RHC Global Exports Private Limited Vs Union of India (Gujarat High Court)
A Special Economic Zone (or SEZ) is a specially marked territory or enclave within the territorial boundaries of a country that has more liberal economic laws than the rest of the country. An SEZ is an enclave within that country that is typically duty-free and has different business and commercial laws chiefly to encourage investment and create employment and embolden exports earning valuable forex. Apart from generating employment opportunities and promoting investment, SEZs are created also to better administer these areas, thereby increasing the ease of doing business as well. A few examples of successful SEZs in India are
- SEEPZ Special Economic Zone (Mumbai),
- Kandla SEZ
- Cochin SEZ
- Madras SEZ
- Visakhapatnam SEZ
- Falta SEZ
2. The functioning of SEZs is governed by a three-tier administrative set-up. The Board of Approval is the apex body and is headed by the Secretary, Department of Commerce. The Approval Committee at the Zone level deals with approval of units in the SEZs and other related issues. SEZs each zone are headed by a Development Commissioner, who is also heading the Unit Approval Committee. Development Commissioner is the nodal officer for SEZs who help in resolution of problems and grievences, if any, faced by the units or developer. In all SEZ’s, the statutory functions are controlled by the Government while the rest of the operations are privatized.
3. SEZs are treated as foreign territory for tax purposes even though they are located within a country’s borders. All the Supplies of Goods as well as Services made into SEZs are exempt from paying GST because they are considered as exports. But, when an SEZ supplies goods/services to anyone in the Domestic Tariff Ares (DTA), it will be deemed a regular inter-state supply and will attract IGST in terms of Article 269(A) of the Constitution of India. However, when an SEZ supplies goods/services to a Domestic Tariff Area (DTA), it is exempt from paying taxes, although the receiver in the DTA has to pay all the taxes under Reverse Charge Basis as a recipient of such supplies. In that sense, SEZs are generally not covered under the Definition of Taxpayers under any Tax Laws in the country.
4. SEZs are generally immune to most of the Tax laws promulgated in this country. By virtue of the provisions contained under Section 51 of the SEZ Act, 2005, it provides overriding effect to the which is reproduced below:
“Act to have overriding effect. Sec.51. – The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.”
In addition, by Section 55 of the SEZ Act 2005, it gives power to the Central Government to make rules for carrying out the provisions of the Act. In exercise of the aforesaid powers, the Central Government made “The Special Economic Zones Rules, 2006” Rule 31 deals with the exemption from payment of all taxes. It is very important to read in tandem the all provisions which gives overriding powers. The provisions of Section 26 read with Rule 31 of the SEZ Rules 2006 thus, also have overriding effect over anything inconsistent contained in any other law for the time being in force.
5. It is under these circumstances the we need to dwell upon the question whether the GST officers especially the State GST Officers have jurisdictional control over the SEZ units or not.
6. Be it as it may…… In a very important development, the division bench of Gujarat High Court in the case reference WP No: C/SCA/5978/2023 CAV JUDGMENT DATED: 06/06/2023 has ruled that officials of GST department can initiate proceedings against a unit situated in the Special Economic Zone (SEZ) as they have jurisdiction over the unit. In fact, going beyond, it has also imposed a penalty on the unit for not cooperating with the process initiated by the Goods and Service Tax department. The court in its judgement held a view that GST authorities are empowered to carry out proceedings in SEZ the Division bench while dismissing a petition filed by M/s. RHC Global Exports Private Ltd, a well-established SEZ unit in SURSEZ administered under the control and directions of the respondent, i.e., the Development Commissioner, SEZ, Surat.
7. After a communication from the officer of the Enforcement Directorate, M/s. RHC Global Exports Private Ltd (Petitioner) was subjected to a search and seizure operation and the premises of the M/s. RHC Global Exports Private Ltd were sealed. The sealing memo, according to the petitioner, appears does not reflect any due process followed by the Officers (respondent) and it was carried out without arriving at any satisfaction as required under Section 67(1) of the GST Act 2017, which provides for power of inspection. The premises of the petitioner were sealed as all employees were before the office of DRI Surat for a recording of statements, and as such, the respondent has sealed the business premises. Simultaneously, the respondent issued a summons under Section 70 of the CGST Act, 2017, and directed the directors of the petitioner company to appear before the respondent for the recording of statements and the production of books of account and all other relevant documents in relation to the inspection. The action of the Tax Officers (Respondents) was questioned by the petitioner as it was aggrieved by them that the officers were acting extra-territorially and have no jurisdiction with reference to the location of the Unit, being inside SEZ Zone.
