Taxmann's GST Investigations Demands Appeals & Prosecution by Taxmann

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Law stated in this book is as amended by the Finance Act, 2023 and updated till 28th April, 2023

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About the Authors

Dr. G. Gokul Kishore

I-5

R. Subhashree

Preface to Second Edition

Goods and Services Tax (GST) is still new and young but use of powers of inspection, search, seizure, confiscation, provisional attachment, arrest and prosecution have been frequent if one goes by the number of orders of various High Courts passed till today. Tax officers have been vested with police powers which have the effect of curtailing personal liberty of taxpayers so as to safeguard public revenue. Orders passed by High Courts indicate that in several cases use of such powers were used by authorities without discretion. There are always two versions of any search and seizure operation as the department claims that taxpayer has not been cooperative while the taxpayer alleges highhandedness and harassment by the officers. It is the courts that test the truth of the facts through evidence. Power to arrest has been used in quite a large number of cases though increasing evasion and fraudulent availment of input tax credit are cited as the reasons behind the same. Surprisingly, we get more jurisprudence on criminal law particularly on arrest and bail through implementation of GST law.

Show cause notice forms the basis for commencement of a dispute, followed by hearing and passing of adjudication order. Many High Court orders point to notices issued being cryptic and vague probably because they are system-generated through GST portal and orders being passed without hearing in violation of principles of natural justice. Moreover as service of orders is made only through online mode, many are caught unawares. Orders-in-Appeal are being passed by departmental quasi-judicial authorities but further appeals have to wait as the GST Appellate Tribunal is yet to be constituted. Though amendments to the relevant provisions of CGST Act have been made by Finance Act, 2023, it will take some time for SGST Act also to be

I-7

amended and establishment of Benches. Compelled by absence of the Appellate Tribunal, taxpayers have to knock the doors of High Courts to exercise writ jurisdiction and such courts also, considering the present scenario, entertain the petitions and pass orders rendering justice.

We have enormous jurisprudence under pre-GST laws on visit of the departmental officers to the premises of taxpayer for conducting search and seizure operations besides those on proceedings relating to confiscation, penalty, notices, adjudication, appeals and prosecution. Under GST law, the same is emerging with huge inflow of orders. Department has also issued instructions and clarifications on exercise of such powers. A book to cover, at one place, such past and emerging jurisprudence along with a lucid commentary on the statutory provisions under GST law relating to inspection, summons, search, seizure, detention, audit, confiscation, penalty, show cause notices, adjudication, appeals, revision, provisional attachment, arrest, bail, prosecution, compounding and recovery of dues is a requirement felt among taxpayers, departmental officers, members of the bar, professionals and the judiciary. This book is a modest endeavour intended to cater to this requirement. We trust all stakeholders will find the second edition of this book also useful.

We are indebted to our parents for sacriﬁcing whatever they had to ensure that we have access to the best education without which this book could not have been a reality. We are grateful to Mr. V. Lakshmikumaran, Advocate, for the learnings and Taxmann, the leader in tax publishing industry for providing this fulﬁlling opportunity. We thank members of our families, professional colleagues and friends for their overwhelming support in this endeavour.

April, 2023

Chennai

Email: advgokulsubha@gmail.com

G. Gokul Kishore R. Subhashree

I-8

About the Authors I-5 Preface to Second Edition I-7 Contents I-11 List of Cases I-29 Chapter 1 Introduction 1 Chapter 2 Inspection, Search and Seizure 5 Chapter 3 Summons for attendance and production of documents 45 Chapter 4 Audit and Access to business premises 58 Chapter 5 Detention, seizure and release of goods and conveyances in transit 67 Chapter 6 Demands and Adjudication 80 Chapter 7 146 PAGE I-9

Chapter-Heads

Chapter 8 Appeals and Revision 170 Chapter 9 Arrest, Bail and Prosecution 223 Chapter 10 Provisional attachment & Recovery of dues 257 Chapter 11 Burden of proof and certain procedures 277 APPENDICES APPENDIX I : 291 APPENDIX II : - 296 APPENDIX III : 298 APPENDIX IV : 303 APPENDIX V : 312 APPENDIX VI : 320 APPENDIX VII : 323 APPENDIX VIII : 328 APPENDIX IX: - 332 SUBJECT INDEX 355 PAGE I-10

