Compliant u/s 132 of HPGST Act cannot be quashed simply because investigation was not made with GST Authorities at Delhi: Himachal Pradesh HC [Read Order]

In a recent case, the Himachal Pradesh High Court ruled that compliant under section 132 of Himachal Pradesh Goods and Services Tax (HPGST)/Central Goods and Services Tax CGST Act, 2017 cannot be quashed simply because investigation was not made with GST authorities at Delhi.

Gagandeep Singh and another, the petitioner has filed the present petition for quashing of Complaint No. GST/01/2018 filed under Section 69 read with Section 132 of Himachal Pradesh Goods and Services Tax (HPGST)/Central Goods and Services Tax (CGST) Act read with Section 20 of Integrated Goods and Services Tax Act (IGST) pending before learned Additional Chief Judicial Magistrate (ACJM), Kasauli along with subsequent proceedings.

The petition are that the complainant filed a complaint against the petitioners/accused for the commission of offences punishable under Section 69 read with Section 132 of HPGST/CGST Act, 2017, read with Section 20 of the IGST Act, 2017. It was asserted that M/s G.M. PowerTech is a registered taxable person consisting of a partnership firm of Gagan Deep Singh and Jatinder Mohan (the present petitioners/accused). Information was received from reliable sources that the petitioners indulged in large-scale evasion of tax by availing the fraudulent input tax credit during the years 2017-18 and 2018-19.

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They declared inward supplies (purchases) from Delhi and U.P.-based floating fictitious and non-existent firms, which were registered to pass on the fraudulent benefit of input tax credit on the strength of fake invoices. The matter was examined on the GST Portal, and it was verified that several consignments were delivered in twowheelers, three-wheelers or cars. The registration numbers of many vehicles declared to have transported the goods from outside the State were found to be fake.

The consignments were also transported in cars, but it was not possible to transport such heavy goods in cars. Goods worth ₹ 2,89,26,299/- were declared to have been transported by a fake or non-existent vehicles. Input tax credit (ITC) of ₹ 61,69,147/- was claimed. The search warrant was issued to ASTEO-Rupinder Singh, and the business premises of the taxpayer were searched. Inquiry under Section 70 of the Act was initiated on 05.11.2018.

The summons were issued to the suppliers M/s Om Metals, M/s Ridhi Alloys and M/s SD Enterprises; however, these were returned with the report of an unknown address. A team led by ASTEO-Rupinder Singh was deputed to physically verify the suppliers. ASTEO visited the premises and found that no such entities existed at the given address. They were asked to make inquiries about the residential address, but the addresses were found to be fake. G.M. Powertech claimed input tax credit fraudulently worth ₹ 9,21,30,291/- in respect of a non-existent supplier namely M/s SD Enterprises, M/s OM Metals and M/s Ridhi Alloys; hence, a complaint was filed before the Court for taking action as per the law.

Being aggrieved from the filing of the complaint and the proceedings pending before the Trial Court, the petitioners have filed the present petition asserting that the provisions of HPGST/CGST and IGST Acts are silent regarding the arrest, investigation and filing of the complaint. HPGST Act has made the provisions of search and seizure provided under Cr.P.C. applicable to the HPGST Act. The Officers under the Act have been given unbridled powers.

The petition is opposed by filing a reply taking preliminary objections regarding the petitioners being estopped by their act, deed and conduct to file the present petition and the petitioners having no prima facie case in their favour. It was asserted that the petitioners are the partners of M/s G.M. Powertech. They availed input tax credit of ₹ 15,86,49,362/- by conducting their business in violation of the CGST and HPGST Act. The petitioners were liable to be arrested for the violation as per Sections 69 and 132 of the Act. The provisions of arrest are governed by the Cr. P.C. The provisions of Cr.P.C. will also apply to the investigation and filing of the complaint as per Section 4(2) read with Section 5 of the Cr. P.C.

The premises of the petitioners were searched under the due authority as per Section 67 of CGST. The petitioners were summoned to provide the record or other information. They initially provided the record through their counsel, but thereafter, they failed to appear. The investigation regarding the validity of suppliers was carried out, and it was found that no such supplier existed at the given address; therefore, it was prayed that the present petition be dismissed.

Mr. Dinesh Singh Rawat, counsel for the petitioners, submitted that the HPGST/CGST Act does not provide for investigation and filing of the complaint. The investigation was carried out by the officials of the department, which materially prejudiced the petitioners. The continuation of the proceedings before the Trial Court amounts to an abuse of the process of the law.

Mr. Prashant Sen, Deputy Advocate General, for the respondent/State submitted that the provisions of Cr.P.C. apply to the investigation and trial conducted under HPGST/CGST Act as per Section 4 (2) read with Section 5 of Cr. P.C. Therefore, the submission that unguided and unbridled powers have been conferred upon the authorities is not correct.

It was submitted that the investigation was not properly conducted. The officials visited the addresses mentioned in the invoices and did not contact the GST Officials in Delhi to ascertain the proper names and addresses. This submission will not help the petitioners. When the officials went to the addresses mentioned in the invoices and found that no such entity existed, it was sufficient to infer that the invoices were fake, and the material shown to have been supplied as per the invoices could not have been supplied since no such person existed at the given address.

The Court has to see a prima facie case while exercising inherent power and does not sift the evidence to determine its creditworthiness or value. The court viewed that Trial Court to see where the matter is pending; hence, the complaint cannot be quashed simply because the investigation was not made with the GST authorities at Delhi.

A division bench of Justice Rakesh Kainthla and Justice Saurav Pathania viewed that in Mukesh Singh, the Supreme Court held that the investigation is not vitiated simply because the informant is the investigator. The question of bias or prejudice would depend upon the facts and circumstances of the case; hence, the cited judgment does not show that the complaint is liable to be quashed because the investigation was made by the officials of the department.

While dismissing the application, the bench held that compliant under Himachal Pradesh Goods and Services Tax (HPGST)/Central Goods and Services Tax CGST Act, 2017 cannot be quashed simply because investigation was not made with GST authorities at Delhi.

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