2021 (2) TMI 701 - HC - GST

High Court Guidelines Prohibit Recovery During GST Search, Emphasize Compliance and Disciplinary Action

The High Court directed the issuance of guidelines prohibiting recovery during search/inspection proceedings under the GST Act. Assessees were instructed ... Recovery during search/inspection proceedings - Voluntary payment after completion of search proceedings - Grievance/complaint mechanism for alleged forced payments - Disciplinary action for officers violating prescribed directions - Issuance of administrative guidelines/circulars by the Central Board of Indirect Taxes and Customs and Chief CommissionerRecovery during search/inspection proceedings - Voluntary payment after completion of search proceedings - Grievance/complaint mechanism for alleged forced payments - Disciplinary action for officers violating prescribed directions - Interim directions to the tax administration prescribing conduct and remedies in relation to payment/recovery during search/inspection proceedings under the GST law. - HELD THAT: - The Court, on an interim basis, directed the Central Board of Indirect Taxes and Customs and the Chief Commissioner of Central/State Tax of Gujarat to issue suitable guidelines/circulars prescribing that: no recovery by cheque, cash, e-payment or adjustment of input tax credit shall be made at the time of search/inspection proceedings; where an assessee offers voluntary payment by filing Form DRC-03 during the search, the assessee should be advised to file such form on the next day after the search proceedings conclude and after the visiting officers have left the premises; a facility to file a complaint/grievance after the conclusion of the search should be made available to an assessee who alleges it was forced to make payment during the search; and where a complaint establishes that an officer acted contrary to these directions, strict disciplinary action should be initiated against the concerned officer. These interim directions were issued to govern administrative practice during searches and to provide a post-search remedy and disciplinary consequence for non-compliance. The operative directions were recorded as part of the Court's order and will be considered further after the respondents and departmental officers rejoin the proceedings as directed. [Paras 2]Interim order directing the revenue authorities to issue guidelines containing the four specified measures, and directing reappearance of officers for further consideration.Final Conclusion: Interim directions were issued to the Central Board of Indirect Taxes and Customs and the Chief Commissioner (Central/State Tax, Gujarat) to frame and circulate guidelines prohibiting recoveries during search/inspection, providing for deferred voluntary payment, a post-search grievance mechanism, and disciplinary consequences for contraventions; officers are to rejoin the hearing and the matter is posted for further consideration on 18/02/2021. Issues:1. Issuance of guidelines regarding recovery during search/inspection proceedings under GST Act.2. Timing of voluntary payment by assessee during search proceedings.3. Availability of complaint/grievance filing facility for assessee.4. Disciplinary action against officers acting against the issued directions.Analysis:1. The High Court directed the Central Board of Indirect Taxes and Customs and the Chief Commissioner of Central/State Tax of Gujarat to issue guidelines prohibiting any recovery during search/inspection proceedings under the Central/Gujarat Goods and Services Tax Act, 2017. The Court emphasized that no recovery should be made by any mode, including cheque, cash, e-payment, or adjustment of input tax credit under any circumstances.2. The Court further directed that even if the assessee wishes to make a voluntary payment by filing Form DRC-03, they should do so on the day following the conclusion of the search proceedings and after the visiting team officers have left the premises. This timing restriction aims to ensure transparency and prevent undue influence during the search process.3. Additionally, the judgment mandated the provision of a facility for filing complaints or grievances after the search proceedings if the assessee was compelled to make a payment during the search. This step aims to protect the rights of the assessee and provide a recourse for any unjust actions taken during the search operation.4. The Court warned that if an assessee files a complaint and an officer is found to have disregarded the issued directions, strict disciplinary action should be initiated against the concerned officer. This provision underscores the importance of compliance with the guidelines and serves as a deterrent against any misconduct by the officers involved in the search operations.The Court adjourned the matter to a later date for further proceedings and instructed all officers to participate in the video conference promptly.