M/S Sri Sai Food Grain And Iron Stors vs. The State Of Bihar

Held

The Court held that the inspection and seizure were not carried out in accordance with Section 67 of the BGST/CGST Act, 2017. The inspection report, though signed by two individuals, Sri Sandeep Jaiswal (son of the proprietor) and Sri Ram Pravesh Yadav (staff of the petitioner), did not contain the signatures of two independent witnesses, rendering them connected to the petitioner and lacking independent status. The Court rejected the respondents' contention that other individuals named in the order of seizure were independent witnesses, viewing this as an afterthought to cover up the deficiency. Furthermore, the Court noted that the order of seizure was admittedly tampered with and interpolated by Ms. Kumari Anu Soni, the officer who prepared it, making the order invalid and unreliable. Consequently, the demand order dated 09.05.2024, based on this flawed inspection and seizure, was set aside. The Court admonished Ms. Kumari Anu Soni for her misconduct, warning of disciplinary action if such an offense is repeated.

Facts

The petitioner, M/s Sri Sai Food Grain and Iron Stores, challenged a demand letter dated 09.05.2024, issued by the Deputy Commissioner of State Tax, Gopalganj Circle, demanding tax, interest, and penalty totaling Rs. 88,64,550.50 for the period April 2023 to January 2024. The demand was based on an inspection and seizure conducted on 18.01.2024. The petitioner contended that the inspection violated Section 67(10) of the BGST/CGST Act, 2017, and Section 100(4) of the CrPC, as it was conducted in the absence of two independent witnesses. The petitioner also cited a CBIC instruction regarding the execution of search authorizations. During the proceedings, it was discovered that the original order of seizure had been tampered with by Ms. Kumari Anu Soni, the Assistant Commissioner who conducted the inspection. She later admitted to interpolating the words 'As Per Physical Verification' into the order of seizure while the case was pending.

Key Issues

1. Whether the inspection and seizure conducted on 18.01.2024 were in violation of Section 67(10) of the BGST/CGST Act, 2017, read with Section 100(4) of the Code of Criminal Procedure, 1973, due to the absence of two independent witnesses? Petitioner's arguments: The inspection was conducted in violation of Section 67(10) of the BGST/CGST Act, 2017, and Section 100(4) of the CrPC, as no independent witnesses were present. The search was also in violation of Instruction No. 01/2020-21 GST-Investigation dated 02.02.2021, which mandates showing the search authorization to the person in charge and obtaining signatures of witnesses. Therefore, the demand based on this inspection is unsustainable. Revenue's arguments: The respondents defended the inspection report dated 18.01.2024. They admitted that the order of seizure prepared on the same date was interpolated by Ms. Kumari Anu Soni, who led the inspection team.