8. The bone of contention of the petitioners was that the business premises of the petitioners were situated in an SEZ and were to be treated as foreign territory and not subjected to provisions by state authorities, which have no jurisdiction to carry out any search proceedings at the premises of the petitioners. The petitioner submitted that since the petitioner’s unit was within the area earmarked and is a SURSEZ unit, which is a distinctly foreign territory, administered under control and directions of the Development Commissioner and as such, is a tax-neutral or revenue-neutral area, it is outside the ambit of the provisions of the CGST Act, 2017 or the SGST Act, 2017. Accordingly, it was propounded that the state authorities are not empowered to initiate any action since every SEZ unit is a tax-neutral zone.
9. The Honourable High Court held that the GST- Tax Department’s jurisdiction is unquestionable as the Central Government has already authorised those officers by virtue of a notification dated August 5, 2016. Further, provision under the State GST law indicates that where any proper officer issues an order under this Act, he is also issuing an order under the CGST Act 2017 as authorised by the Act, or under intimation to the jurisdictional officer of the Central Government and vice versa. The freedom of Cross Empowerment between CGST and SGST Officers are allowed in terms of Section 6 of the CGST / SGST Act 2017. It is observed that Section 6 of the CGST Act provides for cross empowerment of State Tax officers and Central Tax officers and reads as:-
“6. (1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes- of this Act, Subject to such conditions as the Government shall, on the recommendations of the Council, by Notification specify.”
Thus in terms of sub-section (1) of section 6 of the CGST Act and subsection (1) of section 6 of the respective State GST Acts respective State Tax officers and the Central Tax officers respectively are authorised to be the proper officers for the purposes of respective Acts and no separate notification is required for exercising the said powers in this case by the Central Tax Officers under the provisions of the State GST Act. It is noteworthy in this context that the registered person in GST are registered under both the CGST Act and the respective SGST/UTGST Act. Further, by virtue of a circulars No: 01/01/2017 and Circular No: 03/03/2017, dated July 7, 2017, the functions of proper officers under the CGST Act are also defined and delegated. Hence, once the Central Government has notified the functions of proper officers, the said functions shall be applicable to be carried out equally by the officers under the CGST Act and SGST Act. Hence, it cannot be said there was a lack of authority on the part of the GST officers, as contended, by the petitioner and it cannot be said that Tax officers were acting without the authority of law or jurisdiction.
10. The court noted that once the Central Government has notified the functions of proper officers, those functions shall also be applicable to be carried out by the officers under the CGST Act, 2017 and hence it cannot be said that there was any lack of authority on the part of respondents. The honourable court did not buy the arguments propounded by the petitioners and did not find any merit / substance in their argument and said it deemed it proper to dismiss the petitions with costs of Rs 10,000 for each petition to be paid to the Gujarat State Legal Service Authority within 10 days from the date of order putting rest to the litigation on jurisdiction.
Before bidding adieu………………
11. It is to be agreed and accepted that The petitioners, M/s. RHC Global Exports Private Ltd would be bound by the legislative provisions and circulars issued thereof. The court has reiterated that in case the action of the State and Central Authorities is overlapping, the Petitioner would be at liberty to take action to impugn the same in accordance with law. In the absence of this jeopardy, the issue cannot be treated void ab initio due to lack of jurisdiction.
12. SEZ – Safe Economic Zones from the scanner of enforcing agencies – not anymore ?
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. By way of these petitions, respective petitioners have assailed basically the action of respondent Nos.4, 5 and 6 who initiated proceedings under Section 67 read with Section 70(1) of GGST Act, 2017 and CGST Act, 2017 and sought consequential reliefs. Since common question of law and facts have arisen, learned advocates have requested to deal with petitions conjointly, as a result of this, Special Civil Application No.5978 of 2023 is treated as a lead matter since the issues are identical.
