Order Date – 05 December 2023

Parties: Lovelesh Singhal Prop Shivani Overseas Vs Commissioner, Delhi Goods and Services Tax & Ors.

Facts –

• The Petitioner, Lovelesh Singhal Prop Shivani Overseas, is engaged in the business of trading of PVC Resin. On a search conducted by the department on 07.10.2022 on the basis of authorisation issued in Form GST INS-01 in terms of Rule 139(1) of the CGST Rules, the petitioner was forced to reverse the ITC in respect of supplies purchased from one M/s Samridhi Exports.
• The petitioner denied the mismatch in GST returns filed for the period 2017-2018 to 2022-2023 and undertook to furnish the reconciliation, in case there was any mismatch attributable to ITC availed. Accordingly a show cause notice was issued proposing to demand GST along with interest and penalty.
• Being aggrieved the petitioner filed the writ petition.

Issue –

• Whether the search and inspection are legal and proper?

Order –

• The Divisional Bench of Hon’ble High Court observed that in the present case, the proper officer has issued the authorization in Form INS-01 setting out all the reasons as stated in Section 67(1)(a) of the CGST Act and all the reasons (except the taxpayer claiming refund in excess of his entitlement) as set out in Clause A for issuing such authorization.
• The respondents have not referred to any specific reason for initiating the proceedings under Section 67 of the CGST Act, in their counter affidavit, except to state that the reasons to believe were duly recorded on the file prior to conducting the search and the inspection.
• Hence it was held that the authorization for conducting search or inspection under Section 67 of the CGST Act is illegal for want of reasons to believe that the grounds for conducting the said search as set out in Section 67(1)(a) of the CGST Act, exist.
• In the present case, it would be necessary for the petitioner to acknowledge the underlying liability on account of which the tax is paid. This is also required to be acknowledged by the respondents. Further in the present case the petitioner has disputed that he is liable to pay any tax. There is no determination of the petitioner’s liability to pay tax. Clearly, in such circumstances, the tax deposited by the petitioner cannot be considered as voluntary and within the scheme of Section 73(5) of the CGST Act.
• It is also important to note that the requisite procedure under Rule 142 of the CGST Rules has also not been complied with. Admittedly, the respondents have not issued any acknowledgement accepting the payment made by the petitioner in Form GST DRC-04 as required under the CGST Rules.
• Thus the respondents are directed to reverse the ITC deposited and the writ petition is disposed off.