Search u/s 67(1)(a) CGST Act upheld; reasons to believe limited review, voluntary tax deposit refunded

HC upheld the legality of the search and inspection under Section 67(1)(a) CGST Act, holding that "reasons to believe" require only rational, relevant material and that sufficiency of such reasons is not justiciable. The information that petitioner purchased goods from a non-existent supplier provided adequate basis to infer wrongful ITC availment; hence, the inspection by central officers was not illegal, nor barred by Section 6(2)(b) CGST Act despite earlier DGST action. However, HC directed refund of Rs. 10,00,000 voluntarily deposited in FORM GST DRC-03. Petition disposed.

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Issues Involved:
1. Legality of the search conducted under Section 67 of the CGST Act.
2. Whether the petitioner was coerced into depositing Rs. 10,00,000.
3. Entitlement to a refund of the deposited amount.
4. Supply of FORM GST INS-01 and other documents.

Summary:

Issue 1: Legality of the Search
The petitioner challenged the search conducted on 12.11.2022 under Section 67 of the CGST Act on two grounds: the authorization was issued mechanically without "reasons to believe" as required under Section 67(1)(a), and the search was illegal due to prior similar proceedings by the Delhi Goods & Services Tax Authorities, invoking Section 6(2)(b) of the CGST Act. The court referred to the interpretation of "reasons to believe" from *Calcutta Discount Co. Ltd. v. Income Tax Officer* and concluded that the information about the petitioner's transactions with non-existent suppliers provided a rational basis for the belief that the petitioner wrongfully availed ITC. Hence, the search was not illegal or vitiated.

Issue 2: Coercion into Depositing Rs. 10,00,000
The petitioner claimed he was coerced into depositing Rs. 10,00,000 during the search. The court noted that the deposit was made in FORM GST DRC-03 from the laptop carried by the visiting team and the petitioner claimed coercion immediately by a letter dated 14.11.2022. The court found this issue covered by previous decisions in *Vallabh Textiles v. Senior Intelligence Officer* and *Lovelesh Singhal v. Commissioner, Delhi Goods & Service Tax*. Hence, the court directed the respondents to refund the amount.

Issue 3: Entitlement to Refund
The court directed the respondents to refund the sum of Rs. 10,00,000 deposited by the petitioner, clarifying that this order would not preclude the respondents from taking necessary steps to protect the interest of the Revenue, including actions under Section 83 of the CGST Act or Rule 86(A) of the CGST Rules if conditions are satisfied.

Issue 4: Supply of Documents
The petitioner's request for a copy of FORM GST INS-01, Panchnama, and recorded statement was deemed unnecessary as the respondents affirmed that no statement was recorded and no goods or documents were seized under Section 67(2) of the CGST Act.

Conclusion:
The petition was disposed of with directions to refund the deposited amount, while allowing the respondents to take further steps to protect revenue interests if necessary.

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