When Substantial part of investigation is completed by Improper officer, Show Cause Notice issued by Proper officer is also invalid: High Court

In the present case, the High Court examined the legal validity of a show cause notice issued by Proper officer under GST without independent satisfaction, following an investigation conducted by Improper officer.

Petitioner:

The case of the petitioner is that investigation was initiated by respondent no. 2 against the petitioner without jurisdiction. It is submitted that pursuant to the initiation of such investigation; inspection, search and seizure of several premises belonging to the petitioner was carried out, certain materials were seized and the petitioner was called for questioning and his submissions have been recorded.

That petitioner was forced to make a payment of Rs. 50,00,000/- towards probable liability during investigation and the same has been paid by the petitioner under protest.

That all these things happened when the investigation was being done by respondent no. 2.

That respondent no. 2 never had the jurisdiction to conduct the investigation or inspection, search or seizure or demand payments towards the probable liability during investigation.

That thereafter respondent no. 2 realized that he does not have the necessary jurisdiction and transferred the case to respondent no.3, who is the proper Officer, to conduct the necessary investigation. But, respondent no.3 instead of conducting the investigation afresh, relying upon the records built by respondent no. 2, a show cause notice has been issued under Section 74 of the CGST Act.

That as the inspection, search and seizure is not conducted by a proper Officer, the consequential show cause notice though issued by a proper Officer under Section 74 of the CGST Act has to be set aside and consequently, the respondents are also required to reimburse the sum of Rs. 50,00,000/- deposited by the petitioner.

Revenue:

Per contra, the learned counsel for the respondents, upon instructions, submits that though bulk of the investigation, inspection, search and seizure have been done by respondent no. 2, respondent no.3 has also recorded certain statement of the petitioner. He further submits that though in the show cause notice respondent no. 1 has relied upon the investigation, inspection, search and seizure done by respondent no. 2, as the show cause notice is issued by a proper Officer, the same cannot be set aside.

High Court:

Reading of the provisions shows that it is only a proper Officer who can investigate into evasion of GST and inspection, search and seizure and arrest can be done only by the proper Officer failing which the same will have to be held invalid

In the instant case, admittedly, substantial part of the investigation including search and seizure of the materials has been done by respondent no. 2 who is not the proper Officer and under the circumstances, the said investigation, inspection, search and seizure in respect of the petitioner herein has to be considered ab initio void.

When the same is considered as ab initio void, notice issued under Section 74 of the CGST Act based upon search, seizure and the statements recorded from the petitioner which has been relied upon, has to be considered illegal and that there is no satisfaction on part of the proper Officer for issuance of the notice under Section 74 of the CGST Act.

If respondent no. 2 after investigation has transferred the case to respondent no.3, for issuance of notice under Section 74, respondent no.3 was required to redo the investigation and come to an independent conclusion as contemplated under Section 74 of the CGST Act and only thereafter a fresh notice requires to be issued.

Respondent no. 1 cannot issue a notice under Section 74 on the 'borrowed satisfaction'.

Under the said circumstances, the impugned notice is liable to be set aside.

Consequently, the respondents are required to be directed to refund the sum of Rs. 50,00,000/- deposited by the petitioner and also return the seized documents and other goods which were seized by respondent no. 2 to the petitioner.

Liberty will have to be reserved to the respondents to initiate appropriate action in accordance with law.

taxreply.com © 2024. All Rights Reserved