Gujarat HC directs strict action against officers abusing power of authority

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The Hon’ble HC, Gujarat in the matter of M/s Paresh Nathalal Chauhan v. State of Gujarat in the R/Special Civil Application No. 18436 of 2019 decided on October 25, 2019  directed the Commissioner of State Tax, Ahmedabad to carry out a proper inquiry in the matter and submit a report before the Hon’ble Court on or before 13th November, 2019 in respect of officers staying at the assessee’s premises day and night without any authority of  law.

Facts: M/s Paresh Nathalal Chauhan’s (“the Petitioner”) house was searched by the Officers (“Respondents”). The Respondents have submitted the confidential report of the proceedings carried out by the Respondents at the premises of the Petitioner pursuant to the authorisation issued in favour of the Respondent under Section 67(2) of the Central Goods and Services Tax Act, 2017 (“CGST Act”)

As per the report, the Respondents were authorised to carry out the search at the residential premises of the Petitioner and had stayed there from October 11, 2019 to October 18, 2019. On October 11, 2019 at 2:15 hrs, it has been recorded that after searching of the rooms in the premises, the records of the accounts were brought to the main room and gathered there which included the bank passbooks of the family members as well as cheque books and that verification thereof is continuing.

Further, they had stayed at the premises and had examined the phone calls that were received by the family members and had recorded their phone calls. They had also recorded statements of the family members of the Petitioner on October 11, 2019. The record further reveals that the officers who had arrived on the previous day as well as the panchas were relieved by new set of officers and this cycle continued till October 18, 2019. It appeared that thereafter they have been questioning the family members of the Petitioner on a day to day basis till October 18, 2019.

Issue:

Validity of search and seizure carried out by the Respondents under Section 67(2) of the CGST Act.

Held:

The Hon’ble HC, Gujarat in the R/Special Civil Application No. 18436 of 2019 decided on October 25, 2019 held as under:

  • Section 67 (2) of the CGST Act empowers the authorised officer to search and seize goods, documents or books or things and Section 67 (4) of the CGST Act empowers the officer authorised under sub-section (2) to seal or break open door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied. Thus, the Respondents were authorised to seize such books, goods, documents, or things which were found at the premises. Section 67 (2) of the CGST Act does not empower the officer concerned to record statements of family members through force or coercion or to record their conversations in their mobile phones.
  • The manner in which the Respondents have conducted themselves by overreaching the process of law and acting beyond the powers vested in them under Section 67(2) of the CGST Act needs to be deprecated in the strictest terms. Therefore, a proper inquiry needs to be made in respect of the action of the Respondents of staying day and night at the premises of the Petitioner without any authority of law.
  • Further directed the Commissioner of State Tax, Ahmedabad to carry out a proper inquiry in the matter and submit a report before the Court on or before 13th November, 2019.

Note:

The Hon’ble HC, Gujarat in R/Special Civil Application No. 18436 of 2019 decided on November 20, 2019 held as under:

“It appears that the Chief Commissioner of G.S.T. has taken a very lenient view in the matter and instead of examining the action of the concerned officers in the context of the relevant provisions of the Goods & Services Tax Act, has tried to justify the action of the concerned officers, which is required to be deprecated in the strictest terms.

The matter is adjourned to 11th December 2019.”

Relevant provisions:

Section 67(2) and (4) of the CGST Act:

67. Power of Inspection, search and seizure-

….

(2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things:

Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer:

Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.

….

(4) The officer authorised under sub-section (2) shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied.”