CONTENTS About the Authors I-5 Preface to Second Edition I-7 Chapter-heads I-9 List of Cases I-29 1 INTRODUCTION 1.1 1 1.2 2 1.3 3 2 INSPECTION, SEARCH AND SEIZURE 2.1 5 2.2 5 2.2.1 5 2.2.2 8 2.2.3 9 I-11

2.2.3.1 - 9 2.2.3.2 10 2.2.4 11 2.3 12 2.3.1 13 2.3.2 14 2.3.3 15 2.3.4 15 2.3.5 18 2.3.6 18 2.3.7 19 2.3.8 21 2.3.9 - 22 2.3.10 24 2.3.11 24 2.3.12 25 2.3.13 26 2.3.14 26 2.3.15 26 2.3.16 27 2.3.17 27 2.3.18 29 I-12

2.3.19 30 2.4 30 2.5 32 2.5.1 34 2.5.2 35 2.6 35 2.6.1 36 2.6.2 37 2.6.3 - 38 2.6.4 38 2.6.5 38 2.6.6 40 2.7 40 2.8 43 2.9 44 3 SUMMONS FOR ATTENDANCE AND PRODUCTION OF DOCUMENTS 3.1 45 3.2 46 3.2.1 46 3.3 47 3.4 47 3.5 48 I-13

3.6 48 3.7 49 3.8 50 3.8.1 51 3.8.2 53 3.8.3 53 3.8.4 54 3.8.5 54 3.8.6 55 3.9 56 4 AUDIT AND ACCESS TO BUSINESS PREMISES 4.1 58 4.1.1 58 4.1.2 60 4.1.3 60 4.1.4 61 4.1.5 61 4.1.6 62 4.1.7 62 4.2 63 4.2.1 64 4.2.2 65 4.2.3 65 4.2.4 65 4.2.5 66 I-14

5 DETENTION, SEIZURE AND RELEASE OF GOODS AND CONVEYANCES IN TRANSIT 5.1 68 5.2 69 5.3 70 5.4 71 5.5 71 5.6 72 5.6.1 72 5.7 73 5.8 73 5.9 74 5.10 75 5.11 77 5.12 78 5.13 78 5.14 78 6 DEMANDS AND ADJUDICATION 6.1 80 6.1.1 80 6.1.2 81 I-15

6.1.3 82 6.1.4 83 6.1.5 84 6.1.6 85 6.1.7 85 6.1.8 86 6.1.9 86 6.1.10 87 6.1.11 88 6.1.12 88 6.1.13 89 6.1.14 90 6.1.15 void ab initio 90 6.1.16 91 6.1.17 91 6.2 91 6.2.1 92 6.2.2 93 6.2.3 94 6.2.4 94 6.2.5 95 I-16

6.2.6 96 6.2.7 98 6.3 98 6.3.1 98 6.3.2 - 99 6.3.3 99 6.3.4 100 6.4 100 6.5 101 6.6 101 6.7 102 6.8 103 6.8.1 104 6.9 104 6.9.1 105 6.9.2 106 6.9.3 109 6.9.4 110 6.9.5 110 6.9.6 110 6.9.7 111 6.9.8 111 6.10 112 6.11 112 I-17

6.11.1 114 6.11.2 114 6.11.3 115 6.11.4 118 6.11.5 120 6.11.6 121 6.11.7 123 6.11.8 124 6.11.9 124 6.11.10 127 6.11.11 128 6.11.12 res judicata 128 6.11.13 res judicata 129 6.11.14 131 6.11.15 131 6.11.16 132 6.11.17 132 6.11.18 133 6.11.19 133 6.11.20 134 6.11.21 134 6.12 136 6.13 137 I-18

6.14 137 6.15 138 6.16 138 6.17 138 6.18 140 6.19 140 6.20 141 6.21 142 6.21.1 142 6.22 143 6.23 144 6.24 144 6.25 144 7 CONFISCATION OF GOODS OR CONVEYANCE AND PENALTY 7.1 146 7.1.1 146 7.1.2 mens rea 148 7.1.3 149 7.1.4 149 7.1.5 150 I-19

7.1.6 150 7.1.7 151 7.1.8 152 7.1.9 153 7.1.10 153 7.1.11 154 7.1.12 155 7.1.13 156 7.1.14 157 7.2 157 7.2.1 158 7.2.2 159 7.2.3 159 7.2.4 160 7.2.5 160 7.2.6 160 7.2.7 161 7.2.8 161 7.2.9 162 7.2.10 163 7.2.11 163 7.2.12 164 7.2.13 164 7.3 165 7.4 mens rea 166 I-20

