M/S Bankipore Club LTD vs. The Union Of INDIA
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The petitioner, M/s Bankipore Club Ltd., a members' club established in 1865, filed a writ petition challenging a summons dated January 13, 2023, issued by the Superintendent, CGST & CX, Patna. The summons, issued under Section 70 of the CGST Act, 2017, required the club's Honorary Secretary to appear and produce various financial documents, including statements of payments received, Balance Sheets, Profit & Loss Accounts, Form 26 AS, and bank statements, for periods from July 1, 2017, to the present. The petitioner contended that due to its operation on the principle of mutuality and agency, the CGST Act was not applicable to it until the amendment inserting Clause (aa) to Section 7 of the CGST Act, effective January 1, 2022.
Held
The Court held that Section 70 of the CGST Act confers wide powers on the proper officer to summon any person for evidence or production of documents in any inquiry, similar to a civil court's powers under the Code of Civil Procedure, 1908. Consequently, the Court was not inclined to interfere with the impugned summons. However, it was open for the petitioner to raise the plea before the proper officer that the club had no tax liability under the CGST Act prior to the amendment effective January 1, 2022, with the insertion of Clause (aa) to Section 7(1). The Court directed that the competent/proper officer must consider this provision of law and any other pleas raised by the petitioner while making further decisions. The writ application was disposed of with these directions.
Key Issues
1. Whether the summons issued under Section 70 of the CGST Act, 2017, is valid for demanding documents pertaining to periods prior to the amendment of Section 7(1) of the CGST Act with effect from January 1, 2022, which introduced Clause (aa) making clubs liable for CGST. The petitioner argued that prior to this amendment, the club's operations based on mutuality meant it was not liable for CGST, and therefore, documents for periods before January 1, 2022, should not be demanded. The petitioner relied on the Supreme Court's decision in State of West Bengal and others v. Calcutta Club Limited. The revenue contended that it was not apparent from the pleadings whether the petitioner was registered under the CGST Act or Bihar Goods and Services Tax Act, 2017.
Sections Cited
Section 70, Section 7(1)(aa)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL JUDGMENT (Per: HONOURABLE THE ACTING CHIEF JUSTICE) Date : 27-03-2023
The petitioner claims to be a Members Club which was established in the year 1865. It is the petitioner’s case that it provides its members all usual privileges, advantages, conveniences accommodation of a club. The petitioner and its members operated on the principles of agency and the club has its relationship with its individual members based on the 2/5 principle of mutuality. This writ application under Article 226 of the Constitution of India has been filed putting to challenge summons dated 13.01.2023 issued by the Superintendent, CGST & CX, Patna, whereby the Secretary of the club has been summoned under Section 70 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”) to give evidence and produce documents including statement showing details of payment received under different heads/services from 01.07.2017 till date and a copy of the Balance Sheet, Profit & Loss Account and Form 26 AS for the Financial Years 2017-18, 2018-19, 2019-20, 2020-21 and 2021-22; and trial Balance Sheet for the Financial Year 2022-23. The petitioner has also been asked to produce copy of bank statements of the bank accounts related to the club from 01.07.2017 till date as per the said impugned summons. Mr. Ajay Kumar Rastogi, learned Senior Counsel appearing on behalf of the petitioner has submitted that as the club operates on the principles of agency and having its relationship with the individual members based on the principle of mutuality, the CGST Act was not applicable to it till the CGST Act was amended with the insertion of Clause (aa) to 3/5 Section 7 of the CGST Act by Finance Act, 2021 with effect from 01.01.2022. He contends that only after insertion of Clause (aa) to Section 7 of the CGST Act, the club has become liable to pay CGST which amendment is apparently subsequent to the Hon’ble Supreme Court’s decision in the case of State of West Bengal and others v. Calcutta Club Limited, reported in (2019) 19 SCC 107. He has submitted accordingly that the petitioner ought not to have been directed to produce any document for the transactions prior to 01.01.2022. Learned counsel for the Union of India has, on the other hand, submitted that it is not apparent from the pleadings in the writ petition that the petitioner is registered under the CGST Act or Bihar Goods and Services Tax Act, 2017. Section 70 of the CGST Act, which confers upon the proper officer to summon any person, reads as under:- “70. Power to summon persons to give evidence and produce documents.— (1) The proper officer under this Act shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil Court under the provisions of the Code of Civil Procedure, 1908 (5 of 1908). (2) Every such inquiry referred to in sub- 4/5 section (1) shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860).” It can be easily culled out from the plain reading of Section 70 of the CGST Act that it confers upon the proper officer the power to summon any person whose attendance is considered to be necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908. In view of the wide scope of Section 70 of the CGST Act, we are not inclined to interfere with the impugned summons. It will, however, be open to the petitioner to take a plea before the proper officer under Section 70 of the CGST Act while responding to the summons that the club does not have any tax liability under the CGST Act prior to the amendment introduced in the CGST Act with effect from 01.01.2022 with the insertion of Clause (aa) to Section 7(1) of the CGST Act. It goes without saying that it shall be incumbent upon the competent/proper officer to take into account the said provision of law and any other plea while taking any further decision.
5/5 The writ application stands disposed of accordingly.
P.K.P./Anushka (Chakradhari Sharan Singh, ACJ) (Madhuresh Prasad, J) AFR/NAFR CAV DATE Uploading Date 03.04.2023 Transmission Date
Reproduced from the public record of the Patna High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.