NathalalMaganlal Chauhan VS State of Gujarat

The court made the RULE returnable forthwith with Mr. Vinay Vishen and Mr. Chintan Dave, the learned Assistant Government Pleaders (AGP), waiving the service of notice of rule on behalf of the State respondents. Since both writ applications raised the same issues, they were heard together and are being disposed of by a common judgment and order. For convenience, Special Civil Application No. 513 of 2020 is treated as the lead case. The writ applicant, under Article 226 of the Constitution of India, seeks reliefs, including a writ of mandamus or other appropriate orders to quash and set aside the Notification No. EST/1/Jurisdiction/B.2168 dated 05.07.2017 issued by the Commissioner of State Tax, Gujarat State. Additionally, the applicant requests a stay on the implementation and operation of the said notification pending admission, final hearing, and disposal of the petition. Furthermore, the applicant seeks the release of Paresh Nathalal Chauhan, the petitioner’s son, who has been arrested under authorization issued by the Additional Commissioner of State Tax.

(A) The petitioner seeks the issuance of a writ of mandamus, writ of prohibition, or any other suitable writ, order, or direction, requesting that the respondents refrain from taking any actions against them in their capacity as the proprietor of Lancer Enterprise. The petitioner argues that any exercise of powers under Section 69 read with Section 132 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Gujarat Goods and Services Tax Act, 2017 (GGST Act) should not proceed without adhering to the due process of law for the assessment and adjudication of alleged GST evasion. Specifically, the petitioner asserts that the investigation should follow the procedures outlined in Section 61, Section 73, or Section 74 of the CGST Act and GGST Act, including the provisions set forth in Chapter XII of both Acts and Chapter VIII of the corresponding Central Goods and Services Tax Rules, 2017 (CGST Rules) and Gujarat Goods and Services Tax Rules, 2017 (GGST Rules). The petition challenges the initiation of the investigation by the State Tax Unit-22, Ahmedabad, alleging that due process has not been followed.

(B) The petitioner requests the issuance of a writ of mandamus, writ of prohibition, or any other appropriate writ, order, or direction to quash and set aside an order dated June 23, 2017, bearing No.GSL/S.5(1)/B.1. This order was issued by the Commissioner of State Tax, Gujarat, under sub-section (1) of Section 5 read with clause (91) of Section 2 of the GGST Act. The order assigned certain functions to be performed by a higher officer under the GGST Act, and the petitioner seeks to challenge this assignment, arguing that it was made without proper authority or procedural adherence.

(C) Pending the admission, final hearing, and disposal of the petition, the petitioner requests that the respondents be restrained from exercising powers under Section 69 read with Section 132 of the CGST Act or GGST Act. This request aims to prevent any immediate action that might be taken by the respondents before the court has the opportunity to fully consider the merits of the petition.

In this case, Mr. Chetan Pandya, the advocate representing the petitioner, has submitted an affidavit from Nathalal Maganlal Chauhan, the petitioner’s father, which has been accepted into the record. Additionally, the learned Assistant Government Pleader has provided a confidential report detailing the actions taken by the respondents at the petitioner’s premises following an authorization granted to the second respondent under subsection (2) of section 67 of the Central Goods and Services Tax Act, 2017 (CGST Act).

Upon reviewing the report, it is clear that the officers responsible for the search at the petitioner’s residential premises were present from October 11, 2019, to October 18, 2019. The report indicates that on October 11, 2019, at 2:15 PM, the officers had searched the rooms, gathered various documents including bank passbooks and cheque books, and brought these records to the main room for verification. Following this initial search, no further searches were documented. However, the officers continued their presence at the premises and examined phone calls received by family members, recording these communications, as well as taking statements from the petitioner’s family members.

Mr. Chetan Pandya, the advocate representing the petitioner, has submitted an affidavit from Nathalal Maganlal Chauhan, the petitioner’s father, which has been accepted by the court. Additionally, the learned Assistant Government Pleader provided a confidential report detailing the proceedings conducted by the respondents at the petitioner’s premises, based on the authorization given to the second respondent under Section 67(2) of the Central Goods and Services Tax Act, 2017 (CGST Act).

The court has reviewed the report thoroughly, which shows that the authorized officers conducted a search at the petitioner’s residence from October 11, 2019, to October 18, 2019. On October 11, 2019, at 2:15 PM, it was noted that after searching various rooms, the officers gathered the financial records, including bank passbooks and cheque books, into the main room for verification. The subsequent record indicates that although no further searches were conducted, the officers remained at the premises and scrutinized phone calls made by the family members, recording both the calls and their statements. Additionally, a rotation of officers and panchas occurred during the period, continuing until October 18, 2019, when the family members were questioned daily.