2. In Special Civil Application No.5978 of 2023, petitioner has submitted that petitioner is a company incorporated on 24.1.2019 and has its head office and special economic come operations at the address shown in the cause title of petition. Petitioner Nos.2 and 3 are Directors of the company since they are substantially interested and material affected in the conduct and business of petitioner company and as such has submitted this lead petition.
3. According to petitioners, petitioner company is a well-established SEZ Unit in SURSEZ administered under the control and directions of respondent No.3, i.e. Development Commissioner, SEZ, Surat. Petitioner company was granted approval to operate SEZ unit in SURSEZ by respondent No.3 vide LOP No.SSEZ/II/03/2019-20/140 on 1.5.2019. Petitioner is in specific area within SURSEZ which is located for Gem and Jewelry activity and Unit of the petitioner is to be treated as foreign territory for its business operations and as such they are ‘Tax Neutral’ or ‘Revenue Neutral’ entity with respect to levy and collection of custom duties, GST and other indirect taxes. In respect of this business, petitioner has obtained Registration-cum Membership Certificate from Export Promotion Council for EOUS & SEZ Unit as well as Registration cum-Membership Certificate from Gem & Jewelry Export Council, Surat in the context of Clause (xvi) of LOP. Further, in compliance of Clause (xvii) of LOP, petitioner also obtained GSTIN certificate bearing No.24AAJCR3808D1ZM and as such petitioner is a tax neutral in terms of GST registration. According to petitioner, even GST registration of company is indicating tax entity as ‘SEZ Unit’ and is covered under first proviso to Rule 8 of the Central Goods and Services Tax Rules, 2017 which indicates as “PROVIDED that a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone Developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone”. For the purpose of facilitating measure for the vendors to the petitioner’s SURSEZ unit, IGST registration number is also taken since they supply goods and services to the petitioner in SURSEZ and for facilitating importers from DTA area for goods/ services taken out from petitioner in SURSEZ to enable importers to identify petitioner’s unit. It is the case of petitioner that in both instances, incidence of IGST is not borne by the petitioner. So far as petitioner’s unit is concerned, same is ‘Zero Rated Supply’ and as such a tax neutral / revenue neutral and petitioner is filing nil IGST returns and only declares value of imports and Exports from its SEZ unit at SURSEZ. Petitioner also additionally obtained a Legal Entity Identifier India Limited Certificate and this LEI provides security for international transactions, shortcuts KYC processes and boosts transparency throughout the global financial system. LEI is also a valuable tool for validating identity and gives the petitioner an instant credibility boost. Petitioner contended that this LEI is a sort of a legal identity to transact globally and same is granted only to credible and fully KYC and PMLA compliant entities.
4. It is the case of petitioner that some ostensible oral communication from an officer of Enforcement Directorate, petitioner company was subjected to search and seizure operation and premises of the petitioner company were sealed vide a sealing memo dated 3.3.2023 by respondent No.4 at around 3.00 p.m. Sealing memo according to petitioner does not reflect any due process followed by respondent No.4 and same is carried out without arriving at any satisfaction as required under Section 67(1) of GST Act. Premises of petitioner were sealed as all employees were before the office of DRI Surat for recording of statements and as such respondent No.4 has sealed business premises, as indicated above. Simultaneously, respondent No.4 issued summons under Section 70 of CGST/ GST Act, 2017 and directed the Directors of petitioner company to appear before respondent No.4 for recording of statements and for production of books of accounts on 4.3.2023. On very same day, i.e. on 3.3.2023, under some cause of action, another officer of State Tax, i.e. respondent No.5 subjected the residential premises of petitioner for search and seizure operation and sealed the said residential premise on 3.3.2023. According to petitioner, said search operations were carried out under the provisions of Section 67 of the GST Act and again without arriving at any satisfaction, as required under said provisions. Petitioner No.1 was not available at his residence as he was staying with his relatives and as such respondent No.5 has sealed the residential premises and simultaneously, respondent