Cross Examination of Summons/Arrest Memo issued by GST Officers is not allowable: Gujarat HC [Read Order]

The Gujarat High Court held that cross examination by assesee on the Summons /arrest memo issued by GST officers. The court viewed that the assessee has an alternative efficacious remedy to challenge the order by preferring an Appeal under Section 107 of the GST Act.

Sazid Ali Khan, the petitioner has prayed for quashing and setting aside the Order-in-Original dated 24th January, 2025 passed by the respondent No.2-Joint Commissioner, Central GST, Vadodara-I. The petitioner is a proprietor of M/s.KSEG India International and doing scrap business since two decades. The petitioner was registered under the provisions of Central Sales Tax Act and the Value Added Tax Act and after coming into force of the Goods and Services Tax Act, the petitioner was registered under the provisions of the Central/State Goods and Services Tax Act, 2017 (‘the GST Act’).

It is the case of the petitioner that the petitioner filed regular returns as required under the provisions of the GST Act. An information was received by the letter dated 04.10.2018 from the Joint Commissioner (Preventive), CGST, Ahmedabad South by the respondents to the effect that M/s.S.K.Enterprise, Ahmedabad is indulging in generating invoices and passing on GST credit to other Companies without any actual movement of goods and has passed on the GST credit to the M/s.KSEG India International, Vadodara.

On the basis of such information, a search operation was conducted at the premises of the petitioner on 11.01.2019 and relevant documents i.e. purchase invoices of M/s.S.K.Enterprise, Ledger Account etc. were seized under the Panchnama. Thereafter, further investigation was carried out against M/s.H.M.Industries Private Limited, Kapadwanj on the same issue i.e. availment of credit on strength of input invoices without receipt of the goods from three bogus firms of Ahmedabad i.e. M/s.Shivay Enterprise, M/s.Avi Enterprise and M/s.Parshwnath Engineering. During the course of the search at the premises of M/s.KSEG, it was found that the petitioner also availed the credit on the strength of invoices issues by the said three firms.

After the investigation was carried out, the statement of the petitioner was recorded on 26th March, 2019 wherein, in answer to question No.11, the petitioner refused to peruse the printout of the vehicles verification report downloaded from the website https://vahan.nic.in by stating that such reports were not concerning him but agreed with the ‘Remarks Column’ shown against 27 vehicles out of 119 vehicles as mentioned in the table and also accepted that heavy cargo like scraps cannot be transported in three wheeler tempo/three wheeler passenger vehicles, scooters, motorcycles, bus and tractor trailer etc.

The petitioner was also arrested on 30th March, 2019 by the respondent-Authorities and was released on bail after deposit of Rs.35 Lakhs as personal bail and after agreeing for some other conditions of the bail order.

It appears that the summons dated 14.08.2019 was also issued upon the petitioner to submit relevant documents i.e. Invoices of Suppliers, Lorry Receipts, Public Consignments Notes and E-way Bills etc. for the period from July, 2017 to March, 2018 and 2018-19 in case of four firms as well as M/s.Aadarsh Trading and M/s.Vikas Trading. In response to such summons, the petitioner by letter dated 21.08.2019 submitted that the so called documents pertaining to the said period were not in his possession and the same were lost by the person from his Office namely Mr.Keshavkumar Sharma during the transit from Nehru Nagar, Ghaziabad to Hapudmod Bus-Station at Delhi and the same was reported to Sihani Gate Police Station, Delhi. Accordingly, the summons dated 16.09.2019 was issued to Mr.Keshavkumar Sharma to give statement but he did not produce himself before the respondent.

In the further statement of the petitioner recorded on 7th February, 2022, it was stated that Mr.Keshavkumar Sharma has left his Company and all the documents for the years 2017-18 and 2018-19 except seized by the Department on 11.01.2019 had been lost in Ghaziabad by the said person.

The respondent No.2 thereafter extended the investigation towards verification of various vehicles used in the transactions between the petitioner firm and various other firms who were alleged to have provided the Invoices without supply of the goods and it was found during theinvestigation that no E-Way Bill during the period from May, 2018 to March, 2021 was available for the supply of the goods to M/s.KSEG by four firms i.e. M/s.M&M.Enterprise, M/s.Riteshkumar Arvindbhai Parekh, M/s.Fairwell Sales Private Limited and M/s.Ajay Enterprise.

During the investigation, it was further revealed that the fake/dubious ITC were passed on by M/s.KSEG in respect of fifteen firms and accordingly, a search was again conducted on 08.07.2021 at the premises of the petitioner at Vadodara by the Officers of the Preventive Section of the CGST&CE, Vadodara-I and purchase ledger of the fifteen units were seized. Thereafter, on further investigation, it was revealed that in case of one M/s.Laxmi Traders that it was a fictitious firm and has passed on ITC to the tune of Rs.24,82,956/- to M/s.KSEG-Proprietorship concern of the petitioner.

Investigation was carried out in almost more than 24 firms and thereafter, the final statement of the petitioner was recorded again on 6th March, 2023 wherein, it was stated that he has availed Input Tax Credit on value mentioned in GSTR-2A and did not place any written order for purchase of scrap and there is no outstanding payment in case of M/s.Fairwell Sales Private Limited and M/s.Shivay Tradelink and rest of the parties.

The respondent thereafter issued the intimation in Form GST-DRC-01A under Rule 142(1A) of the Central Goods and Services Tax Rules, 2017 ( ‘the Rules’) on 17th March, 2023 but no reply of the same was received till the issuance of the show-cause notice on 31st March, 2023.

The petitioner has submitted that the impugned order is passed without giving an opportunity of hearing to the petitioner or his Advocate and without affording any opportunity of cross-examination as prayed for by the petitioner on 04.10.2024. It was submitted that this petition is filed for a limited purpose so as to avail the opportunity to cross-examine the witnesses which was proposed by the petitioner in the application dated 04.10.2024.

It was therefore submitted that the petitioner is not desirous to make any submission on merits but the matter may be remanded back to the respondent-Authority only for the purpose of granting an opportunity of hearing to the petitioner as the Advocate for the petitioner could not remain present on two occasions i.e. on 26.12.2024 and on 15.01.2025 which is reflected in the impugned order.

A division bench of Justices Bhargav D. Karia and Pranav Trivedi observed that the assessee has an alternative efficacious remedy to challenge the order by preferring an Appeal under Section 107 of the GST Act. In view of the above, the bench dismissed the petition with a liberty to the assessee to file statuary Appeal as provided under Section 107 of the GST Act.

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