Section 67 of the CGST Act, which governs powers of inspection, search, and seizure, states that if a proper officer, not below the rank of Joint Commissioner, has reasonable grounds to believe that a taxable person has suppressed transactions, claimed excess input tax credit, or engaged in any act of tax evasion or contravention of the Act’s provisions, they may authorize another officer to conduct an inspection. This section also covers cases where goods that have evaded tax are being kept or where accounts are maintained in a way that could cause tax evasion.

In the case at hand, Mr. Chetan Pandya, representing the petitioner, has presented an affidavit from Nathalal Maganlal Chauhan, the petitioner’s father, which has been officially recorded. Additionally, the Assistant Government Pleader has submitted a confidential report detailing the proceedings conducted by the respondents at the petitioner’s residence. This was done under the authorization provided to the second respondent in accordance with sub-section (2) of section 67 of the Central Goods and Services Tax Act, 2017 (CGST Act).

The court has reviewed the report, which indicates that the officers authorized to search the petitioner’s home were present there from October 11, 2019, to October 18, 2019. The report shows that on October 11, 2019, at 2:15 PM, the officers had completed searching the rooms and collected various records, including bank passbooks and cheque books, which were gathered in the main room for ongoing verification. The record reveals that while there were no further searches, the officers continued their stay at the premises and examined phone calls made to family members, recording these calls and statements from them. It appears that the officers, along with the panchas, were periodically replaced until the end of the inspection on October 18, 2019, during which they continued questioning the petitioner’s family members daily.

Section 67 of the CGST Act grants powers of inspection, search, and seizure. Sub-section (1) allows a proper officer, not below the rank of Joint Commissioner, to authorize any other officer to inspect business places if there is reason to believe that a taxable person is involved in tax evasion or has contravened the provisions of the Act. Sub-section (2) provides that if there is reason to believe that goods liable for confiscation or relevant documents are secreted in any place, the proper officer may authorize a search and seizure. If goods cannot be seized immediately, an order may be served to prevent their removal or alteration without prior permission. Documents or items seized can be retained only as long as necessary for examination and inquiry.

Mr. Chetan Pandya, the petitioner’s advocate, has presented an affidavit from Nathalal Maganlal Chauhan, the petitioner’s father, which has been recorded. The Assistant Government Pleader has submitted a confidential report detailing the proceedings conducted by the respondents at the petitioner’s premises, following an authorization issued to the second respondent under section 67(2) of the Central Goods and Services Tax Act, 2017 (CGST Act). Upon reviewing the report, it is evident that the authorized officers searched the petitioner’s residential premises from October 11, 2019, to October 18, 2019. On October 11, 2019, at 2:15 PM, the officers gathered various records, including family bank passbooks and cheque books, in the main room for verification. After this, no further searches were reported; instead, the officers remained at the premises, examining phone calls received by family members and recording their statements. The officers who initially arrived, along with the panchas, were replaced daily by new officers and panchas until October 18, 2019, during which time they continued to question the petitioner’s family members.

Section 67 of the CGST Act grants powers related to inspection, search, and seizure. Sub-section (1) allows a proper officer, not below the rank of Joint Commissioner, to authorize another officer to inspect the premises of a taxable person or businesses involved in transporting goods if there is reason to believe that tax evasion or contravention of the Act is occurring. Sub-section (2) authorizes the same officer to search and seize goods, documents, or books that are believed to be relevant to proceedings under the Act, with provisions for handling documents and goods if they cannot be immediately seized. Sub-section (3) mandates that any documents or books not used for issuing a notice should be returned within thirty days of the notice being issued. Sub-section (4) grants the power to seal or break into premises or containers if access is denied. Sub-section (5) allows the person from whose custody documents are seized to make copies or take extracts, except where it may affect the investigation. Finally, sub-section (6) provides for the provisional release of seized goods upon execution of a bond and provision of security or payment of applicable tax, interest, and penalties.

Mr. Chetan Pandya, the petitioner’s advocate, has submitted an affidavit from Nathalal Maganlal Chauhan, the petitioner’s father, which has been included in the record. The Assistant Government Pleader has also provided a confidential report detailing the proceedings conducted by the respondents at the petitioner’s premises, based on authorization given to the second respondent under subsection (2) of section 67 of the Central Goods and Services Tax Act, 2017 (CGST Act).

The court has reviewed this report thoroughly. It shows that the officers authorized to search the petitioner’s residential premises were present from October 11, 2019, to October 18, 2019. On October 11, 2019, at 2:15 PM, the officers documented that after searching the rooms, they collected various records including bank passbooks and cheque books, and continued their verification. The subsequent records indicate that the officers did not conduct further searches but remained on-site, examining and recording phone calls made by the family members and taking their statements on October 11, 2019. The officers who initially arrived, along with the panchas (witnesses), were replaced by new officers and panchas in a cycle that continued until October 18, 2019. The officers questioned the petitioner’s family daily during this period.

