Tuesday, December 5, 2023

Delhi HC says entire concept of GST getting defeated by Input Tax Credit

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The Delhi High Court today observed that the entire concept of the Goods and Services Tax (GST) is getting defeated by the input tax credit while hearing a petition by a businessman seeking protection from arrest in a case of alleged wrongly/illegally availed of Input Tax Credit. 

The petition has also challenged the vires of various provisions of the Central Goods and Services Tax Act, 2017. 

The Court however granted him protection from arrest till the next date of hearing while also directing him to give cooperate in the investigation and to appear before the Deputy Director CGST as and when called.

A two-judge bench of Justice Manmohan & Justice Sanjeev Narula dictated in the order,

“It is agreed between the parties that the petitioners premises shall be searched tomorrow on Dec 10, 11AM in the authorised representatives of the petitioner. After preparations of ‘panchnama’ the residentially premises shall be de-sealed. The petitioner shall corporate in the investigation. We direct petitioner to appear before the Deputy Director CGST day after tomorrow 11 AM. For investigation & for recording of statement. He shall continue to appear as and when directed by the Deputy Director. Till the next date of hearing the petitioner shall not be arrested. List on 23rd.” 

The Court was hearing the petition filed by Arun Gupta director of Transline Technologies Pvt Ltd. And challenged the Section 69 & 132 of the CGST Act, 2017, as unconstitutional and ultra vires to Article 21 of the Constitution of India and hence unconstitutional, illegal and unenforceable. Secondly, he sought directions to respondents to comply with the mandatory procedure under Chapter XII of the Code of Criminal Procedure, 1973 including Section 154, 157, 167, 172 etc for valid commencement of investigation into any offence qua the petitioner. There were certain other direction sought by the petitioner. 

During the hearing today the Petitioners Counsel Advocate Vijay Aggarwal submitted When they (GST) officials come and examine me in my house they have sealed my house. I am not an absconder. Even if I am concealing something I will grant them access. It was not required for them to seal my house. They have sealed my Godown. Section 100 CrPC states, if you go for search you should have two respectable person from the locality. There is no search and seizure rule under the GST. There is a provision in CRPC and PMLA. 

Petitioner referred a TADA Case judgment. 

Delhi HC asked- What is the relevance of TADA recovery here? What are you talking about? 

Petitioner- what I want to show is that there whole procedure is wrong. My grievance is that my house is sealed. 

Justice Manmohan- if no panchas are from the locality then you can bring panchas from outside. Please don’t give this lectures. We know how panchas are being dealt with. We are only here for money you know that. Don’t give us these lectures. Panchas can be bought with money. Mr Aggarwal you are senior man you know what is the ground reality. 

Petitioner- they don’t even maintain a case diary also. 

Delhi HC- this is not a case of taxing, this is a case where the refund has taken on wrong basis. This is a case where you have reimbursed money wrongly. 

Respondent- the amount involved in this case is around 13 Cr. 

Petitioner- I am a chartered account too my lords. Please see section 70 CGST Act, I will show what is the problem with this section. 

Delhi HC- what is wrong with this section? you have challenged the section prematurely. I think your submission will go with the little cost. 

Petitioner- I am only trying to assist my lords

Delhi HC- power of arrest we will examine it. On section 69 we will examine it. 

Respondent- They have caused damage to the Govt by fake Input Tax Credit (ITC). They have purchased the raw material. Purchasing good in the black market without paying taxes and purchasing fake invoices. They have illegally availed Crores of Input Tax Credit without the supply of goods and in the basis of fake invoices. 

Delhi HC- the entire concept of the GST is defeated by the input tax credit. 

Respondent- the government is trying to cop up with it by investigation. arrests are being done. In this case the wrong tax claimed upto 13 crore. They have no documents to prove the legitimate purchase of goods in their godowns. When they were arrested the tele data was deleted by the petitioners. Since the date of arrest of other two directors , the director Mr Gupta apprehending arrest. There is no authorisation of arrest till date against the petitioner. He is absconding since November 11. He has to come forward. His residential premises will be de sealed today. 

Delhi HC- how could u sealed it (house)? Under what provision you could sealed the house? 

Respondent- since he is absconding since Nov 11. 

Delhi HC- we will not come into the viries of the sections. 

Respondent- the same sections are in challenge before the Supreme Court. 

Delhi HC- Petitioner have provided some audio and video tapes alleging manhandling by your (GST) officials. We have to deal with it. We have to examine it. We need a proper affidavit. We won’t allow you take coercive action till then. 

Respondent- the petitioner is the owner and he is the mastermind. He is the one who is causing damage to the nation. 

Delhi HC- you file a reply. A proper affidavit and we won’t allow you to arrest him. This is a case where some material has been shown. 

Delhi HC- we issue notice on prayer A & B. They will open your premises. They won’t arrest you till the next date. 

Also Read: Constitution Bench to hear Maratha quota law in January 2021

Mr Harpreet Singh counsel for the respondents accepts notice, said the Court. 

The matter would now be heard on Dec 23. 

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