7.5 166 7.6 166 7.7 167 7.8 168 7.9 168 7.10 ` 168 8 APPEALS AND REVISION 8.1 170 8.1.1 170 8.1.2 172 8.1.3 172 8.1.4 173 8.1.5 173 8.1.6 173 8.1.7 174 8.1.8 174 8.1.9 174 8.1.10 177 8.1.11 180 8.1.12 181 8.1.13 181 8.1.14 181 8.1.15 182 8.1.16 183 I-21

8.1.17 183 8.1.18 186 8.1.19 187 8.1.20 187 8.1.21 187 8.1.22 188 8.2 188 8.2.1 189 8.2.2 190 8.3 191 8.3.1 191 8.3.2 192 8.3.3 192 8.3.4 192 8.3.5 193 8.3.6 193 8.3.7 193 8.3.8 194 8.3.9 194 8.3.10 196 8.3.11 196 8.3.12 196 8.3.13 198 8.3.14 198 8.3.15 199 8.3.16 200 8.3.17 201 8.3.18 202 I-22

8.3.19 203 8.3.20 204 8.3.21 205 8.3.22 205 8.3.23 206 8.3.24 206 8.3.25 206 8.3.26 207 8.3.27 209 8.3.28 209 8.3.29 209 8.3.30 210 8.4 211 8.4.1 212 8.4.2 212 8.4.3 216 8.4.4 216 8.4.5 217 8.5 218 8.6 219 8.7 219 8.8 220 8.9 222 9 ARREST, BAIL AND PROSECUTION 9.1 223 9.1.1 224 I-23

9.1.2 225 9.1.3 226 9.1.4 226 9.1.5 229 9.1.6 231 9.1.7 233 9.1.8 234 9.1.9 - 235 9.1.10 236 9.1.11 237 9.2 237 9.2.1 238 9.2.2 241 9.2.3 242 9.2.4 242 9.2.5 242 9.2.6 243 9.2.7 modus operandi 243 9.2.8 244 9.2.9 244 9.2.10 244 9.2.11 245 9.2.12 245 I-24

9.2.13 246 9.2.14 247 9.2.15 248 9.2.16 248 9.2.17 249 9.2.18 250 9.2.19 250 9.2.20 254 9.3 254 9.3.1 254 9.3.2 255 9.3.3 255 9.3.4 255 10 PROVISIONAL ATTACHMENT AND RECOVERY OF DUES 10.1 257 10.1.1 257 10.1.2 257 10.1.3 258 10.1.4 259 10.1.5 260 10.1.6 261 10.1.7 261 10.1.8 262 I-25

10.1.9 262 10.1.10 265 10.1.11 265 10.1.12 266 10.1.13 266 10.2 - 267 10.2.1 267 10.2.2 Suo motu 268 10.2.3 268 10.2.4 269 10.2.5 269 10.2.6 271 10.2.7 272 10.2.8 272 10.2.9 273 10.2.10 273 10.2.11 274 10.2.12 274 10.2.13 274 10.2.14 275 I-26

10.2.15 275 10.2.16 275 10.2.17 276 11 BURDEN OF PROOF AND CERTAIN PROCEDURES 11.1 277 11.2 279 11.3 279 11.3.1 280 11.3.2 280 11.3.3 280 11.3.4 282 11.3.5 283 11.4 284 11.5 285 11.6 286 11.7 287 APPENDICES APPENDIX I : 291 APPENDIX II : 296 APPENDIX III : 298 I-27

APPENDIX IV : 303 APPENDIX V : 312 APPENDIX VI : 320 APPENDIX VII : 323 APPENDIX VIII: 328 APPENDIX IX: 332 SUBJECT INDEX 355 I-28

3 SUMMONS FOR ATTENDANCE AND PRODUCTION OF DOCUMENTS CHAPTER

3.1 POWER TO SUMMON PERSONS TO GIVE EVIDENCE AND PRODUCE DOCUMENTS

G.K. Trading Company Union of India S.K. Metal Assistant Commissioner, B II Enforcement Wing II, Department of Commercial Taxes, Government of Rajasthan, Jaipur

