No Punitive Action if Petitioners Participate in the Investigation: Bombay High Court

Excerpt

Directorate-General of GST Intelligence, Mumbai, carried out a raid on the petitioner’s premises against which the petitioner filed a writ petition. The Court held that the summons given to petitioners/petitioner No.2 on 12.10.2020 and 13.11.2020 is true in the light of the aforementioned legal situation and no intervention is called for. The Court directed that if petitioners participate in the investigation; the respondents are not allowed to take any punitive action against the petitioners.

Brief facts

Petitioner No.1 is a listed company in the Companies Act, 1956, and engaged in the consumer trading market. For the last 34 years, products, FMCG objects, cameras, batteries, etc. The Managing Director of Petitioner No.1 is Petitioner No.2.

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On 03.04.2019, the Directorate-General of GST Intelligence, Mumbai, carried out a raid on petitioner No.1 and respondent No.6 and 7 premises and confiscated many records, account books, hard disks, etc. for the GST investigation into alleged tax evasion. A duly signed panchnama was drawn up on 03.04.2019 by the Senior Intelligence Officer in the office of respondent No.2. i.e., the Directorate General of GST Intelligence, Mumbai Zonal Unit.

By applying to the National Company Law Tribunal, Mumbai, the Bombay Sales Agency, a financial creditor of petitioner No.1, invoked section 7 of the Insolvency and Bankruptcy Code, 2016. NCLT accepted respondent No.3’s application and declared a moratorium concerning section 14 of the Code.

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Ms Palak Swapnil Desai appointed as Interim Resolution Professional. Assets of petitioner no.1 should not be liquidated until the insolvency process was completed was the appeal.

Arguments before the Court

The learned advocate Mr Mathew Nedumpara a/w Ms Nikita Panhalkarri for the petitioners submitted before the Hon’ble Court that petitioner No.2 expressed serious apprehensions over arrest by the officers of respondent No.2 for interrogation and investigation about the alleged evasion of service tax /GST and, therefore, had approached the Court seeking protection. He argued that petitioners, and more specifically petitioner No.2, were prepared and willing to cooperate with the investigation and investigation carried out by respondent no. 2

He submitted that there was no reference to any specific allegation/charge of tax evasion in the first 4 summons received by the petitioners and that it was the duty of the officer concerned to issue the summons to specify the charge and to provide the material and evidence based on which the charge was based. And as an investigation officer/agency, respondent No.2 is required to follow the principles of natural justice to carry out fair investigations and inquiries under the relevant statutes. The learned advocate Mr Pradeep S. Jetly, Senior Counsel a/w Mr J.B. Mishra for Respondent before the Hon’ble Court that He drew our attention to the affidavit-in-reply filed by the Deputy Director, GST Intelligence Directorate, Mumbai Unit, dated 06.01.2021. He submitted that the summons had been given based on information established by respondent No.2’s officers.Nos.1 to 4 and learned advocate Mr Rahul Punjabi for Respondent No.5. submitted  He claimed that petitioner No.1 and its associates, by raising invoices without supply/movement of goods among themselves, engaged in circular trading practices. He said that such circular trading involved the wrongful eligibility of the parties for Input Tax Credit (‘ITC’ for short). The advocate, on behalf of Resolution Professional, filed an affidavit-in-reply, saying, inter alia, that the petition cannot be maintained on behalf of the company of petitioner No.1, because the designated representative of petitioner No.1 did not have the authority to initiate the petition; the act of petitioner No.2 checking the petition is an act of intentional misrepresentation; the management of the business of petitioner No.1 vests with the professional resolution as the powers of the Board of Directors of petitioner No.1 is suspended and are to be exercised by the Professional Resolution.

Court’s Observations

Regard was paid to the submissions advanced by the learned advocates for both the petitioners as well as the respondent. The following statutory provisions were referred by the Hon’ble Court:

  1. Finance Act -S.83 
  2. Central Excise Act -S.14 
  3. Central Goods and Services Tax Act -S.70
  4. Code of Civil Procedure -S.132 
  5. Code of Civil Procedure -S.133 
  6. Indian Penal Code -S.193 
  7. Indian Penal Code -S.228 
  8. Constitution of India -Art.226 
  9. Constitution of India -Art.227

Court’s Decision

In the light of the submissions put forth by the learned counsel for the applicant, the Court held that the summons given to petitioners/petitioner No.2 on 12.10.2020 and 13.11.2020 is true in the light of the aforementioned legal situation and no intervention is called for. Accordingly, in that view of the matter, the Court directed that petitioner No.2 remains present in the office of the Directorate General of GST Intelligence, Mumbai before the investigative officer/authority concerned on 1st March 2021 at 11:00 a.m. for inquiry and thereafter as and when required for the intent of the investigation and afterward, if and when possible. If the petitioners participate in the investigation, the respondents are not allowed to take any punitive action against the petitioners. 

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Accordingly, the written petition is disposed of in the words above. There shall, however, be no order concerning costs.

Case: JSK Marketing Limited & Anr v Union of India & Ors.

Click to read the Judgement


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