No.4 issued summons on 3.3.2023 to appear on 10.3.2023 and pasted said summons on the wall of residential premise. Yet another agency, i.e. respondent No.6, also took up a parallel proceedings under the said cause of action initiated by respondent No.4 and also searched the petitioner’s business premises in Mumbai with Panchas (witnesses) and seized books of accounts under Form GST INS-2 and passed an order of seizure on 4.3.2023 for the receipt for seized documents. Re No.6 after said search proceedings had also issued various summons under Section 70 of GST Act to the directors of the company and employees of the company respectively on 3.3.2023 as well as on 4.3.2023 for the statement or proceedings and this according to petitioners was merely a roving inquiry, tantamounts to be a colourable exercise of power and as such according to petitioner, is inconsistent, perverse and ex-facie illegal and respondent Nos.4 to 6 are acting without authority of law and went on harassing the petitioner which has constrained the petitioners to approach this Court by way of present petition under Article 226 of the Constitution of India and reliefs which are sought in the petition are set out hereunder:-
A. This Hon’ble Court may be pleased to issue the writ of mandamus or any other appropriate writ, order or direction in the nature of mandamus, quashing and setting aside the proceedings Initiated by Respondent no. 4.0. Assistant Commissioner of State Tax (4), Surat, Respondent No.5/1.0. Assistant Commissioner of State Tax (1), Ahmedabad and 6 l.e. Assistant Commissioner of State Tax, Mumbai against the Petitioners u/s.67 read with section 70(1) of the GGST Act, 2017 and CGST Act 2017 along with the consequential proceeding. and/or Orders passed therein, as the said proceedings are absolutely illegal, unlawful, contrary the provisions of the Act, abuse of process of law, against the facts and evidence on record with consequential relief;
B. Pending the admission, hearing and final disposal of this petition, this Hon’ble Court may be pleased to stay the impugned proceedings initiated by Respondent no. 4 i.e. Assistant Commissioner of State Tax (4), Surat, Respondent No.5 i.e. Assistant Commissioner of State Tax (1), Ahmedabad and 6 i.e. Assistant Commissioner of State Tax, Mumbai against the Petitioners and be further pleased to direct Respondent no. 4 i.e. Assistant Commissioner of State Tax (4), Surat, Respondent No.5 i.e. Assistant Commissioner of State Tax (1), Ahmedabad and 6 i.e. Assistant Commissioner of State Tax, Mumbai not to take any coercive steps against Petitioners pursuant to impugned inquiry proceedings;
C. An ex-parte ad-interim relief in terms of prayer “B” above may kindly be granted; and
D. Grant such other and further relief/s as may be deemed fit and proper in the interest of justice.
5. Insofar as Special Civil Application No.5979 of 2023 is concerned, almost similar is the circumstance stated by petitioner and aggrieved by the action of respondent Nos.4 to 6 have contended that entire proceedings initiated by respondent is without authority of law and thereby sought a relief for quashing and setting aside the proceedings initiated by respondent Nos.4 and 5 against the petitioners under Section 67 and 70(1) of GGST Act, 2017 as well as CGST Act, 2017 and sought consequential reliefs.
6. Same is the case with Special Civil Application No.5980 of 2023, wherein also, aggrieved by an action of respondent Nos. 4 and 5, a request is made to set aside the proceedings which are initiated by an authority against the petitioner on the similar line, but one additional prayer in this petition is to the effect that action initiated under Section 73 of GGST Act as well as CGST Act, 2017 also may be quashed and set aside. Since mainly lead matter is argued by counsel appearing for petitioners as well as countered by learned advocates, as per the request of learned advocates, facts and contentions taken in the lead matter are treated as contentions raised in other two petitions of present group as not separately argued and as such the Court has heard learned senior counsel Mr. S.N. Soparkar assisted by Mr. Abhishekkumar C. Malvi for petitioners and learned Government Pleader Mrs. Manisha L. Shah, assisted by learned Assistant Government Pleader Mr. Chintan Dave for the State- respondents, and since long drawn hearing had taken place and on 5.5.2023 being a last half working day of ensuing vacation, order is kept reserved and since pleadings have been completed, these three petitions have been requested to be dealt with as limited issue with regard to lake of authority of respondent Nos.4,5 and 6 is tried to be agitated.
