 1 SCR 1 has held as under:- The statute itself in the two classes of cases before us clearly lays down the purpose behind them, that is that premises belonging to the Corporation and the Government should be subject to speedy procedure in the matter of evicting unauthorized persons occupying them. This is a sufficient guidance for the authorities on whom the power has been conferred. With such an indication clearly given in the statutes one expects the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Article 246A is significantly wide as it not only empowers both Parliament and State Legislatures to levy and/or enact GST Act, but it also grants the power to make all laws with respect to Goods and Service Tax. 33. It is settled law that unless the Constitution itself expressly prohibits legislation on the subject either absolutely or conditionally, the power of a Legislature to enact legislation within its legislative competence is plenary. Also, the words/expression in a constitutional enactment conferring legislative power have to be construed as words of widest amplitude, content and therefore the most liberal construction has to be placed upon them. 34. In fact, the power of arrest conferred by Section 69 of the Act is not a general power of arrest, but is restricted to certain offences which are specified under Section 69 of the Act namely some of the offences covered under Section 132 of the Act and the offences so specified are all offences relating to goods and service tax. Consequently, this Court is of the prima facie view that the expression with respect to goods and services tax used in Article 246A, being a constitutional provision, must be given its wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of the law. A strict interpretation would result in a large number of statutes being declared invalid on the ground of overlapping. If the legislature is to have the full scope to exercise the powers granted to it, it is necessary to assume that the Constitution does not prevent a legislature from dealing with a matter which may incidentally affect any matter in the domain of the other legislature. Gwyer, C.J. in Subramanyan Chettiar v. Muttuswami Goundan [1940] F.C.R. 188 in explaining the validity of the doctrine of pith and substance said: It must inevitably happen from time to time that legislation though purporting to deal with a subject in one List, touches also upon a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appear to have legislated in a forbidden sphere. 38. Consequently, this Court is of the prima facie opinion that the pith and substance of the CGST Act is on a topic, upon which the Parliament has power to legislate as the power t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by Union Parliament to be valid under this entry must satisfy two requirements; one, that it must relate to criminal law and the offence should not be such as has been or could be provided against laws with respect to any of the matters specified in List II. What is a criminal law? Any Act or rule dealing with crime, (The) criminal justice system is a firmly societal defensive reaction to intolerable behavior. From the beginning it was considered as a tool designed to protect an established order of values attuned to the political organisation of the community. Transgression of some important norms reflecting these values was seen as a crime and, as such, demanded punishment. 446. What is a crime in a given society at a particular time has a wide connotation as the concept of crime keeps on changing with change in political, economic and social set-up of the country. Various legislations dealing with economic offences or offences dealing with violation of industrial activity or breach of taxing provision are ample proof of it. The Constitution-makers foresaw the eventuality, therefore they conferred such powers both on Central and State Legislatures to make laws in this r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary delay, if the offences are cognizable and non bailable. However, the provisions of Sections 154 to 157 of the Code will have no application at that point of time. Otherwise, sub-section (3) of section 69 provides for granting bail as the provision does not confer upon the GST officers, the powers of the officer in charge of a police station in respect of the investigation and report. Instead of defining the power to grant bail in detail, saying as to what they should do or what they should not do, the short and expedient way of referring to the powers of another officer when placed in somewhat similar circumstances, has been adopted. By its language, the sub-section (3) does not equate the officers of the GST with an officer in charge of a police station, nor does it make him one by implication. It only, therefore, means that he has got the powers as defined in the Code of Criminal Procedure for the purpose of releasing such person on bail or otherwise. This does not necessarily mean that a person alleged to have committed a non cognizable and bailable offence cannot be arrested without a warrant issued by the Magistrate. (iii) The authorised officer exercising power t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) AND THE AFORESAID GUJARAT HIGH COURT JUDGMENT, THE ARGUMENTS THAT PREJUDICE IS CAUSED TO THE PETITIONERS AS THEY ARE NOT ABLE TO AVAIL PROTECTION UNDER ARTICLE 20(3) OF THE CONSTITUTION AND/OR THE PROVISIONS OF CR. P.C. DO NOT APPLY EVEN WHEN CGST ACT IS SILENT, ARE UNTENABLE IN LAW. 45. It is relevant to note that when any person is arrested under Section 132(5) of the CGST Act, the said person has to be informed of the grounds of arrest and must necessarily be produced before a Magistrate under Section 69 (2) within a period of twenty-four hours. This ensures judicial scrutiny over the acts of executive and it cannot be termed as unreasonable and/or excessive, as sought to be contended by the petitioners. 46. Further, the argument that prejudice is caused to the Petitioners as they are not able to avail protection under Article 20(3) of the Constitution and/or the provisions of Cr.P.C. do not apply even when CGST Act is silent, are untenable in law. The Supreme Court in Directorate of Enforcement vs. Deepak Mahajan (supra) has held as under:- 87. In Ramesh Chandra Mehta v. State of W.B. [AIR 1970 SC 940 : (1969) 2 SCR 461 : 1970 Cri LJ 863] a Constitution Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limits the application of the provisions of the Code reading, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences. xxxx xxxx xxxx xxxx 132. For the aforementioned reasons, we hold that the operation of Section 4(2) of the Code is straightaway attracted to the area of investigation, inquiry and trial of the offences under the special laws including the FERA and Customs Act and consequently Section 167 of the Code can be made applicable during the investigation or inquiry of an offence under the special Acts also inasmuch as there is no specific provision contrary to that excluding the operation of Section 167. 