The Karnataka High Court has held that the central tax commissioner is not a proper officer to investigate GST evasion and has quashed the show cause notice issued under Section 74 of the CGST Act.
The bench of Justice M.I.Arun has observed that it is only a proper Officer who can investigate into evasion of GST and inspection, search and seizure and arrest can be done only by the proper Officer failing which the same will have to be held invalid.
The bench noted that based upon the inspection, search and seizure if the proper Officer comes to the conclusion that there is mens rea involved as contemplated under Section 74 of the CGST Act, he can issue a notice under Section 74 and not otherwise.
The court noted that the substantial part of the investigation including search and seizure of the materials has been done by central tax commissioner who is not the proper Officer and under the circumstances, the said investigation, inspection, search and seizure in respect of the petitioner herein has to be considered ab initio void.
The petitioner is involved in the transportation of goods and was registered under the provisions of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017.
On the ground that the petitioner along with several other persons have indulged in purchase of arecanut from several persons and supplying the same to various Gutkha manufacturers without payment of appropriate applicable GST, investigation has been initiated against the petitioner under the provisions of the GST Act, which has culminated in the impugned show cause notice being issued from Additional Commissioner Of Central Tax.
The petitioner submitted that investigation was initiated by central tax commissioner against the petitioner without jurisdiction. Pursuant to the initiation of investigation; inspection, search and seizure of several premises belonging to the petitioner as envisaged under Chapter 14 of the CGST Act/KGST Act was carried out, certain materials were seized and the petitioner was called for questioning and his submissions have been recorded.
The petitioner submitted that it was forced to make a payment of Rs.50,00,000 towards probable liability during investigation and the same has been paid by the petitioner under protest.
The court held that if commissioner of central tax after investigation has transferred the case to Principal Commissioner Of Central Tax, for issuance of notice under Section 74, Principal Commissioner Of Central Tax was required to redo the investigation and come to an independent conclusion as contemplated under Section 74 of the CGST Act and only thereafter a fresh notice requires to be issued. Additional Commissioner Of Central Tax cannot issue a notice under Section 74 on the ‘borrowed satisfaction’. The notice is liable to be set aside.
The court directed that department to refund a sum of Rs.50,00,000 to the petitioner within eight weeks.
Case Details
Case Title: M/S. Vigneshwara Transport Company Versus Additional Commissioner Of Central Tax
Case No.: Writ Petition No.18305 Of 2023 (T-Res)
Date: 28/11/2024
Counsel For Petitioner: Pranay Sharma Y
Counsel For Respondent: Jeevan J. Neeralgi