7. Learned senior advocate Mr. Saurabh Soparkar appearing for petitioners has submitted that since petitioner’s Unit is within the area earmarked and is SURSEZ unit which is a distinct foreign territory and as such, are tax neutral/ revenue neutral area and hence outside the ambit of provision of CGST Act, 2017 or SGST Act, 2017, particularly from Chapter-IX, X, XII, XIII, XIV, XV, XVI and XIX of CGST Act and accordingly, action initiated by respondent Nos.4, 5 and 6 is beyond jurisdiction, hence relief deserves to be granted. The main substantial issue which has been raised by learned senior counsel is that by virtue of provisions contained in SEZ Act, State authorities are not empowered to initiate any action since every SEZ unit is tax neutral zone. According to Mr. Soparkar, supplies to the petitioners SURSEZ Unit are considered as Zero Rated Supply under the provisions of IGST Act, 2017 and as such they are not subjected to provisions relating to levy, collection, evasion or otherwise of GST in the unit. It has been submitted that in both cases, whether it is an input supply to SEZ unit or is an outward supply by SEZ unit, SEZ unit does not suffer any tax incidence on supply either way. Insofar as incidence of GST Laws are concerned, petitioner’s unit will be governed under Integrated Goods and Services Tax (IGST) as it is not to be considered as a part of India. Preamble to IGST Act itself is making it clear that petitioners are not subjected to the domain of any of the respondent authorities, i.e. respondent Nos.4, 5 and 6 and as such, even if proceedings are initiated by respondent Nos.4, 5 and 6, assumed to be sanctioned under Chapter XVI by way of any coercive proceedings, same will not have any sanction at all and as such since entire proceedings initiated by respondents against petitioners being without authority, or jurisdiction, there is hardly any reason to allow said proceedings to be concluded. By referring to certain provisions of SEZ Act, particularly 2nd Proviso of Section 22 read with Clause (2) of Section 21 of SEZ Act 2005 which authorizes only ADG of DRI or ADG of DGCEI as Authorized Officers for the purposes of enforcement of provisions of the Customs Act, Central Excise Act and Finance Act and for no other Statute. Even offences under CGST Act, 2017, SGST Act, 2017, UTGST, 2017 or even IGST Act, 2017 are not notified offices under the provisions of Section 21(1) of SEZ Act and as such there is a serious act on the part of respondent authorities without jurisdiction. Further, entire proceedings launched against petitioners are devoid of any ‘due process’ doctrine and for that purpose, learned senior counsel Mr. Soparkar has drawn attention of the Court to Section 67 of the Act, which indicates sufficient safeguards before launching proceedings against any person and therefore, concept of ‘due process’ which has been clearly stipulated in Section 67, activities undertaken by respondent Nos.4 to 6 are nothing but mere fishing and roving inquiry and that inquiry or process being without jurisdiction, relief prayed for deserves to be granted.
8. Learned senior counsel Mr. Soparkar has also pointed out clear hardship which has been meted out to the petitioners on account of such unauthorized action and then by referring to notifications, it has been tried to be analyzed that authorities are acting beyond the scope of their jurisdiction. It has been contended that by referring to page 51 Annexure-K, page- 52 Annexure-L and page-53 Annexure-M for indicating that single enforcement officer or agency specified for notified offences under Customs, Central Excise and Service Tax and thereby authorization is to be extended by Central Government. For this purpose, an attention is drawn to page-51 and then indicated that by virtue of sub-section (1) of Section 21 of SEZ Act, 2005, Central Government notifies offences contained in the Sections which are mentioned in a tabular form in respect of Customs Act, 1961, Central Excise Act, 1944 and Finance Act, 1994 and by virtue of sub-section (2) of Section 21 and second proviso to Section 22 of SEZ Act, 2005, Central Government has authorised Additional Director Genera, Directorate of Revenue Intelligence for offences under Customs Act and Additional Director General, Directorate General of Central Excise Intelligence for offences under Central Excise Act, 1944 and Finance Act, 1994 to be an enforcement officer in respect of any notified offence or offences committed or likely to be committed in a Special Economic Zone and by referring to these notifications, which are at page 52 and 53 of petition compilation, a contention is reiterated that action of respondent Nos.4, 5 and 6 is beyond the scope of their authority, as such same is not sustainable in the eye of law.
