Facts of the Case

  • The petitioner company was registered under GST and operating in Delhi with multiple units.
  • On 30 September 2020, DGST authorities conducted a search under Section 67 DGST Act.
  • Documents were demanded for multiple financial years and statements of the director were recorded.
  • The petitioner alleged:
    • Forced statement and coercion to deposit tax via Form DRC-03
    • Multiple searches by CGST authorities earlier, including one quashed by Punjab & Haryana High Court
    • Illegal second search by DGST for the same subject matter

Issues Involved

  1. Whether parallel proceedings by CGST and DGST authorities are permissible under GST law?
  2. Whether the search conducted under Section 67 DGST Act was valid?
  3. Whether absence of independent witnesses and signatures vitiates the search?
  4. Whether the statement recorded during search was admissible if allegedly coerced?
  5. Whether “reasons to believe” requirement was satisfied?

Petitioner’s Arguments

  • Parallel Investigation Prohibited:
    Invoked Section 6 DGST Act stating once CGST initiated proceedings, DGST cannot investigate same matter.
  • Procedural Violations:
    • No independent witnesses present
    • Mandatory signatures missing
    • Incorrect use of DVAT provisions
  • Coercion Allegation:
    Statement of director was forcibly recorded and tax payment extracted.
  • Invalid Authorization:
    Defects in Form GST INS-01 (authorization for search).
  • No Proper “Reasons to Believe”:
    Search lacked legal justification under Section 67.

Respondent’s Arguments

  • Search was lawful and authorized under Section 67 DGST Act.
  • No parallel investigation—DGST inquiry limited to different period (2020–21).
  • Reasons to believe existed, based on:
    • High turnover discrepancies
    • ITC mismatch
    • Fake invoice suspicion
    • Risk classification of taxpayer
  • Statement was voluntary, never retracted.
  • Absence of witnesses does not invalidate search (relying on Supreme Court precedents).

Court Findings / Judgment

1. No Case of Parallel Investigation

  • Mere requisition of documents does not establish parallel proceedings.
  • DGST clarified investigation relates to different tax period.

2. Statement Not Retracted = Weak Coercion Claim

  • Court held:
    • If statement was coerced, it should have been retracted immediately.
    • Failure to do so weakens petitioner’s claim.

3. Validity of Search

  • Court upheld:
    • Proper authorization existed
    • Officers were competent
    • No illegality merely due to absence of signatures

4. “Reasons to Believe” Satisfied

  • Court limited scope of judicial review:
    • Cannot test adequacy of reasons
    • Only existence of reasonable basis required

5. Procedural Defects Not Fatal

  • Absence of witnesses or signature irregularities does not invalidate proceedings.

6. Cross-Empowerment under GST

  • Both Central and State authorities can initiate intelligence-based enforcement actions independently. 

Court Order

  • Writ Petition Dismissed / Disposed
  • Search action upheld as valid
  • Petitioner given liberty to challenge at adjudication stage if required

Important Clarifications

  • Parallel proceedings not automatically presumed—must be clearly overlapping.
  • Statement during search is relevant evidence, but admissibility tested at adjudication stage.
  • Minor procedural lapses do not invalidate GST search.
  • Cross-empowerment allows both CGST & SGST authorities to act independently.
  • Judicial review in GST search is limited to existence of “reason to believe”, not its sufficiency.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:64-DB/SVN07012021CW1212021_211441.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.