The Chhattisgarh High Court in Harsh Wadhwani & Anr. v. Additional Director General Directorate General of GST Intelligence, Raipur & Ors. held that no coercive action should be taken against traders accused of fake Input Tax Credit (ITC) claims if they are cooperating fully with the investigation. In this case, the petitioners were issued summons under Section 70 of the CGST Act for alleged fake ITC involving two entities—Taj Enterprises and Agastya Enterprises. The petitioners affirmed their willingness to appear before officers, provide oral evidence, and answer all queries. They sought protection from coercive steps and withdrawal of the negative balance created in their electronic credit ledger. The Court directed the petitioners to remain present whenever required and ruled that as long as they cooperate, the authorities shall not take any coercive measures against them or the associated firms. The decision reinforces that cooperation with investigative proceedings serves as valid grounds for protection against adverse action in fake ITC inquiries.
Facts:
M/s. Vijay Laxmi Trade Company, Raipur (Chhattisgarh), (“the Petitioner”) filed a claim of ITC for the Financial Year (“FY”) 2024-25, to which the Additional Director General Directorate General of GST Intelligence, Raipur, (“the Respondent”) issued a notice under Section 70 of the Central Goods and Services Act, 2017 (“the CGST Act”), for alleged evasion of taxes by claiming fake ITC. The Respondent also issued summons to the Petitioner with respect to two parties namely, M/s. Taj Enterprises and M/s. Agastya Enterprises (“the Firms”).
Aggrieved, the petitioner filed the present writ petition. The petitioner submitted that they are ready to cooperate in enquiry and record their oral evidence by satisfying all the queries needed by the respondent pertaining to aforesaid two firms. In this light, the petitioner prayed to direct the respondent to not take any coercive steps against the petitioners pertaining to the aforesaid two firms and to withdraw the negative balance/block created in the electronic credit ledger (“ECrL”) of the petitioner.
Issues:
Whether the coercive actions be taken against the accused, in cases where he is willing to cooperate in the fake ITC probe?
Held:
The Hon’ble Chhattisgarh High Court in WPT NO. 148 of 2025 held as under:
- Directed that, the petitioners shall remain present before the investigation officers whenever required.
- Held that, if the petitioners cooperate in the investigation, the respondent shall not take any coercive steps against the petitioners or associated firms in respect to aforesaid two firms.
Our Comments:
Section 70 of the CGST Act:
Power to summon persons to give evidence and produce documents.––
(1) The proper officer under this Act shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908 (5 of 1908). 1(1A) All persons summoned under sub-section (1) shall be bound to attend, either in person or by an authorised representative, as such officer may direct, and the person so appearing shall state the truth during examination or make statements or produce such documents and other things as may be required.
(2) Every such inquiry referred to in sub-section (1) shall be deemed to be a “judicial proceeding” within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860).
In a similar case in Nannapaneni Krishnamurthy Vs. State Of Andhra Pradesh [Criminal Petition No. 2440 of 2021, dated April 19, 2021], the Hon’ble Andhra Pradesh High Court held no coercive steps will be taken against the petitioners, including arrest, as and when they appear before the Investigating Officer.
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