9. Yet another submission is made that there are guidelines also issued for investigating/ visiting or to inspect or search or seizure SEZ and said guidelines which are framed is indicated in a communication dated 1.3.2021 at Annexure-N and even that has not been observed by an authority while taking or dealing with present petitioners and as such, when entire exercise is undertaken without the authority of law, relief prayed for deserves to be granted in the interest of justice. No other submissions have been made.
10. As against this, learned Government Pleader Mrs. Manisha Shah appearing on behalf of respondent Nos.4,5 and 6 has pointed out detailed circumstance which has constrained the authority to initiate action against petitioners and relevant narration has been made with regard to factual background of petitioners from the affidavit-in-reply and a contention is raised that this is not a fit case to exercise extraordinary equitable jurisdiction and has submitted that authority has acted well within the scope of authority. To substantiate this, learned Government Pleader Mrs. Shah has drawn attention to relevant provisions of SEZ Act, 2005 as well as GGST Act, 2017 and also notifications issued by the Central Government and thereby submitted that it is absolutely within the domain of respondents authority to proceed against petitioners when such shocking factual background is that of the present petitioners. Mrs. Shah has contended that a bare reading of provisions contained under Section 22 of SEZ Act, 2005 would clearly indicate that any officer or agency who is authorized by Central Government may carry out search and seizure, investigation or inspection in any Special Economic Zone or unit as the case may be, without even prior intimation or approval of Development officer and to further strengthen her submission, Mrs. Shah has also drawn attention to Section 6 of GGST Act which also deals with authorization of officers of Central Tax as proper officer in certain circumstances and thereby by referring to two provisions, namely Section 22 of SEZ Act read with Section 6 of GGST Act, a contention is raised that respondent authorities are empowered to carry out proceedings in SEZ since Central Government has already authorized the officers vide notification dated 5.8.2016 since by virtue of Section 2 of GGST Act, an order passed under CGST Act shall also be construed to have been passed under GGST Act and as such it is ill-founded for the petitioners to contend that there is no jurisdiction with respondent authorities. Apart from that, circular dated 5.7.2017 has also been pointed out to indicate that functions of proper officers which are defined under CGST Act and has submitted that Section 6(2) of GGST Act is with regard to cross-empowerment and once Central Govt has notified functions of proper officers by virtue of circular dated 5.7.2017, same will also be applicable for officers under GGST Act and there is no reason for petitioners to contend that action initiated is beyond the scope of authority. In fact, according learned Government Pleader Mrs. Shah, petitioners have conveniently loss sight of the fact that provisions contained under Section 1 of the Integrated Goods and Services Tax Act, 2017, i.e. IGST Act, said provision indicates that IGST Act is applicable to whole of India and Section 7 of IGST Act determines inter-state supply. Subsection (5) of Section 7 of the Act indicates that supply of goods or services or both to or by the SEZ unit shall be treated to be a supply of goods or services or both in the course of inter-state trade or both and as such, petitioners are under erroneous belief that once business of petitioners is carried out through SEZ, respondents cannot initiate any proceedings. If this meaning which is tried to be canvassed by petitioners is introduced, then very purpose of the Act or provision would be defeated and same would give license to SEZ unit or to keep themselves away from the rigors of the provisions. Hence, in the absence of any apparent inconsistency between SEZ Act, 2005 and GST Act, 2017, no case is made out by petitioners and here in the instant case, before initiating action, Development Commissioner, SEZ had been duly intimated before search and seizure by departmental officers while carrying out process under Section 67 of the GGST Act, 2017.
11. Learned Government Pleader Mrs. Shah has then invited attention of the Court to circular issued by Assistant Commissioner of Sales Tax Unit-62, Surat dated 3.3.2023 and has referred to Section 72 of the Act and has indicated that this petitioner’s unit is under jurisdiction of Development Commissioner and hence requested to cooperate in the proceedings under Section 67(2) of the aforesaid petitioner’s dealers/ suppliers. By further drawing attention to Article 246A of the Constitution of India, which is prescribing special provision with respect to goods and services tax and then has contended that enforcement agencies are notified for exercising power conferred under sub-section (1) of Section 21 of SEZ Act, 2005 by drawing attention to page 51 of the petition compilation and has also indicated page 52 and in connection with that, a circular dated 5.7.2017 at page 81 is also brought to the notice of this Court to indicate that respondent authorities, precisely respondent Nos.4, 5 and 6, are acting well within the scope of their authority. It has been submitted that if interpretation as canvassed by petitioners to the effect that Special Economic Zone shall be deemed to be a territory outside the custom territory of India and to be considered an area outside India, such interpretation would lead to a situation where specific economic zone would not be subjected to any laws whatsoever and object of SEZ Act 2005 would be frustrated and therefore there is hardly any justification for petitioner to contend that there is no scope with respondent Nos.4, 5 and 6 to proceed ahead against petitioners in any form.
