GST Inspection Not Legally Sustainable Without Compliance With S.67 Of CGST Act & S.100 CrPC: Patna HC Quashes ₹88.64 Lakh Tax Demand
The Patna High Court, while allowing a petition challenging a tax demand of ₹88,64,550.50, has observed that an inspection conducted under the BGST/CGST regime is legally unsustainable if not carried out in compliance with Section 67 of the BGST/CGST Act, 2017 read with Section 100 of the Code of Criminal Procedure, 1973. According to Section 67 of BGST/CGST Act, 2017, an inspection to...
The Patna High Court, while allowing a petition challenging a tax demand of ₹88,64,550.50, has observed that an inspection conducted under the BGST/CGST regime is legally unsustainable if not carried out in compliance with Section 67 of the BGST/CGST Act, 2017 read with Section 100 of the Code of Criminal Procedure, 1973.
According to Section 67 of BGST/CGST Act, 2017, an inspection to be conducted in accordance with the Code of Criminal Procedure. Further, as per Section 100 of the Code of Criminal Procedure, there should be two witnesses when the inspection is conducted.
Presiding over the ruling, a Division Bench comprising Justice P. B. Bajanthri and Justice Alok Kumar Sinha, stated, “Section 67 of BGST/CGST Act, 2017 specifically mandates an inspection to be conducted in accordance with the Code of Criminal Procedure. Section 100 of the Code of Criminal Procedure stipulates that there shall be two witnesses when the inspection is conducted… The inspection report, therefore, does not contain the names and signatures of two independent witnesses which is the mandatory requirement of Section 67 of the BGST/CGST Act, 2017… Clearly this appears to be an afterthought done with the motive to simply cover-up the lacuna…”
“we find that the inspection was carried out without any independent witnesses and even the order of seizure is invalid due to tampered/ interpolated documents, on both these counts they are against the provision as contained under Section 67 of the BGST/CGST Act, 2017 read with Section 100 of the Code of Criminal Procedure, 1973,” the bench added.
The above ruling was delivered in a Civil Writ Jurisdiction Case whereby the petitioner had challenged a demand order for ₹88,64,550.50 issued under Section 74(9) of the BGST/CGST Act on the grounds that the underlying inspection violated statutory procedure.
It was contended by the petitioner that the inspection was conducted in the absence of two independent witnesses, a requirement not just under the Act but also under Section 100(4) of the CrPC. The only witnesses recorded in the inspection report were the son of the proprietor, Sandeep Jaiswal, and a staff member, Ram Pravesh Yadav, both of whom were closely connected to the petitioner and therefore lacked the independence required by law.
However, it was countered by the respondents that two independent individuals, Santosh Kumar and Ramashish Prasad, were present as witnesses and had signed the seizure order. However, this argument was rejected by the Court rejected while noting that their names and signatures didn't appear in the inspection report, and that there was no explanation for why the petitioner's representatives who had signed the report were excluded from the seizure order allegedly prepared at the same time.
The Court further observed that the seizure order itself had been tampered with by Ms. Kumari Anu Soni, the Assistant Commissioner of State Tax who led the search. “In the order of seizure (Annexure '1' to the Counter affidavit filed by Respondent no.3), as against Column No. (A)- Details of Goods Seized, the words 'As Per Physical Verification' were not mentioned but in the original order of seizure the words 'As Per Physical Verification' had been inserted/interpolated by Ms. Kumari Anu Soni who had signed and prepared the order of seizure,” the Court added.
After having carefully heard the submissions of the parties and after having perused the relevant documents brought on record particularly the inspection report and the order of seizure, the Court held, “we are of the view that the inspection/search was not carried out in accordance with Section 67 of the BGST/CGST Act, 2017 for the reasons explained hereunder.”
Accordingly, the High Court set aside the impugned tax demand which was, “based on the inspection said to have been carried out on 18.01.2024, and we admonish Ms. Kumari Anu Soni, Deputy Commissioner of State Tax to not to tamper with any departmental/court record in future, failing which disciplinary authority or this court will be constrained to order for disciplinary action to be taken against her,” and allowed the writ petition.
Case Title: M/s Sri Sai Food Grain and Iron Stors vs The State of Bihar & Ors.
LL Citation: 2025 LiveLaw (Pat) 45