The Madras High Court stayed the recovery proceedings under the Tamil Nadu Goods and Service Tax (TNGST)Act, 2017 till the Completion of investigation on tax evasion through misuse of login ID and password.
M/s.Shewil Trading Company, the petitioner challenged the impugned Notice issued in issued by the 3rd respondent. The petitioner was issued by an impugned recovery notice dated 29.07.2022 seeking to recover a sum of Rs.11,63,24,233/- from the petitioner for the assessment years 2014-2015 and 2015 -2016.
The specific case of the petitioner is that the impugned notice has been issued seeking to recover the aforesaid amount of Rs.11,63,24,233/- without even serving a copy of the assessment order. It is submitted that the petitioner was a dealer engaged in the business of outward supply of Curtains, Form mattresses and Pillows and was carrying on the business for almost 28 years and filed manual returns under the provisions of erstwhile TNGST Act, 1959 and electronically under the provisions of TNVAT Act, 2006 for the Assessment Year 2009-2010.
It was submitted that the petitioner was filing regular returns electronically till December 2013 in terms of the provisions of TNVAT Rules, 2007. It is further submitted that from January 2014, the petitioner experienced a problem. The petitioner was unable to log in and file a return in the portal as the petitioner’s attempt to log in was declined on the screen as an ‘invalid login account’. The petitioner has therefore filed returns manually and escalated the issue with the 2nd respondent on 06.02.2014, 22.12.2014, 09.02.2015 and 02.07.2015.
It has been reiterated by the petitioner regarding the alleged misuse of the petitioner’s login ID and Password, as a result of which, a huge transaction was made by a person using the petitioner’s TIN number.
The respondents submit that the impugned recovery notice does not call for interference. It is submitted that the petitioner has suffered an assessment order dated 09.11.2021 which preceded a notice before passing of the said order. However, the petitioner failed to participate in the assessment proceedings.
It was further submitted that after the GST Act came into force, the petitioner, started carrying on business with a new ID and closed down the business in the year 2018. The registration was also cancelled on 05.03.2019 with retrospective effect from 31.12.2018.
The Court directed the Commercial Tax Officer to pass a proper order after a thorough investigation with the help of the Economic Offence and Cyber Crime Wing of the State as to whether indeed there was a misuse of login ID or whether the petitioner therein was masquerading as an unknown person to make it seem as if the said login ID was misused by an unknown person facilitating availing of ineligible Input Tax credit and to evade tax.
A Single bench of Justice C Saravanan observed that the petitioner has also filed a complaint before the Cyber Crime for the alleged misuse of the login ID of the petitioner from 01.01.2014 to 31.08.2015. The status of the investigation under the above FIR registered based on the complaint of the petitioner is not known.
“The Commercial Tax Department shall coordinate with the rest of the respondents and the 4th respondent and investigate the complaint of the petitioner. The exercise shall be completed within eighteen (18) months from the date of receipt of a copy of the order.”, the court held.
Further, the bench held that all revenue recovery proceedings against the petitioner shall be kept in abeyance, till the completion of the investigation.
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