Case Law Details

Case Name : Agarwal Oil Mill Vs State of Madhya Pradesh (Madhya Pradesh High Court)
Appeal Number : W.P. 12679/2020
Date of Judgement/Order : 15/09/2020
Related Assessment Year :
Courts : All High Courts (6133) Madhya Pradesh HC (78)

Agarwal Oil Mill Vs. State of Madhya Pradesh (Madhya Pradesh High Court)

The issue under consideration is whether supply of copies of documents which is not seized by the department in search is allowed to produced as evidence for reduction of tax liability?

High Court states that from order sheets as detailed and explained above, ever since conduction of search till passing of the impugned order, it is evident that due and sufficient opportunity was afforded to petitioner to produce the remaining relevant documents which had not been recovered during search. The explanation given by petitioner for not producing documents sought by Revenue was that the same are maintained in soft copy in computer while in regard to other documents sought by the Revenue, there was no explanation. This obviously gives an impression that the remaining relevant documents which could not be seized during search are still in possession of petitioner and therefore supply of copies or extracts of the seized documents to petitioner can enable the petitioner to carry out interpolations for reducing or depressing tax liability and with corresponding loss to the Revenue. The formation of this opinion is founded upon reasonable apprehension in the mind of the competent authority that supply of copies/extracts of seized documents can lead to adversely affecting the investigation. The discretion available to the competent authority u/S 67(5) of the CGST Act while withholding supply of copies/extracts of documents seized appears to be judiciously exercised by the competent authority for reasons which prima facie appear to be cogent and convincing. Once it is held that discretion available to the competent authority u/S. 67(5) of the CGST Act had been reasonably exercised while refusing to accede to the request for supply of copies/extracts of seized documents, it cannot be said that the competent authority has travelled beyond it’s jurisdictional purviews prescribed by law and therefore in the absence of jurisdictional error in the order impugned, no interference is called for, especially in the face of unavailed alternative statutory remedy of appeal. Consequently, this court does not find any substance in petition which accordingly stand dismissed.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Shri Gaurav Mishra, learned counsel for petitioners in all the petitions.

Shri Ankur Mody, learned Additional Advocate General for the respondents/State.

Learned counsel for the rival parties are heard through video conferencing.

1. All the three petitions have been filed by the same petitioner assailing tax liability alongwith interest and penalty of different assessment years (2017-18, 2018-19 & 2019-20) as contained in the impugned order (Annexure-P/1), dated 11/8/2020 passed by respondent No.4-Assistant Commissioner State Tax, Shivpuri (M.P.).

2. For facility of reference, facts attending W.P.12679/20 are being considered for adjudication.

3. Learned counsel for petitioner submits that though remedy of statutory appeal is available to petitioner against the impugned order (P/1) but since all the impugned orders have been passed in flagrant violation of principles of natural justice in as much as denial of supply of copies/extracts of the seized documents, the petitioners have invoked writ jurisdiction of this court u/Art. 226 of the Constitution. It is submitted that denial of copies of seized documents/their extracts amounts to denial of reasonable opportunity to defend as statutorily provided in Sec. 67(5) of the Central Goods and Services Tax Act, 2017 (for brevity CGST Act).

3.1 Bare facts disclose that at the premises of petitioner-firm which is engaged in the trading of food grains and sugar, a search was conducted on 29/5/2019 by officers of the official respondents which led to seizure of certain material documents. Other documents are alleged to have been handed over to the proprietor of the firm but the seized documents were taken possession of by the official respondents vide seizure memo P/2. A show-cause notice was issued u/Sec. 74 of the CGST Act on 8/7/2020 vide P/3. The tax consultant of the petitioner-firm appeared before the authority on 10/7/2020 when the next date was fixed as 20/7/2020. On 20/7/2020 the proprietor of the petitioner-firm alongwith tax consultant were personally present before the authority and were asked to produce cashbook, ledger of the year 2017-18, 2018-19 and 2019-20 (till 29/5/2019), trading accounts and bank statements.

