The Hon’ble High Court of Andhra Pradesh vide its order dated 25.04.2023 in the matter of M/s Sudhakar Traders Vs. The State of Andhra Pradesh in W.P. Nos. 6599 and 6601 of 2023, held that the notices in Form GST ASMT – 10 pointing out discrepancies after scrutiny of returns, issued by the Deputy Commissioner (ST) without authorization of the Proper Officer (Chief Commissioner) are not valid. Further, the ‘Proper Officer’ in terms of Section 2(91) of APGST Act, would be the Chief Commissioner but not the Deputy Commissioner, and the Deputy Commissioner requires the authorization of Chief Commissioner assigning the task of issuing notices under Rule 99 read with Section 61 of the Act.
The Petitioner filed the writ petitions before the Hon’ble Court challenging the notices in Form GST ASMT – 10 dated 28.02.2023 issued by Respondent no. 2 under Rule 99 of A.P. G.S.T. rules, 2017 read with Section 61 of the A.P.G.S.T. Act, 2017 pointing out discrepancies in the returns filed by the petitioner for the tax period April 2019 to March 2020 and April 2020 to March 2021 respectively.
Facts of the Case: –
- The petitioner is a registered dealer under the APGST Act and an assessee on the file of 3rd respondent herein. The petitioner is engaged in supply of iron and steel purchased from the resident registered taxable persons.
- The Petitioner filed its return for the taxable period April 2019 to March 2020 and April 2020 to March 2021. The 3rd respondent, on having received alert note vide R.C.No.158/C/2020 dated 21.12.2022 from the Regional Vigilance & Enforcement Officer (Respondent No. 2), scrutinized the aforesaid returns and found the suppression of sales turnover in the returns filed for both the tax periods.
- The 3rd respondent issued notices of intimation dated 28.02.2023 regarding the discrepancies in Form GST ASMT-10 under Rule 99(1) of the AGPST Rules r/w Section 61 of the APGST Act and called for the payment of the due tax / explanation within fifteen days of the receipt of the notice.
Petitioner’s Submissions: –
- Vehemently opposing, it was submitted on the behalf of the petitioner that there is no provision authorizing the Director of Vigilance & Enforcement in the State to conduct inspection of the business premises of a registered dealer under GST law. Thus, the impugned notices issued by 3rd respondent on the strength of the alert note forwarded by 2nd respondent is a gross infraction of the GST law and on that ground alone the impugned notices are liable to be set aside.
- That for the sake of arguments, even if it is assumed that Respondent No. 2 has power to inspect the premises of the petitioner still he cannot himself forward any alert notes to the 3rd respondent for the reason that under Section 72 of the APGST Act, which states ‘whenever the Chief Commissioner required the assistance of any public officers for implementation of the provisions of the APGST Act, he may call upon to do so and on his requisition the Government may by notification empower and require any class of officers other than the officers mentioned in sub-section (1) of Section 72 to assist the proper officers in implementation of the Act’,
- However, in the instant there is no material to show that either the Chief Commissioner issued any requisition to the Government seeking assistance of the 2nd respondent being the Regional Vigilance & Enforcement Officer or the Government issued any notification to that effect. Therefore, the impugned notices are not sustainable.
- That Section 67 of the APGST Act enables a Proper Officer not below the rank of Joint Commissioner or any Officer authorized by him to inspect any place of business of the taxable person on the ground that he has suppressed any transaction relating to supply of goods or services. Though, in the impugned notices, the 3rd respondent has not stated anything about the authorization issued to him by Joint Commissioner. Since the notices suffer the vice of lack of authorization under Section 67, they are illegal and unsustainable and liable to be set aside. To support the contention, reliance was placed on Prakashsinh Hathisinh Udavat v. State of Gujarat MANU/GJ/2542/2019.
- The 3rd respondent has not forwarded the inspection report of the 2nd respondent and other incriminating material and thereby the petitioner was deprived of valuable opportunity to submit an effective explanation/objection to the impugned notices. Thus, it was prayed to allow the writ petitions.
Respondents’ Submissions: –
- On the other hand, it was submitted on the behalf of the respondents that section 67(1) and (2) would apply when the assessee acted in contravention of the provisions of the Act to evade tax and such attempts came to the notice of the proper officer not below the rank of Joint Commissioner. Then in order to ascertain the truth of the information, at first, he may authorize an officer to inspect the premises of the assessee and later authorize an officer of the State tax to search and seize incriminating goods or documents as the case may be. However, in the instant case, the impugned notices were not issued under Section 67 of the APGST Act.
- That the Petitioner filed its return for the tax periods April 2019 to March 2020 and April 2020 to March 2021. However, on receiving the alert note from the statutory authority i.e., the Regional Vigilance & Enforcement Officer, Kurnool, pointing out the suppression of sales turnovers, the 3rd respondent in order to seek clarification from the petitioner issued the two impugned notices.