Section 67 of the CGST Act grants powers related to inspection, search, and seizure. According to this section, if a proper officer, at least a Joint Commissioner, believes that a taxable person has concealed transactions or claimed excessive input tax credit, or is otherwise contravening the provisions to evade tax, they can authorize another officer to inspect any place of business. Furthermore, if the proper officer believes that goods or documents useful for proceedings under the Act are concealed, they may authorize a search and seizure of such goods or documents. The Act allows for the sealing or breaking open of premises or containers if access is denied, and the person from whose custody documents are seized can make copies or extracts in the presence of the authorized officer. Seized goods may be released provisionally upon the execution of a bond and security or payment of applicable tax, interest, and penalty. If no notice is issued within six months of seizure, the goods must be returned, with a possible extension of six months if sufficient cause is shown. Additionally, the Government may specify goods that should be disposed of quickly due to their perishable nature or other relevant factors. The procedures for search and seizure are also aligned with the Code of Criminal Procedure, 1973.

Mr. Chetan Pandya, the petitioner’s advocate, has submitted an affidavit from Nathalal Maganlal Chauhan, the petitioner’s father, which is now part of the record. The Assistant Government Pleader has provided a confidential report detailing the proceedings conducted by the respondents at the petitioner’s residence, authorized under section 67(2) of the Central Goods and Services Tax Act, 2017. The report indicates that the officers involved in the search stayed at the petitioner’s premises from October 11, 2019, to October 18, 2019. On October 11, 2019, at 2:15 PM, after searching the rooms, they gathered the financial records, including bank passbooks and cheque books, into the main room and began their verification. Although no further search was documented, the officers examined phone calls and recorded statements from the petitioner’s family members, with new officers and panchas replacing the previous ones daily until October 18, 2019.

Section 67 of the CGST Act grants the power to inspect, search, and seize. Sub-section (1) allows a proper officer, not below the rank of Joint Commissioner, to authorize another officer to inspect places of business if there is reason to believe that a taxable person has evaded tax. Sub-section (2) permits the search and seizure of goods, documents, or books if the officer suspects they are secreted in any place. It also provides for the issuance of orders to prevent the removal of goods if seizure is impractical. Sub-section (3) requires the return of documents not relied upon for issuing notices within 30 days. Sub-section (4) authorizes officers to seal or break open premises if access is denied. Sub-section (5) allows the person from whom documents are seized to make copies in the presence of an authorized officer, except where it might hinder the investigation. Sub-section (6) details the conditions under which seized goods may be released provisionally. Sub-section (7) mandates the return of goods if no notice is given within six months, extendable for another six months if justified. Sub-section (8) enables the government to specify goods for disposal soon after seizure. Sub-section (9) requires an inventory to be prepared for specified goods. Sub-section (10) applies the Code of Criminal Procedure to searches and seizures with modifications. Sub-section (11) allows for the seizure of accounts or documents if there is an attempt to evade tax. Sub-section (12) authorizes the purchase of goods or services to verify tax invoice issuance and mandates a refund for returned goods.

Mr. Chetan Pandya, the advocate for the petitioner, has submitted an affidavit from Nathalal Maganlal Chauhan, the petitioner’s father, which has been accepted by the court. The Assistant Government Pleader has provided a confidential report detailing the proceedings conducted by the respondents at the petitioner’s premises following an authorization under section 67(2) of the Central Goods and Services Tax Act, 2017 (CGST Act).

The court reviewed the report, which indicates that officers authorized to search the petitioner’s residence stayed from October 11, 2019, to October 18, 2019. The records show that on October 11, 2019, the officers collected the family’s bank passbooks and cheque books and were in the process of verifying them. Although no additional searches were recorded, the officers continued to stay at the premises, examining phone calls and recording statements from the petitioner’s family members. The initial team of officers and panchas were replaced by new ones repeatedly until October 18, 2019, and the questioning of the family members persisted daily.

Section 67 of the CGST Act provides powers for inspection, search, and seizure. Sub-section (2) allows an authorized officer to search and seize goods, documents, or books if they believe such items are relevant to proceedings under the Act. Sub-section (4) allows for sealing or breaking open of premises or containers if access is denied. However, the sub-sections do not grant authority to use coercion or force to obtain information or recordings from family members.

It is noted that from October 12 to October 18, 2019, the presence of officers, including a CRPF officer, at the petitioner’s residence, despite the seizure of goods on October 11, 2019, was unwarranted and beyond legal authority. The officers’ actions were deemed a misuse of their powers, as they exceeded the legal scope permitted under the CGST Act, especially regarding the treatment of family members and the use of coercive measures. Consequently, there is a need for a thorough investigation into the conduct of the respondent officers.

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