GST search action upheld despite challenges over witness signatures and panchnama under Section 67

Delhi HC upheld the validity of GST search action under Section 67 of DGST Act, 2017. The court rejected petitioner's challenges regarding absence of independent witnesses' signatures, lack of panchnama, and missing authorized person's signature on Form GST INS-01. HC held that search officers properly displayed identity cards and discharged duties, with rational grounds existing for "reasons to believe" requirement. Court noted overlapping Central and State GST authority actions should be addressed separately, and evidentiary value of statements would be determined during adjudication stage. Petition disposed of without relief.

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Issues Involved:
1. Legality of the search action under Section 67 of the DGST Act, 2017.
2. Alleged harassment by the CGST Authorities.
3. Parallel enquiries by State and Central GST Authorities.
4. Compliance with procedural requirements during the search.
5. Validity of the statement recorded during the search.
6. Relevance of the Delhi Value Added Tax Act, 2004 in the search documents.
7. Adequacy of reasons to believe for conducting the search.

Detailed Analysis:

1. Legality of the Search Action:
The petitioner challenged the search action conducted on 30th September 2020 under Section 67 of the DGST Act, 2017, arguing that it was illegal and unlawful. The court, however, found that the search was lawful and within the confines of the law, as the officers were duly authorized and competent to carry out the search. The court noted that the reasons to believe justifying the search action were provided and found to be adequate.

2. Alleged Harassment by CGST Authorities:
The petitioner claimed harassment by the CGST Authorities, citing multiple searches, including one on 7th March 2020, which was quashed by the Punjab and Haryana High Court. The court did not find this argument compelling enough to invalidate the current search by the State GST Authority, as there was no substantial cause of action presented.

3. Parallel Enquiries by State and Central GST Authorities:
The petitioner argued that parallel enquiries by State and Central GST Authorities were not permissible under Sections 5 and 6 of the DGST Act, 2017. The court noted that there was no overlap in the periods under investigation by the State and Central Authorities. The court also referred to guidelines and clarifications issued by the Central Board of Indirect Taxes and Customs, which allow for cross-empowerment of officers for intelligence-based enforcement actions.

4. Compliance with Procedural Requirements:
The petitioner contended that the search was conducted without the presence of two independent witnesses, as required under Section 67(10) of the DGST Act, 2017, and Sections 165(4) and 100(4) of the Code of Criminal Procedure, 1973. The court found this argument insignificant, noting that there was no specific provision requiring witness signatures on statements recorded during a search. The court emphasized that the absence of witnesses did not invalidate the search action.

5. Validity of the Statement Recorded During the Search:
The petitioner argued that the statement recorded during the search was coerced and should not be given effect. The court found no merit in this argument, noting that the statement had not been retracted and that the petitioner had agreed to pay the admitted tax and penalty. The court stated that the admissibility of the statement would be determined during the adjudication of the tax demand.

6. Relevance of the Delhi Value Added Tax Act, 2004:
The petitioner argued that references to the Delhi Value Added Tax Act, 2004, in the search documents vitiated the action. The court held that the provisions of the DVAT Act are saved under Section 174(2)(c) of the CGST Act, 2017, and can be resorted to for adjudication purposes for dues pertaining to the period before the promulgation of the CGST Laws.

7. Adequacy of Reasons to Believe:
The petitioner challenged the adequacy of reasons to believe for conducting the search. The court reviewed the reasons provided and found them to be sufficient, noting that the formation of belief by the proper officer met the statutory requirements. The court emphasized that its scrutiny was limited to ensuring that the conditions specified under the statutory provision were met and found no grounds to countermand the search action.

Conclusion:
The court dismissed the petition, finding no substantial cause of action to invalidate the search action. The court upheld the legality of the search conducted under Section 67 of the DGST Act, 2017, and found the procedural and substantive grounds raised by the petitioner to be without merit. The court clarified that it had not expressed any opinion on the merits of the case, leaving the determination of tax liability to the appropriate stage of adjudication.

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