2023 (9) TMI 1178 - HC - GST

Judicial Review Challenges Validity of GST Search Warrant Citing Insufficient Procedural Grounds Under Section 67(1)

HC scrutinized search authorization under GST Act, challenging the legality of a search based on Special Judge's directions. The Court raised concerns ... Search authorization under the Central Goods and Services Tax Act - conditions for authorising search under Section 67(1) of the Central Goods & Services Tax Act, 2017 - interim stay of proceedings pursuant to search - production of departmental files and filing of counter affidavitInterim stay of proceedings pursuant to search - Interim stay of proceedings arising from the search conducted pursuant to the search authorization. - HELD THAT: - The Court issued notice and, as an interim measure, stayed the proceedings pending further adjudication. The stay was ordered while the respondent obtains instructions and, if necessary, files a counter affidavit. The order preserves the petitioners' challenge to the legality of the search authorization for adjudication on merits after production of the departmental records and filing of the counter affidavit. [Paras 7, 11]Proceedings pursuant to the search are stayed pending further orders; notice issued.Production of departmental files and filing of counter affidavit - search authorization under the Central Goods and Services Tax Act - Direction to the respondent to produce relevant files and to file a counter affidavit within a specified period. - HELD THAT: - The Court directed the respondent to produce the relevant files containing the directions for conducting the search and permitted two weeks for filing any counter affidavit. The respondent accepted notice and was granted time to obtain instructions and to file its response. These directions are procedural steps to enable adjudication on the petitioners' challenge to the search authorization. [Paras 8, 9, 11]Respondent to produce relevant files and file counter affidavit within two weeks; matter listed for further hearing on the specified date.Final Conclusion: Notice issued; respondent directed to produce relevant files and file a counter affidavit within two weeks; proceedings consequent to the search are stayed and the matter is listed for further hearing. Issues involved: Impugning search authorization u/s 67(1) of the Central Goods & Services Tax Act, 2017; Legality of search authorization; Directions issued by Special Judge for inquiry.Impugning search authorization u/s 67(1) of the Central Goods & Services Tax Act, 2017:The petitioners challenged the search authorization dated 22.08.2023, contending it was illegal as the proper officer lacked the requisite reason to believe conditions u/s 67(1) of the Act were met. The search was prompted by Special Judge's directions to various departments to investigate the source of funds received by the petitioners. Petitioner no. 2's property purchase for Rs. 50,00,000 raised suspicions, as the funds were linked to a bail collateral. The Court expressed doubts on the legitimacy of such a broad inquiry and emphasized that the proper officer's search authorization hinges on meeting the Act's specified conditions.Legality of search authorization:The Court raised concerns regarding the legality of the search authorization issued without proper compliance with u/s 67(1) of the Act. It questioned the validity of the search conducted based on directions from the Special Judge, emphasizing the necessity for the proper officer to adhere strictly to the Act's provisions before authorizing a search. Notice was issued to the respondent, who agreed to respond and requested time to prepare a counter affidavit within two weeks.Directions issued by Special Judge for inquiry:The search stemmed from directions by the Special Judge (P.C. Act) to investigate the origin of Rs. 50,00,000 received by the petitioners. The funds were traced to a property purchase and used as bail collateral, prompting further scrutiny. The Court highlighted the need for the respondent to provide relevant files containing the search directives, and proceedings following the search were stayed until the next hearing scheduled for 17.10.2023.