2019 (5) TMI 895 - HC - GST

Court grants relief in mandamus case for document supply & protection against coercive actions

The court granted relief in favor of the petitioner in a case involving entitlement to mandamus for the supply of documents and statements, interim ... Power of inspection, search and seizure - Entitlement to copies of seized documents under Section 67(5) - Punishment under Section 132 for offences relating to wrongful availment of input tax credit and bill trading - Requirement of determination/assessment before initiation of prosecution under Section 132 (except habitual offenders) - Provisional attachment to protect revenue under Section 83Entitlement to copies of seized documents under Section 67(5) - Power of inspection, search and seizure - Petitioner entitled to copies of documents and statements seized or recorded during inspection subject to remittance of copying charges - HELD THAT: - The Court examined Section 67(5) which permits the person from whose custody documents are seized to make copies or take extracts except where, in the opinion of the proper officer, such supply may prejudicially affect an on-going investigation. The respondents relied on Section 67(5) orally but did not aver in the counter that furnishing the particular documents sought would prejudice the investigation. In the absence of any such specific averment or reasons on file, the Court concluded there was no established apprehension of prejudice and directed the respondents to furnish copies of the documents seized on specified dates and copies of statements recorded, on payment of copying charges within two weeks of receipt of the order. [Paras 30]Copies of the seized documents and recorded statements to be furnished to the petitioner on payment of copying charges within two weeks.Punishment under Section 132 for offences relating to wrongful availment of input tax credit and bill trading - Requirement of determination/assessment before initiation of prosecution under Section 132 (except habitual offenders) - Invocation of coercive/punitive consequences under Section 132 cannot be exercised prior to determination of liability by an assessment except in cases of a shown habitual offender; threats of arrest in the absence of such determination are impermissible - HELD THAT: - The Court analysed Section 132 and the statutory scheme of the CGST Act, concluding that the offences in Section 132 concern matters that are essentially determinable in assessment proceedings (Sections 73/74) and that committal of the offence must be established before punishment is imposed. Reliance was placed on the reasoning in Make My Trip and the Supreme Court's confirmation that procedural safeguards must be followed before exercising coercive powers. The Court held that absent any allegation or material establishing that the petitioner is a habitual offender, pointing out Section 132 to intimidate or threaten arrest prior to adjudication was contrary to the scheme of the Act and amounted to excess of authority. Consequently, interim protection from coercive action under Section 69 read with Section 132 was granted. [Paras 36, 40, 46]Interim protection granted; respondents restrained from invoking coercive/punitive powers under Section 132 against the petitioner pending adjudication (subject to statutory exceptions for habitual offenders).Requirement of determination/assessment before initiation of prosecution under Section 132 (except habitual offenders) - Provisional attachment to protect revenue under Section 83 - Respondents directed to complete adjudication by issuing show cause notice and passing reasoned assessment within a specified time; protective measures under Section 83 are available to the Department pending adjudication - HELD THAT: - The Court emphasised that determination of any excess input tax credit and assessment under Sections 73/74 must precede recovery or prosecution. To ensure timely resolution, the Court directed the respondents to issue a show cause notice specifying proposed assessments, afford the petitioner full opportunity to reply and to pass a reasoned, speaking order within twelve weeks. While refusing to compel a pre-adjudication deposit from the petitioner in the absence of statutory authority, the Court noted that the statute contains Section 83 empowering provisional attachment to protect revenue and that such remedies are available to the Department. [Paras 46, 50, 52]Adjudication to be completed within twelve weeks after issuance of show cause notice and opportunity to the petitioner; Department may resort to statutory protective measures such as provisional attachment under Section 83 where appropriate.Final Conclusion: Writ petition allowed: respondents directed to furnish copies of seized documents and recorded statements on payment of copying charges; respondents restrained from invoking coercive/punitive measures under Section 132 prior to assessment (except in cases of established habitual offenders); adjudication to be completed by issuing show cause notice and passing a reasoned order within twelve weeks; respondents may use statutory protective measures such as provisional attachment under Section 83 to protect revenue. Issues Involved:1. Entitlement to mandamus for supply of documents and statements.2. Interim protection against coercive actions under Section 69 of the CGST Act.3. Direction for respondents to complete adjudication and assessment following due process.Issue-wise Detailed Analysis:1. Entitlement to Mandamus for Supply of Documents and Statements:The petitioner, an assessee under the CGST Act, 2017, faced an investigation starting from 15.10.2018, resulting in the seizure of documents and records. Despite repeated requests, the petitioner was not provided with copies of these documents or statements recorded during the investigation. The court noted that Section 67(5) of the CGST Act allows withholding documents if it prejudices the investigation, but the respondents did not claim such prejudice in their counter affidavit. Therefore, the court directed the respondents to provide copies of the seized documents and statements within two weeks upon remittance of copying charges. This issue was resolved in favor of the petitioner.2. Interim Protection Against Coercive Actions Under Section 69 of the CGST Act:The petitioner alleged harassment and intimidation by the department, including threats of arrest under Section 69 of the CGST Act. The court emphasized that punishment under Section 132 of the CGST Act requires a determination of the offence post-assessment. It referenced the Delhi High Court's decision in Make My Trip (India) Pvt. Ltd. v. Union of India, which was upheld by the Supreme Court, stating that arrest powers should not be used without following due process. The court found the department's actions premature and contrary to the scheme of the Act, granting interim protection to the petitioner. This issue was also resolved in favor of the petitioner.3. Direction for Respondents to Complete Adjudication and Assessment Following Due Process:The petitioner sought a directive for the respondents to complete the adjudication process and make an assessment in accordance with the law. The court directed the respondents to issue a show cause notice, provide the petitioner an opportunity to respond, and complete the adjudication process within twelve weeks. The court clarified that its observations were limited to the procedural issues and would not prejudice the final assessment. This issue was resolved in favor of the petitioner.Additional Observations:- The court rejected the department's request to direct the petitioner to deposit a sum as security, stating that a statement is not a substitute for an assessment.- The court highlighted Section 83 of the CGST Act, which allows for provisional attachment of property to protect revenue interests, suggesting that the department could use this provision if necessary.Conclusion:The writ petition was allowed, directing the respondents to provide the requested documents and statements, granting interim protection to the petitioner, and instructing the respondents to complete the adjudication process within twelve weeks. The court emphasized adherence to due process and statutory provisions in the investigation and assessment under the CGST Act.