When Investigation Is Substantially Completed By Improper Officer, SCN Issued U/S 74 Of CGST Act Is Liable To Be Set Aside: Karnataka HC
The Karnataka High Court held that when investigation is substantially completed by improper officer, show cause notice issued by proper officer u/s 74 of CGST Act is liable to be set aside. The Bench of Justice M.I. Arun observed that “…..substantial part of the investigation including search and seizure of the materials has been done by respondent no.2 who is not the proper...
The Karnataka High Court held that when investigation is substantially completed by improper officer, show cause notice issued by proper officer u/s 74 of CGST Act is liable to be set aside.
The Bench of Justice M.I. Arun observed that “…..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 assessee herein has to be considered ab initio void…..”
In this case, the issue before the bench was when the investigation, inspection, search and seizure is substantially completed by an improper Officer, is the show cause notice issued by a proper Officer under Section 74 of the CGST Act and KGST Act liable to be set aside.
The assessee submitted that the investigation was initiated by the Commissioner of Central Tax/respondent no.2 against the assessee without jurisdiction.
It was further submitted that later the respondent no.2 realized that he does not have the necessary jurisdiction and transferred the case to Principal Commissioner of Central Tax/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 and KGST Act.
The bench after analysing Section 67, 70 & 74 of the CGST Act observed 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 and based upon the inspection, search and seizure if the proper Officer comes to the conclusion that there is mens rea involved as contemplated under Section 74 of the CGST Act, he can issue a notice under Section 74 and not otherwise.
The bench, further noted that, 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 assessee 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 assessee 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., added the bench.
In view of the above, the bench allowed the petition.
Case Title: M/s Vigneshwara Transport Company v. Additional Commissioner of Central Tax Bengaluru North-West Commissionerate
Case Number: WRIT PETITION NO.18305 OF 2023 (T-RES)
Counsel for Petitioner/ Assessee: Pranay Sharma Y.
Counsel for Respondent/ Department: Jeevan J. Neeralgi