2025 (10) TMI 1180 - HC - GST

Petitioners ordered to cooperate with GST investigation into alleged fake-invoice ITC claims; authorities to decide objections promptly

Harsh Wadhwani Proprietor Vijay Laxmi Trade Company, Santosh Wadhwani Authorised Representative of Vijay Laxmi Trade Company Versus Additional Director General Directorate General of GST Intelligence Raipur, Deputy Commissioner Of State Tax Raipur, Superintendent/ appraiser/senior Intelligence Officer Directorate General Of GST Intelligence Raipur, Joint Commissioner State Tax Division-02, Raipur, Union Of India, State Of Chhattisgarh, Commissioner Of Commercial Tax GST Department Raipur, Principal Commissioner CGST And Central Excise Raipur.

The HC directed petitioners to appear before investigating officers at the O/o Director General, GST Intelligence, Raipur on 28 Oct 2025 and thereafter as ... Issuance of notices / summons u/s 70 of CGST Act - fraudulent claims of Input Tax Credit (ITC) based on suspected fake invoices - HELD THAT:- This Court directs that petitioners shall remain present before the concerned investigating officers/authorities in the O/o. Director General, GST Intelligence, Raipur on 28th October, 2025 for the purpose of enquiry and thereafter as and when required by the respondent officers/authorities. If the petitioners cooperate in the investigation, the Central GST Authority shall not take any coercive steps against the petitioners in respect of two firms namely (1) M/s. Taj Enterprises and (2) M/s. Agastya Enterprises. It is further observed that the objections filed by the petitioners (Annexure P/13 Colly) shall be disposed of by the respondent officers/authorities as early as possible, by passing speaking order in accordance with law. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the tax authority, under the Central Goods and Services Act, 2017, may issue summons under Section 70 to record oral evidence from a taxpayer in relation to alleged fraudulent claims of Input Tax Credit (ITC) based on suspected fake invoices. 2. Whether the issuance of non-specific summons directing personal appearance for oral evidence (without specifying the precise subject-matter of the testimony beyond the general enquiry) is lawful and necessitates any additional procedural safeguards. 3. Whether the Court should restrain the tax authority from taking coercive action against the taxpayer pending investigation, conditioned upon the taxpayer's cooperation. 4. Whether objections filed by the taxpayer against the enquiry/action must be decided by the tax authority by a speaking order and within a reasonable time. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to summon and record oral evidence under Section 70 (Legal framework) Legal framework: Section 70 of the Act empowers tax authorities to summon persons and record evidence for the purposes of investigation into evasion or irregularities relating to GST returns and ITC claims. Precedent Treatment: The judgment does not rely on or discuss prior judicial precedents; the Court treats the enquiry power as statutorily conferred and operational as applied. Interpretation and reasoning: The Court recognizes that the authority, upon scrutinising GSTR-3B returns and finding prima facie indications of ITC claimed on the basis of fake invoices, is entitled to issue notices and summon persons to record oral evidence. The power to enquire is linked to the object of verifying the correctness of ITC claims and detecting tax evasion. Ratio vs. Obiter: Ratio - The authority lawfully may issue summons under Section 70 to investigate suspected fake ITC claims by recording oral evidence. Conclusions: The issuance of summons under Section 70 for recording oral evidence in connection with suspected fraudulent ITC claims is within the statutory powers of the tax authority and is legally permissible. Issue 2 - Validity of non-specific summons and procedural safeguards Legal framework: Summons should ordinarily enable the person summoned to understand the nature of the enquiry and the matters on which evidence is sought; however, statutory enquiry powers allow some breadth in questioning to ascertain facts. Precedent Treatment: No precedents were cited; the Court addresses sufficiency of information practically rather than declaring formal invalidity. Interpretation and reasoning: The Court notes a distinction between the first notice, which identified the two firms relevant to the enquiry, and subsequent summons that directed personal appearance but did not expressly specify the precise topics for oral evidence. Rather than declaring such summons void for want of specificity, the Court accepts the authority's requirement to record oral evidence to clarify discrepancies revealed in earlier replies. The Court implicitly recognizes that clarity in summons is desirable but does not invalidate the summons here because the overall context (investigation into ITC claims relating to specified firms) was known. Ratio vs. Obiter: Obiter - The Court's acceptance that non-specific summons may be operative so long as the broader subject-matter of enquiry is identifiable is an ancillary observation tied to the facts rather than a broad principle overruling formal requirements. Conclusions: While specificity in summons is preferable, a summons requiring personal appearance for oral evidence is not necessarily invalid where the scope of the enquiry (e.g., alleged fake ITC in relation to identified firms) is reasonably ascertainable from earlier communications. Issue 3 - Interim restraint on coercive action conditioned on cooperation Legal framework: Courts may grant interim protection from coercive action where petitioners undertake to cooperate with lawful investigation and where such protection is necessary to secure fairness pending enquiry. Precedent Treatment: The Court does not rely on specific precedents but applies established equitable practice of conditioning protection on cooperation. Interpretation and reasoning: The Court balanced the authority's statutory investigatory interest against the petitioners' right against undue coercion. Finding no reason to deny the authority the ability to investigate, the Court directed presence on a specified date and provided that if petitioners cooperate fully, no coercive measures shall be initiated in respect of the identified firms. The Court left open that, upon recording oral evidence, if discrepancies or fraudulent claims are established, appropriate legal action may follow. Ratio vs. Obiter: Ratio - The Court's directive that investigative authorities shall refrain from coercive action while a cooperative taxpayer attends and participates in the enquiry is an operative order grounded in balancing investigatory needs and protection from premature coercion. Conclusions: The Court will restrain coercive action conditionally: the tax authority must not initiate coercive measures against the taxpayers concerning the subject firms so long as the taxpayers attend and cooperate in the investigation; the authority remains free to take lawful action if evidence of discrepancies or evasion emerges. Issue 4 - Duty to decide objections by speaking order within a reasonable time Legal framework: Administrative law principles require reasons to be furnished for decisions affecting rights; objections lodged with authorities should be considered and disposed of by a reasoned (speaking) order within a reasonable time. Precedent Treatment: No case law cited; the Court applies canonical administrative law norms. Interpretation and reasoning: The Court observed that objections filed by the petitioners were pending and directed the tax authorities to dispose of those objections expeditiously by passing a speaking order in accordance with law. The Court emphasized the need for reasoned disposal so as to allow meaningful judicial review and to ensure fairness in administrative action. Ratio vs. Obiter: Ratio - It is an operative mandate that objections relevant to the investigation must be decided by the authority by a speaking order and promptly. Conclusions: The tax authority is directed to decide the petitioner's objections by passing a speaking order as early as possible, consistent with legal standards of reasoned decision-making. Cross-references and Interrelationships The Court's directions on conditional non-coercion (Issue 3) are tied to the lawful exercise of Section 70 powers (Issue 1) and to the practical sufficiency of summons (Issue 2); compliance by the petitioners in the enquiry informs whether coercive steps become permissible. The requirement to dispose of objections by speaking order (Issue 4) safeguards procedural fairness during the investigatory process contemplated under Issues 1-3. Overall Disposition (Conclusions summarized) The authority may lawfully summon the taxpayers under Section 70 to record oral evidence in an enquiry into alleged fake ITC claims; the taxpayers are directed to appear on a specific date and thereafter as required; if they cooperate, the authority shall not resort to coercive measures in respect of the identified firms during the cooperative investigation; objections filed by the taxpayers must be disposed of by the authority by a speaking order expeditiously; if post-enquiry discrepancies or evasion are found, the authority may take appropriate action in accordance with law.