Laxman Prabu State, MLJ QD

Yasho Industries Ltd. Union of India

3.2 INQUIRY DEEMED TO BE JUDICIAL PROCEEDINGS AS PER IPC

3.2.1 Power of “inquiry” under the Act is not restricted vide

National Building Construction Company Ltd. Union of India

Para 3.2 46 -

3.3

3.4

47 Para 3.4

NATURE OF PROCEEDINGS P.V. Ramana Reddy Union of India Romesh Chandra Mehta State of West Bengal K.I. Pavunny Asstt. Collector

APPLICABILITY OF PROVISIONS OF CPC

3.5 CONSEQUENCES OF FAILURE TO ATTEND AS PER SUMMONS

3.6 COMPLIANCE WITH SUMMONS

Vijay Mallya Enforcement Directorate, Ministry of Finance -

Dy. Chief

Para 3.6 48

d -

Controller of Imports and Exports Roshan lal Agarwal

3.7 DETAILS AVAILABLE WITH DEPARTMENT - SUMMONS NOT TO BE ISSUED

A.S. Corporation Union of India

Dharampal Satyapal Ltd. Union of India

Ebiz.Com (P.) Ltd. Union of India

49 Para 3.7

3.8 ADMISSIBILITY OF STATEMENTS

Lal

Para 3.8 50

Romesh Chandra Mehta State of West Bengal Amba

Union of India K.I. Pavunny Asstt. Collector

Romesh Chandra Mehta State of West Bengal .

Soni

Customs authorities must be taken to be persons in authority and the statements would be inadmissible in a criminal trial if it is proved that they were caused by inducement, threat or promise

3.8.1

51 Para 3.8

Vallabhdas Liladhar Asstt. Collector of Customs K.I. Pavunny Asstt. Collector Amba Lal Union of India - Presence of Advocate during recording of statement Poolpandi Superintendent of Central Excise

Agarwal Foundries Pvt. Ltd. Union of India

Anil G Merchant Director of Revenue-

Nandini Satpathy Dani P.L. Sudhir

Kumar Aggarwal Directorate General of GST IntelligencePoolpandi Superintendent of Central Excise -

A Y Trading Co. Director General of GST Intelligence

Para 3.8 52

GST Investigations Demands Appeals & Prosecution

AUTHOR : G. GOKUL KISHORE, R. SUBHASHREE

PUBLISHER : TAXMANN

DATE OF PUBLICATION : MAY 2023

EDITION : 2nd Edition

ISBN NO : 9789356221246

NO. OF PAGES : 416

BINDING TYPE : PAPERBACK

DESCRIPTION

This book provides a concise commentary & practical guidance on the past & emerging jurisprudence as per the Orders of various High Courts & Ratio of judgements on the following:

▪ Search, Seizure, Summons and Statements

▪ Arrest, Bail, Provisional Attachment, Demands, Penalty & Confiscation

The objective of this book is to sensitize both taxpayers and tax officers to their rights and obligations when:

▪ Investigations are undertaken;

▪ Records and documents are seized;

▪ Officials from companies are summoned, and

▪ statements are recorded.

This book will be helpful for taxpayers, departmental officers, members of the bar & bench, professionals and the judiciary to appreciate the intricate points and issues arising from the implementation of the relevant provisions conferring wide powers on the officers.The Present Publication is the 2nd Edition, amended by the Finance Act 2023 and updated till 28th April 2023. This book is authored by Dr. Gokul Kishore & R. Subhashree, with the following noteworthy features:

• [Commentary/Practical Guide] This book is intended to serve as a commentary and also a practical guide to all stakeholders on the provisions and issues emerging from various orders passed by High Courts on search, summons, arrest, bail, provisional attachment, demands, penalty and confiscation

• [Analysis of the Statutory Provisions featuring Landmark Cases & Recent Orders] Instances of the use of search and seizure powers have been increasingly visible. This book analyses the provisions along with the landmark cases on this subject and the recent orders under GST law.

• [Analysis includes the Previous & Current Regime of Indirect-taxes] While arrest and prosecution powers have been in the statute book under the pre-GST tax laws, the frequency of invocation of such powers in the GST regime is high. Various orders on bail, conditions for bail and validity of arrest passed by High Courts have been discussed to comprehend the scope, limitations and interpretation of the provisions

• [Threadbare Analysis with Established Jurisprudence & Principles Evolved over the Years] Proceedings for tax recovery commence with demand notice or show cause notice followed by an adjudication order, and the dispute is carried in an appeal if either party is aggrieved. The provisions under GST law on demands, adjudication, appeals, revision and recovery action have been subjected to threadbare analysis with the help of established jurisprudence and principles evolved over the years

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