Search cannot be conducted until all the conditions u/s 67 of the CGST Act are fulfilled

The Hon'ble Delhi High Court in the case of M/s.Bhagat Ram Om Prakash Private Limited &Anr. v. The Commissioner Central Tax GST Delhi-East [W.P. (C) 12304/2023 dated September 19, 2023] stayed the proceedings pursuant to the search, conducted on the basis of the directions issued by the Special Judge, for checking the source of amount, and directed the proper officer to authorized the search only if all the conditions specified under Section 67 of the Central Goods and Service Tax Act, 2017 ("the CGST Act") are fulfilled.  

Facts

M/s. Bhagat Ram Om Prakash Private Limited and other related parties ("the Petitioners") have purchased a property from Mr. Rajesh Kumar Anand for a sum of Rs. 50,00,000/- which was later on deposited in a fixed deposit and then was offered as collateral for securing the bail. 

The Petitioners contended that the search authorization issued by the proper officer ("the Respondent") on August 22, 2023 was illegal as it was issued without determining the conditions specified under Section 67(1) of the CGST Act.

Further, the Petitioners contended that the search was conducted under the directions of the Special Judge to various departments to check the source Rs.50,00,000/- received by the Petitioners.

Aggrieved by the search authorization, petitioners have filed this writ petition before the Hon'ble Delhi High Court. 

Held

The Hon'ble Delhi High Court in W.P. (C) 12304/2023held as under:

• Observed that, the Special Judge is empowered to issue directions for conducting search under the CGST Act. 
• Opined that, the Respondentis authorized to conduct a search only when the conditions specified under Section 67 of the CGST Act have been satisfied. 
• Directed that, the Respondent produces all the relevant files containing the directions for conducting the search. 
• The matter is listed on October 17, 2023.

Relevant Provisions

Section 67(1) of the CGST Act

"(1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-

(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act,

He may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place."
Section 67(2) of the CGST Act: 

"(2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things:"