47. Also just because CGST Act provides for both adjudication of civil liability and criminal prosecution doesn t mean that the said Act is unfair or unreasonable. RELIANCE ON NO COERCIVE ORDERS BY COUNSEL FOR THE PETITIONERS ARE UNTENABLE AS THE SUPREME COURT IN UNION OF INDIA VS. SAPNA JAIN ORS., SLP (CRL.) 4322-4324/2019 DATED 29TH MAY, 2019 HAS SPOKEN ITS MIND . 48. The no coercive orders relied upon by learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax enactments for search and arrest are actually intended to aid and support their main function of levy and collection of taxes and duties, iii) that a person against whom an enquiry is undertaken under the relevant provisions of the tax laws, does not automatically become a person accused of an offence, until prosecution is launched, iv) that the statements made by persons in the course of enquiries under the tax laws, cannot be equated to statements made by persons accused of an offence, and v) that as a consequence, there is no protection for such persons under Article 20(3) of the Constitution of India, as the persons summoned for enquiry are not persons accused of any offence within the meaning of Article 20(3) of the Constitution of India. xxxx xxxx xxxx xxxx 58. Therefore, all the technical objections raised by the petitioners, to the entitlement as well as the necessity for the respondents to arrest them are liable to rejected. Once this is done, we will have to examine whether, in the facts and circumstances of these cases, the petitioners are entitled to protection against arrest. It must be remembered that the petitioners cannot be placed in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... POWERED TO CONDUCT INTELLIGENCE-BASED ENFORCEMENT ACTION AGAINST TAXPAYERS ASSIGNED TO STATE TAX ADMINISTRATION UNDER SECTION 6 OF THE CGST ACT. 50. Insofar as the jurisdictional issue raised in W.P.(C.) No. 10130/2020 is concerned, this Court prima facie finds force in the submissions of the learned ASG that the Central tax officers are empowered to conduct intelligence-based enforcement action against taxpayers assigned to State tax administration under Section 6 of the CGST Act. At this interim stage, we cannot vitiate the search action on the premise that the plea that the officer carrying out the search was incompetent. Learned ASG has explained that the address of the Petitioner falls under the jurisdiction of CGST-Delhi North therefore, Additional Commissioner, CGST-Delhi East vide letter dated 22.11.2020 requested Additional Commissioner, CGST-Delhi North to issue a search authorisation under section 67(2) of the CGST Act, 2017 and depute an inspector of CGST Delhi North for the purpose of search at the said address. This contention is of course controverted by the Petitioner and would have to be examined in depth at the final stage, but for now, we do not find the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is a habitual offender and he along with respondent's father Sh. Sanjeev Maggu has perpetrated similar racket of economic crime in the past also, wherein the dummy proprietorship/partnership firms were created in the name of gullible persons to defraud the government exchequer xxxx xxxx xxxx xxxx (viii) The voluntary statement of Sh. Dhruv Maggu was recorded under section 70 of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017, wherein he accepted that his brother Sh. Akhil Maggu and he are business partners. That they have opened several firms and their bank accounts in the name of various poor persons whose IDs have been obtained through Sh. Mukesh Kumar, who is their manager, on payment basis. The GST registration process and documentation is handled by his other three partners with the assistance of Sh. Mukesh Kumar. Parallelly, the IEC from DGFT is also obtained in respect of these firms. Then they arrange trash or low-quality goods and then export the same in the name of the aforesaid created firms, parallelly, they file the GST returns of these firms and pay the GST liability through ITC in these firms. They then claim the IGST refund from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. then raised a sale invoice dated 30.01.2018 of ₹ 2,69,95,500/- involving GST of ₹ 8,09,865/-. This practice has been followed by all these parties for all the invoices raised among themselves. IV. That, on 30.01.2018, the first time when M/s K.P. and Sons raised a sale invoice to M/s Rajdarbar Commodities Pvt. Ltd. for sale of gold bullion worth ₹ 4.5 crores as per their GSTR-2A, they only had stock of gold bullion of ₹ 2.95 crores. Therefore, only with a stock of ₹ 2.95 crores worth of gold bullion, M/s K.P. and Sons had raised sale invoices of ₹ 211.89 crores to M/s Rajdarbar Commodities Pvt. Ltd. and has purchased gold bullion totalling to ₹ 211.81 crores from M/s Vertical Vyapaar Pvt. Ltd. From the above it is clear that the goods are traded by these above entities within themselves and all the GST payments are made through ITC passed on by these firms to each other. Also, from analysing the GSTR-2A of these firms it was found that except from the above transactions none of the above firms are found to have purchased the gold worth ₹ 211 crores either locally or through import. xxxx xxxx xxxx xxxx VII. The sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegation that a tax collection mechanism has been converted into a disbursement mechanism most certainly requires investigation. Accordingly, this Court is not inclined to interfere with the investigation at this stage and that too in writ proceedings. At the same time, innocent persons cannot be arrested or harassed. This Court has no doubt that the trial court, while considering the bail or remand or cancellation of bail application, will separate the wheat from the chaff and will ensure that no innocent person against whom baseless allegations have been made is remanded to police/judicial custody. 56. Consequently, with the aforesaid observations and liberty, the CM No.32276/2020 in WP(C) 10130/2020 for interim relief as well as the prayer for interim relief in WP(C) 5454/2020 are dismissed with liberty to the petitioners to avail the statutory remedies and the CM No. 28105/2020 filed by respondent nos. 2 and 3 in WP(C) 5454/2020 is allowed and the interim order dated 20th August, 2020 passed in W.P.(C) 5454/2020 is vacated. 57. It is clarified that the observations made herein are prima facie and shall not prejudice either of the parties at the stage of final argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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