12. Additionally, learned Government Pleader Mrs. Shah has also submitted that apart from this hyper technicality of lack of authority which is not sustainable, even facts on hand are revealing certain shocking figures of the irregularities which have taken place at the behest of petitioners and for that purpose, paragraph 7 of the affidavit-in-reply is specifically brought to the notice of the Court as to in what manner, petitioners have tried to indulge in activity and just by contending hyper-technicality tried to shield such activity which is impermissible and as such apart from the point of jurisdiction which is otherwise not available to the petitioners, facts are of such nature, which require the petitioners rather to desist from invoking extraordinary equitable jurisdiction of this Court, hence contended that petition being merit-less deserves to be dismissed with costs.
13. In rejoinder, learned senior advocate Mr. Soparkar has reiterated his submissions and then denied the stand of respondent authorities and has objected to the words which are used in affidavit that transaction is bogus and fictitious and petitioner is engaged in any wrong doing. These words which are used are stoutly objected by learned counsel for petitioners and it has been submitted that if authorities have no jurisdiction, they cannot apply any coercive method against petitioners. In fact, according to Mr. Soparkar, as on the date of rejoinder, offences under GST Act, i.e. CGST Act, IGST Act, GGST Act are notified offences as per Section 21(1) of the Act. Hence, since entire exercise is undertaken without application of mind and is a premeditated act, which since not recognized under law, deserves to be quashed, hence requested to grant the reliefs as prayed for in the petition.
14. At this stage, learned Government Pleader Mrs. Shah has pressed into service three decisions for the purpose of strengthening her stand:-
(1) Decision in the case of Essar Steel Limited v. Union of India reported in 2009 (0) AIJEL-HC-222966;
(2) Decision in the case of Union of India v. Oswal Agricomm Pvt. Ltd. reported in 2010 SCC OnLine Guj 6618;
(3) Decision in the case of Indo International Tobacco Ltd. v. Vivek Prasad and others reported in 2022 SCC OnLine Del 90.
15. Having heard learned advocates appearing for the parties and having gone through the provisions coupled with factual details which are provided, we may indicate that in which background of facts, Court has to examine point of jurisdiction as canvassed by petitioners and as such we deem it proper to quote hereunder uncontroverted factual details provided in the affidavit-in-reply by learned Government Pleader, precisely paragraph 7 thereof, which is mentioned hereunder:-
7. The attention of this Hon’ble Court is now drawn to certain factual aspects that compelled the respondent authorities to initiate search proceedings in case of the petitioner.
7.1. Analytics and Intel Inputs: State Tax Department of Gujarat is extensively using system based analysis and GST Analytics and Intelligence Network (GAIN) and various such technological tools through which actionable inputs of tax evaders are generated. Such analysis and discreet inquiry revealed that the parties namely (Rudraksh Gems and Jewels (GSTN: 24FOVPR3628H1ZB), Ashtmangal Gems and Jewels Having GSTN: 24AFHPJ0991H1ZH) were prima facie fictitious and non-existent. It appears that prima facie that further investigation revealed that these parties were showing majority of its outward supply (sales) of goods to one entity namely SAGAR EMPIRE JEWELS PRIVATE LIMITED is engaged into the business of Diamond. This inquiry lead to a group of 3 group companies (petitioners).These three companies are namely Sagar Diamond limited, RHC Global Exports limited and Sagar Empire Jewels Private Limited. Detailed analysis of all the purchases of the group of companies revealed that, they have shown voluminous inward supply (purchases) transactions from entities most of which are fictitious.
7.2. It appears that prima facie of the Quantum of bogus transactions and Input tax credit involved:
Table: 1
Bogus purchases shown by Group companies
