2021 (6) TMI 918 - HC - GST

Court upholds validity of summons and INR 3 Crore payment, dismisses petition

Yasho Industries Limited Versus Union Of India

The court dismissed the petition, upholding the validity of the summons under Section 70 of the CGST Act, the Circular dated 5.7.2017, and the ... Validity of summons issued u/s 70 - Proper officer - search/inspection proceedings u/s 67 of the CGST Act - EOU Scheme - Refund/allow recredit - Refund of duty paid on the goods exported towards fulfillment of the export obligation - fraud or any willful misstatement or suppression of facts - Section 2(91) of CGST Act read with Section 20 of IGST Act - HELD THAT:- From the bare reading of Section 70 of the CGST Act, it clearly emerges that the proper officer has the power to summon any person whose attendance he considers necessary either to give evidence or to produce the documents in any inquiry in the same manner in the case of a Civil Court under the CPC. Now, as per the definition of 'proper officer' as contained in Section 2(91), a 'proper officer' in relation to any function to be performed under the CGST Act means the Commissioner or the officer of the Central Tax, who is assigned that function by the Commissioner in the Board - the respondent No.3 is a proper officer in relation to the function to be performed under the CGST Act as contemplated under Section 2(91), and as such, was entitled to issue summons under Section 70 of the CGST Act in connection with the inquiry initiated against the petitioner. In the instant case, the Board has assigned the officers to perform the function as proper officers in relation to various Sections of CGST Act and the Rules made thereunder by issuing the Circular in question, the question of issuing Notification for delegation of powers by the Commissioner as contemplated under Section 167 of the CGST Act does not arise. Mr.Rastogi appears to have misread the powers of the Board to assign the officers to perform the function as proper officers in relation to the various Sections of the CGST Act, as the delegation of powers by the Commissioner to the other authority or the officer as contemplated in Section 167 of the CGST Act. The Court, therefore, does not find any substance in the submission of Mr.Rastogi that the respondent No.3 was not the ‘proper officer’ as per the definition contained in Section 2(91) of the CGST Act, and therefore, had no powers to issue summons under Section 70 of the CGST Act. Heavy reliance on the interim order passed by this Court in case of Bhumi Associates (supra), it may be noted that apart from the fact that the said order is an interim order, the guidelines issued in the said interim order appear to have been issued in connection with the voluntary payment made by the person during the course of search and seizure proceedings conducted under Section 67 of the CGST Act. Admittedly, no search and seizure proceedings have taken place under Section 67 of the Act, in case of the petitioners. In the instant case, the petitioners having made payment under Section 74(5), they appear to have informed the Proper Officer of such payment in the Form GST DRC-03 (Annexure-F) as contemplated in Rule 142(2) of the said Rules. Petition dismissed. Issues Involved:1. Challenge to Summons under Section 70 of CGST Act.2. Request for refund/recredit of INR 3 Crore.3. Challenge to Circular dated 5.7.2017 regarding assignment of functions to officers under CGST Act.4. Allegation of coercive recovery of INR 3 Crore.5. Jurisdiction of respondent No.3 to issue summons.6. Parallel proceedings by different authorities.7. Voluntariness of payment made under Section 74(5) of CGST Act.Issue-wise Detailed Analysis:1. Challenge to Summons under Section 70 of CGST Act:The petitioners challenged the summons dated 12.4.2021 issued under Section 70 of the CGST Act, which required them to provide evidence and documents. The court examined the definition of 'Proper Officer' under Section 2(91) of the CGST Act and concluded that the respondent No.3, being a Senior Intelligence Officer of DGGI and appointed as a Central Tax Officer, had the authority to issue the summons. The court found that the Circular dated 5.7.2017, which assigned functions to officers, was valid and did not require a separate notification under Section 167 of the CGST Act.2. Request for Refund/Recredit of INR 3 Crore:The petitioners sought a direction for the refund or recredit of INR 3 Crore paid on 9.2.2021. The court noted that the payment was made under Section 74(5) of the CGST Act and was reflected in Form GST DRC-03. The court emphasized that the payment was marked as 'voluntary' and 'under protest' related to an inquiry into an incorrect claim of double benefits. The court stated that the payment would be dealt with or adjusted by the concerned respondent in accordance with the law, particularly under Section 74 of the CGST Act.3. Challenge to Circular dated 5.7.2017:The petitioners challenged the Circular dated 5.7.2017, arguing that the assignment of functions to officers should be through a notification as per Section 167 of the CGST Act. The court rejected this argument, clarifying that Section 2(91) pertains to the assignment of functions by the Commissioner in the Board, not the delegation of powers under Section 167. The court upheld the validity of the Circular, stating that the Board had the authority to assign functions to officers through the Circular.4. Allegation of Coercive Recovery of INR 3 Crore:The petitioners alleged that the INR 3 Crore payment was made under duress. The court examined the Form GST DRC-03, which marked the payment as 'voluntary' and 'under protest.' The court found no evidence of coercion, noting that no search or seizure proceedings were conducted under Section 67 of the CGST Act, and the petitioners did not file any complaint regarding coercion. The court concluded that the payment was voluntary and would be adjusted as per the provisions of Section 74 of the CGST Act.5. Jurisdiction of Respondent No.3 to Issue Summons:The petitioners questioned the jurisdiction of respondent No.3 to issue the summons. The court reaffirmed that respondent No.3, being a Senior Intelligence Officer of DGGI and appointed as a Central Tax Officer, had the authority to issue the summons under Section 70 of the CGST Act. The court emphasized that the Circular dated 5.7.2017 validly assigned the function of issuing summons to the proper officers.6. Parallel Proceedings by Different Authorities:The petitioners argued that they were subjected to parallel proceedings by the Directorate of Revenue Intelligence (DRI) and respondent No.3. The court clarified that the DRI's inquiry was related to the incorrect availment of double benefits under the EOU Scheme, while respondent No.3's inquiry pertained to the refund of ITC under the CGST Act. The court found no issue with parallel proceedings, as they were related to different aspects of the petitioners' activities.7. Voluntariness of Payment Made under Section 74(5) of CGST Act:The court examined the voluntariness of the INR 3 Crore payment made under Section 74(5) of the CGST Act. The court noted that the payment was marked as 'voluntary' in Form GST DRC-03 and found no evidence of coercion. The court emphasized that the payment would be dealt with according to the law, particularly under Section 74 of the CGST Act.Conclusion:The court dismissed the petition, finding no merit in the arguments presented by the petitioners. The court upheld the validity of the summons issued under Section 70 of the CGST Act, the Circular dated 5.7.2017, and the voluntariness of the INR 3 Crore payment made by the petitioners. The court emphasized that the payment would be adjusted according to the provisions of Section 74 of the CGST Act.