TaxTMI 
TaxTMI 
2021 (1) TMI 330
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....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. Keeping in view the aforesaid order, it is directed that, till further orders, bail of the petitioner shall not be cancelled in the present case." 3. Subsequently upon an application being fi....
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....x, 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 Court in a number of cases, where investigation was being conducted under CGST Act, has ordered that no coercive steps be taken against the assessee. In support of their contention, they relied upon the orders passed b....
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....e. 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 specific provision to the contrary in the said Act, general provisions as laid down in the Cr.P.C. have to be followed. In support of his submission, he relied upon the judgment of the Supreme Court in Directorate of Enforcement vs. Deepak Mahaj....
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.... 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 Rs. 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 Rs. 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 Rs. 211.89 crores while having stock worth only Rs. 2.95 crores, which indicates that the petitioner has been indulging in circular trading by raising fraudulent invoices. In view of the said facts, he prayed that no interim protection be granted to the Petitioners. REJOINDER SUBMISSIONS IN W.P.(C) 10130/2020 24. Mr. J.K. Mittal, the learned counsel for the Petitioner argued tha....
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.... 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 20th 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 State Tax and Central Tax officers with regard to intelligence-based enforcement actions. Therefore, the learned ASG stated that the Central Tax Officers are fully empowered to conduct intelligence-based enforcement action against taxpayers assigned to State tax administration under Section 6 of the CGST Act, 2017 and t....
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....ic 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 officers concerned to avail themselves of the procedures prescribed by the Acts and not resort to the dilatory procedure of the ordinary civil court. Even normally one cannot imagine an officer having the choice of two procedures, one which enables him to get possession of the property quickly and the other which would be a prolonged one, to resort to the lat....
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....islature 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 widest amplitude and would include the power to enact criminal law with regard to goods and services tax. 35. There is also no conflict between the operation of Article 246A and Article 246 as a non-obstante clause has been added to Article 246A to clarify that both Parliament and the State Legislatures have simultaneous powers in relation to Goods and Services Tax. Accordingly, th....
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....ture. 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 to arrest and prosecute are ancillary and/or incidental to the power to levy and collect Goods and Services Tax. EVEN IF IT IS ASSUMED THAT POWER TO MAKE OFFENCE IN RELATION TO EVASION OF GOODS AND SERVICE TAX IS NOT TO BE FOUND UNDER ARTICLE 246A, THEN, THE SAME CAN BE TRACED TO ENTRY 1 OF LIST III. THE TERM 'CRIMINAL LAW' USED IN THE AFORESAID ENTRY IS SIGNIFICANTLY WIDE AND INCLUDES ALL CRIMINAL LAWS EXCE....
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....nning 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 regard. Such right includes power to define a crime and provide for its punishment. Use of the expression, "including all matters included in the Penal Code, 1860 at the commencement of the Constitution" is unequivocal indication of comprehensive nature of this entry. It further empowers the legislature to make laws not only in respect of matters covered by the Penal Code, 1860 but any other matter which could reasonably and justif....
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....ing 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 to arrest under section 69 of the CGST Act, is not a Police Officer and, therefore, is not obliged in law to register FIR against the person arrested in respect of an offence under Sections 132 of the CGST Act. (iv) The decision of the Supreme Court in the case of Om Prakash (supra) has no bearing in the case on hand. (v) An authorised Officer is a 'proper officer' for the purposes of the CGST Act. As the authorised Officers are not Police O....
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....agistrate 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 Bench of this Court while examining the admissibility of a statement recorded under Section 171-A of the Sea Customs Act of 1878 (which Act is now repealed) corresponding to Section 108 of the Customs Act of 1962 has held that a person arrested by a Customs Officer is not a person accused of an offence within the meaning of Article 20(3) of the Constitution or within the meaning of Section 25 of the Evidence Act. 88. In Veera Ibrahim v. State of Maharashtra [(1976) 2 SCC 302: 1976 SCC (Cri) 278] a D....
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....nsequently 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 for the Petitioners are ad-interim orders. It is relevant to point out that the Supreme Court in Union of India Vs. Sapna Jain & Ors., SLP (Crl.) 4322-4324/2019 dated 29th May, 2019 has 'spoken its mind' and clarified that the High Courts while entertaining request for grant of pre-arrest bail shall keep in view that the fact that the Apex Court vide order dated 27th May, 2019 passed in SLP (Crl.) 4430/2019 has dismissed the SLP filed against the judgment and order of the Telangana High Court. The relevant portion of the....
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.... 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 higher pedestal than those seeking anticipatory bail. On the other hand, the jurisdiction under Article 226 has to be sparingly used, as cautioned by the Supreme Court in Km.Hema Misra (cited supra). 59. We have very broadly indicated, without going deep, that the petitioners have allegedly involved in circular trading with a turnover on paper to the tune of about Rs. 1,289.00 crores and a benefit of ITC to the tune of Rs. 225.00 crores. The GST regime is at its nascent stage. The law is yet to reach its second anniversary. There were lot of technical glitches in the matter....
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....ch 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 action of search to be without jurisdiction. WHAT EMERGES AT THE PRIMA FACIE STAGE IS THAT IT IS THE CASE OF THE RESPONDENTS THAT A TAX COLLECTION MECHANISM HAS BEEN CONVERTED INTO A DISBURSEMENT MECHANISM AS IF IT WERE A SUBSIDY SCHEME. 51. Turning to the facts of the present cases, in the application for vacation of stay in W.P.(C) No. 5454/2020, it has been averred by the respondents as under:- "(iii) The statements of the proprietors of the said 04 firms were recorded. In their statements, the Proprietors namely Sh. Deepak Kumar Mishra of M/s Monal Enterprises, Mr. Santosh Prasad of M/s Micra Overseas and ....
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.... 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 the govt. in respect of the GST paid on the exports through fake ITC. Then the IGST refund amount received in the account of exporter firms is transferred to other accounts by his partners and then the money is withdrawn as cash from these other accounts. The cash so withdrawn is received by his partners and then distributed among the partners after adjusting the commission or other expenses incurred during the entire process of exports. That he looks after the work related to issuance of invoices and after issuing of the invoices, he handed them over to either his brother Sh. Akhil Maggu or his father Sh. Sanjeev Maggu or Sh. Ra....
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....r 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 Rs. 211 crores either locally or through import. xxxx xxxx xxxx xxxx VII. The searches at all the above locations were conducted on 23.11.2020 and statement of Sh. Vasudev Garg, Director of M/s Rajdarbar Commodities Pvt. Ltd. was recorded on the spot. Sh. Vasudev Garg informed that M/s Rajdarbar Commodities Pvt. Ltd., M/s Vertical Vyapaar Pvt. Ltd. and M/s N.S Software are all firms of Rajdarbar Group. He further stated that there was no supply of goods i.e. gold bullion involved in the business transactions done between M/s K.P. and Sons, M/s Rajdarbar commodities Pvt. Ltd., M/s N.S Software and M/s Vertical Vyapaar Pvt. Ltd. He accepted his mistake and has deposited GST of Rs. 4.5 crores till date vide DRC-03 challans dated 24.11.2020, 01.12.2020, 03.12.2020, 04.12.2020 and 08.12.2020. VIII. Statement of Sh. Gaurav....