The proprietor and the tax consultant perused the scrutiny report prepared by official respondents. A reminder was issued to petitioner and next date of 27/7/2020 was fixed. On 27/7/2020 an application was filed on behalf of petitioner-firm for supplying certified copy of the proposal order, seizure memo and scrutiny report. The competent authority in the order sheet of 27/7/2020 noted that on earlier occasion on 20/7/2020 the proprietor and as well as tax consultant had scrutinized the scrutiny report when they were made aware of the requirement of producing accounts, cashbooks, trading accounts and bank statements but the proprietor failed to do so. The authority recorded in the order sheet dated 27/7/2020 that in the seizure of the books made on 3/7/2020 account books and cash books were not seized and therefore demand has been made from the proprietor to produce the same but the proprietor has not yet produced despite grant of sufficient opportunity. The order sheet further reveals that proprietor disclosed that account books are maintained in the computer. In this scenario, the competent authority while recording order sheet dated 27/7/2020 found that intention on the part of petitioner-proprietor while seeking copies/extracts of the documents seized is to cause interpolations in the account books maintained in his computer. Accordingly, the competent authority exercising it’s discretion available u/Sec. 67 of the CGST Act denied the prayer for grant of copies of the seized books. Finally, the competent authority granted last opportunity to petitioner to produce the documents as required by the competent authority by fixing the date of hearing as 6/8/2020. Thereafter, on 29/7/2020 a fresh reminder was issued to the petitioner reiterating the earlier demand made on 20/7/2020 of producing cash books, ledger, trading accounts, bank statements etc. Thereafter on 6/8/2020 the proprietor and his tax consultant were present and produced the trading accounts, purchase & sale list & bank statements. However, the competent authority noted that ledger and the account books were not produced. The competent authority taking note of the failure of petitioner to produce incomplete record held that verification cannot take place and therefore exercising discretion on the basis of the compelling reason attributed to the petitioner, took the decision of proceeding ex parte and issued the impugned order P/1 adjudicating total tax liability of Rs. 4,33,00,753 for the assessment year 2019-20 which included tax/cess, interest and penalty, which is assailed in WP 12679/20 before this court. So also W.P. 12690/20 assails the impugned order P/1dated 11/8/2020 adjudicating total tax liability of Rs. 16,08,12,732/- for the assessment year 2018-19 and W.P. 12687/20 assails the impugned order P/1 dated 11/8/2020 adjudicating total tax liability of Rs. 8,78,36,779/- for the assessment year 2017-18 after imposing penalty and interest.

3.2 Learned counsel for petitioner on the basis of above factual matrix relying upon Division Bench decision of Bombay High Court in W.P.8075/19 (High Ground Enterprises Ltd. Vs. Union of India & another) 14/8/2019, Kerala High court decision dated 17/12/2019 in WP(C) 34457/19 (M/s Mozart Global Furniture Vs. The State Tax Officer and another) (cumulatively filed as P/11), the Apex Court decisions in M/s Filterco vs. Commissioner of Sales Tex Madhya Pradesh (AIR 1986 SC 626) and M.G.Abrol, Addl. Collector of Customs Bombay Vs. M/s. Shantilal Chhotelal and Co. (AIR 1966 SC 197) contends that sec. 67 of the CGST Act as reproduced in para 6.4 of WP 12679/20 obliges the competent authority to supply copies/extracts of the documents seized during search operation and the only exception carved out is the formation of opinion of competent authority that supply of copies/extracts would prejudicially affect the investigation.

3.3 Learned counsel for petitioner has vehemently argued to submit that once entire documents are seized by the competent authority at the time of search, then supply of copies of seized documents cannot enable the petitioner to indulge in any kind of manipulation/interpolation or interference with investigation.

4. After having heard learned counsel for the rival parties on admission, this court deems it appropriate to decline admission for the reasons infra:

4.1 From order sheets as detailed and explained above, ever since conduction of search till passing of the impugned order, it is evident that due and sufficient opportunity was afforded to petitioner to produce the remaining relevant documents which had not been recovered during search. The explanation given by petitioner for not producing documents sought by Revenue was that the same are maintained in soft copy in computer while in regard to other documents sought by the Revenue, there was no explanation. This obviously gives an impression that the remaining relevant documents which could not be seized during search are still in possession of petitioner and therefore supply of copies or extracts of the seized documents to petitioner can enable the petitioner to carry out interpolations for reducing or depressing tax liability and with corresponding loss to the Revenue. The formation of this opinion is founded upon reasonable apprehension in the mind of the competent authority that supply of copies/extracts of seized documents can lead to adversely affecting the investigation.

4.2 The discretion available to the competent authority u/S 67(5) of the CGST Act while withholding supply of copies/extracts of documents seized appears to be judiciously exercised by the competent authority for reasons which prima facie appear to be cogent and convincing.

4.3 Once it is held that discretion available to the competent authority u/S. 67(5) of the CGST Act had been reasonably exercised while refusing to accede to the request for supply of copies/extracts of seized documents, it cannot be said that the competent authority has travelled beyond it’s jurisdictional purviews prescribed by law and therefore in the absence of jurisdictional error in the order impugned, no interference is called for, especially in the face of unavailed alternative statutory remedy of appeal.

5. Consequently, this court does not find any substance in all the three petitions (WP 12679/20, WP 12690/20 & WP 12687/20) which accordingly stand dismissed in limine at the admission stage itself, sans cost.

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