Allahabad HC to hear Case on GST Search Discipline & Coercive Tax Recovery

Gallantt Ispat Limited Vs Union Of India And 4 Others (Allahabad High Court)

The Allahabad High Court heard the case of Gallantt Ispat Limited versus Union of India and four others regarding the discipline to be maintained in matters related to Goods and Services Tax (GST) searches and forceful tax recovery.

The petitioner was represented by Senior Counsel Sri Tarun Gulati, assisted by counsels Sri Rahul Agarwal and Sri Kumar Sambhav. Respondent nos. 2 to 5 were represented by Sri Dhananjay Awasthi, while Sri Krishna Agarwal appeared for Union of India.

The submissions made included references to statutory law, as well as instructions issued by the Central Board of Indirect Taxes and Customs (CBIC) and the Directorate General of GST Intelligence (DGGI). The petitioner argued that these instructions emphasized the discipline to be maintained in GST search matters, outlining specific guidelines:

1. No tax dues should be recovered during searches, inspections, or investigations.
2. Care should be taken before initiating investigations involving listed companies, PSUs, corporations, or government departments, and summons should not be used to seek information.
3. Vague expressions like “GST Inquiry” or “GST Evasion” should not be used in summonses.
4. Summonses should not be issued for fishing expeditions or roaming inquiries.
5. Investigations should be completed expeditiously, within one year.
6. Arrest provisions should be invoked strictly in accordance with the law.

The petitioner contended that despite these guidelines, the respondent authorities had acted contrary to them. The petitioner, which had not violated any laws, was allegedly coerced into depositing an excess amount of over Rs. 10.03 crores during an investigation that had been ongoing for more than a year and a half. Furthermore, the petitioner’s principal and senior officers were allegedly threatened with arrest without valid grounds.

However, Sri Dhananjay Awasthi, representing the respondents, stated that no further recoveries or coercive measures were currently planned against the petitioner pending the investigation.

The court granted six weeks’ time for the respondents to file a counter affidavit, with the petitioner given a week thereafter to file a rejoinder affidavit. The case was scheduled to be listed in the week commencing 12th August 2024.

The court also emphasized the expectation that the respondent authorities would strictly adhere to the statement made by Sri Dhananjay Awasthi regarding no further recoveries or coercive measures against the petitioner pending the investigation.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Heard Sri Tarun Gulati, learned Senior Counsel assisted by Sri Rahul Agarwal and Sri Kumar Sambhav, learned counsel for the petitioner, Sri Dhananjay Awasthi, learned counsel for respondent nos. 2 to 5 and Sri Krishna Agarwal, learned counsel for Union of India.

2. Submission is, besides the statutory law, the own understanding of the CBIC, the Director of General of GST Intelligence as contained in Instruction No. 1/2022-23 dated 25.05.2022 issued by the Commissioner (GST- Inv), CBIC and letter dated 08.02.2024 issued by ADG, DGGI (Hqrs.) read with Instruction No. 2/2022-23 dated 17th August, 2022 issued by the Commissioner (GST-Inv), CBIC, it is clear that all the field informations have been duly intimated of the discipline to be maintained by them in search matters. Thus, it has been provided:

(i) No recoveries of tax dues may be made during course of the search or inspection or investigation.

(ii) Due care may be taken before initiating investigation in cases of listed companies or PSUs or Corporations or Government Departments etc. and summons should not be used as a means to seek information.

(iii) Vague expressions i.e. “GST Inquiry” or “GST Evasion” may not be used while issuing summons etc.

(iv) Summons may not be issued for fishing and roaming inquiry.

(v) Investigation, if any initiated, must be completed expeditiously i.e. (within one year).

(vi) Strict observance of the law may be made in making arrest and those provisions may not be readily invoked.

3. While detailed reference has been made to such Circulars and Letters, it is a case of the petitioner that the respondent authorities have acted wholly in defiance of the same. The petitioner, who had not made any violation of law, has been forced to deposit amount excess to Rs. 10.03 Crores in the course of investigation that has continued for more than one and half year. Further, its Principal Officers and Senior Officers are being threatened with arrest etc, without any valid proceeding or ground.

4. On the other hand, Sri Dhananjay Awasthi, learned counsel for the respondent upon instructions states that at present no further recoveries or other coercive measures are contemplated against the petitioner, pending investigation.

5. As to the merits of the present case, he prays for and is granted six weeks’ time to file counter affidavit. Petitioner shall have a week thereafter for filing rejoinder affidavit.

6. List in the week commencing 12th August, 2024.

7. In view of the statement made by Sri Dhananjay Awasthi, learned counsel for the respondent, it is expected that the respondent authorities would strictly abide by the statement made.