Facts of the Case

Kabun Enterprises (OPC) Private Limited filed a writ petition challenging search and seizure proceedings conducted by the CGST Department at the residential and business premises of entities controlled by the Gumber family, including Kabun Enterprises. The search was conducted in July 2025 under Section 67 of the CGST Act based on intelligence inputs suggesting creation of multiple fictitious firms for availing and passing on fraudulent Input Tax Credit and claiming inadmissible refunds.

The petitioner alleged that the search and seizure were illegal and violative of statutory safeguards, that CCTV footage from the residential premises was seized in breach of privacy, that payments were extracted and refund applications withdrawn under coercion, and that business premises were unlawfully accessed and sealed.

Issues Involved

Whether the search and seizure conducted under Section 67 of the CGST Act were without jurisdiction, whether seizure of CCTV footage violated the right to privacy, whether allegations of coercion in reversal of ITC and withdrawal of refund applications warranted judicial interference, and whether the High Court should interdict GST investigation at a nascent stage.

Petitioner’s Arguments

The petitioner contended that the panchnamas were defective, seizure of CCTV footage from a shared residential premises violated privacy rights, and that coercive methods were adopted to force payment through DRC-03 and withdrawal of refund applications. It was argued that the GST authorities exceeded the scope of Section 67 CGST Act and acted contrary to CBIC instructions and settled law governing search and seizure.

Respondent’s Arguments

The GST Department submitted that detailed intelligence inputs and discreet verification revealed a complex network of fictitious firms controlled by the Gumber family, including Kabun Enterprises, created solely for passing fake ITC and claiming fraudulent refunds. It was contended that “reasons to believe” were duly recorded by a competent officer prior to authorisation of search, that all actions were carried out in accordance with Section 67 of the CGST Act, and that the seized CCTV footage had not been accessed and would be examined only in accordance with prescribed procedure.

Court Order / Findings

The Delhi High Court analysed the scheme of Section 67 of the CGST Act and reiterated that search and seizure powers are intrusive but statutorily sanctioned where “reasons to believe” exist. The Court found that substantial material was placed on record by the Department indicating creation of multiple layers of non-operational and fictitious firms with circular transactions, nil inward supplies, and refund claims based on fake ITC.

The Court held that sufficiency of reasons cannot be examined in writ jurisdiction and that judicial interference at the investigation stage would be wholly unwarranted. Allegations of coercion and duress were held to be disputed questions of fact not amenable to adjudication under Article 226. The Court also noted the Department’s categorical statement that seized CCTV footage had not been accessed, thereby negating immediate violation of privacy.

Important Clarification

The High Court clarified that Section 67 CGST Act empowers GST authorities to conduct search and seizure to unearth tax evasion and that courts will not interdict investigations merely on allegations of procedural impropriety unless clear jurisdictional error or mala fides are demonstrated. Issues relating to coercion or refund withdrawal may be raised in appropriate proceedings after completion of investigation.

Final Outcome

The writ petition filed by Kabun Enterprises (OPC) Private Limited was dismissed. The Delhi High Court declined to interfere with the search and seizure proceedings conducted under Section 67 of the CGST Act and permitted the GST Department to proceed with the investigation in accordance with law. All pending applications, if any, were disposed of accordingly.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS15092025CW138212025_155439.pdf


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