Madras High Court Demands Transparency from GST Officials
The Madras High Court recently emphasized that claims made by Goods and Services Tax (GST) officials must be substantiated with verifiable records and cannot be accepted at face value. This came to light during the court’s review of a petition from Bhima Enterprises against a search warrant issued without a Document Identification Number (DIN), as required by the Central Board of Indirect Tax and Customs’ circular. [Bhima Enterprises v. Principal Chief Commissioner GST]
Justice GR Swaminathan, while addressing the petition, underscored the necessity for evidence when technical difficulties are cited for failing to generate a DIN. He referred to historical figures from Hindu scriptures, known for their integrity, stating, “Harishchandras and Yudhishthiras have become an extinct species. The veracity of any claim should be open to verification.” He further noted that unless evidence is provided, no claim by an official should be considered axiomatic.
Technical Difficulties and the Importance of Documentation
The court highlighted that any officer claiming an exemption from generating a DIN due to technical problems must document the specific issue and any attempts made to overcome it. Justice Swaminathan stated that if an officer cannot generate a DIN due to technical reasons, they should inform their superior via email. Without such communication, the court would be hesitant to accept the department’s claims.
This case involved a search conducted at a jewelry manufacturer and wholesaler, Bhima Enterprises, in August 2023, which led to the alleged coercive collection of ₹32.62 lakh as tax and penalty. During the search, GST officials seized gold ornaments and bullion, citing discrepancies in the firm’s inventory records.
Coercion Allegations and Lack of DIN
Bhima Enterprises contested the voluntary nature of their payments, asserting that they were coerced. Furthermore, they challenged the search warrant for lacking a DIN, which was attributed to technical issues. However, the court observed that there was no contemporaneous documentation explaining these technical problems, and merely citing technical glitches without evidence was insufficient.
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The court also emphasized that a DIN generated after the fact must be shared with the taxpayer to ensure transparency. In this case, the authorities failed to provide the DIN to Bhima Enterprises, hindering their ability to verify the document’s authenticity.
Implications for Future Proceedings
Justice Swaminathan pointed out that the warrant was issued under Section 67(2) of the Central Goods and Services Tax Act, which pertains to search and seizure, yet it was described as an inspection warrant. The court clarified that inspection, search, and seizure are distinct powers, and the GST INS-01 form should clearly specify the authority granted.
Furthermore, officials are obligated to inform taxpayers about the option to provisionally release seized goods by providing a bond and security. The court concluded that the ₹32.62 lakh payment was not made voluntarily but decided not to immediately quash the search authorization or order a refund, as the firm had used the payment to secure the release of its gold. Instead, the court ordered a fresh assessment to determine whether the amount should be refunded.
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The petitioner was represented by Advocate R Karthik Ranganathan, while Additional Solicitor General ARL Sundaresan, assisted by Advocate N Dilip Kumar, represented the GST authorities.