- It is submitted that 3rd respondent is well within his powers and jurisdiction to issue the impugned notices and the petitioner cannot claim that the 3rd respondent cannot act upon the alert note forwarded by 2nd respondent on one hand and issue the impugned notices without authorization on the other.
- On behalf of 2nd respondent, referring to copy of the G.O.Ms.No.504 dated 25.11.1997 issued by the General Administration (V&E–A) Department, it was submitted that the role of the Vigilance and Enforcement Department has been delineated, as per which one of the tasks of the Vigilance & Enforcement Department is to prevent the leakage of revenues due to the Government and in that context, the 2nd respondent and his officials while inspecting the premises of the petitioner found stock variation and also sale of material without issuing invoices / bills and therefore, after obtaining the statement from the petitioner, forwarded alert note to the 3rd respondent for taking necessary action to prevent evasion of the tax. Thus, the 2nd respondent has authority to inspect the premises of the petitioner and forward the alert note to 3rd respondent and his acts are thus just and legal.
- The Hon’ble Court after considering the submissions made and facts of the case, found that it is not in dispute that impugned notices 28.02.2023 were issued by the 3rd respondent on the strength of the alert note dated 21.11.2022 forwarded by the 2nd respondent stating that during his inspection of the premises of the petitioner, his team found sale of iron and binding wire by the petitioner without issuing any invoices / bills and thus suppressed the sales turnover to avoid the tax.
- The Hon’ble Court on perusal of G.O.Ms.No.504, General Administration (V&E–A) Department, dated 25.11.1997, found that the Vigilance & Enforcement Department was constituted by the Government of A.P. vide G.O.Ms.No.269, General Admin (SC.D) Department dated 11.06.1985 to conduct enquiries / investigations into specific allegations affecting public interest and to take effective measures through its own machinery and achieve several objectives, one of which is prevention of leakage of revenues due to the Government. In the said G.O. The Head Office of V&E was reconstituted into following four wings vide office order No.283, G.A (V&E) Department dated 03.08.1995: (a) Revenue Wing (b) Engineering wing (c) Development works Wing (d) Natural Resources wing. Further, Each of these wings is headed by the Joint / Additional Director. Further, the officers working in V&E Department have jurisdiction and powers throughout the State of Andhra Pradesh in respect of matters to which the Executive Authority of the State extends. The jurisdiction of the V&E Department extends to all departments of the Government, State Public Sector undertakings, State Government companies, all local bodies like Municipalities and Zilla Parishads. Finally, it is stated in the aforesaid G.O. that all the administrative departments of the Government shall extend necessary cooperation to the V&E Department.
- The above G.O. pellucidly tells that the enforcement functions of the V&E Department inter alia are to safeguard revenues due to the Government and in that context, it is permeable in all the departments including the Tax department. Therefore, the Hon’ble Court disagreed with the contention of the petitioner that 2nd respondent has no statutory right to conduct inspection in its premises and forward the alert note to the 3rd respondent and the latter cannot act upon such information.
- Thereafter, the Hon’ble also disagreed with the other contention of the petitioner that unless the Chief Commissioner requires the assistance of any public officer(s) in terms of Section 72(2) of the APGST Act and the Government issues a notification requiring such class of officer(s) to assist the Proper Officer, no assistance can be extended by any public officer as in the instant case.
- The Hon’ble Court referring to the Section 72, found that it is true that when the Chief Commissioner requires the assistance of any other class of officers other than those mentioned in sub-section (1), he may require such assistance and the Government may issue notification in that regard. However, apart from that, the Government with an avowed object constituted V&E Department under G.O.Ms.No.269 and assigned certain functions, one of which is to safeguard the revenue due to the Government. In that context, the officers of the said department can share the relevant information with the Commercial Tax Department and assist them without any prior requisition. The powers conferred under G.O.Ms.Nos.269 and 504 are independent and exclusive and they are in aid to the Tax department but not in derogation to Section 72(2) and in our view, there is no conflict between the powers and functions of the V&E Department and the power of Chief Commissioner to make requisition to the Government under Section 72(2) of the APGST Act.
- With respect to another contention raised on the behalf of the petitioner that the notices became illegal for want of authorization under Section 67, it was found by the Hon’ble Court that it has been rightly argued on the behalf of the respondent that the 3rd respondent issued impugned notices in terms of Rule 99(1) of the APGST Rules r/w Section 61 of the APGST Act but not under Section 67 of the Act. That in the instant case, the 3rd respondent in the light of alert note forwarded by 2nd respondent, only issued the impugned notices to the petitioner either to pay the demanded tax if he accepts the discrepancies or to submit its objections / explanations within the stipulated time. At this stage, no action was contemplated to inspect the premises of the petitioner or to search and seize any goods or books of accounts as contemplated under Section 67 of the Act. Therefore, the contention of the petitioner that the notices became illegal for want of authorization under Section 67 of the APGST Act is untenable. Consequently, the decision in Prakashsinh Hathisinh Udavat relied upon by the petitioner is of no avail. Thus, Section 67 has no relevancy in the instant case.
- Further, it is pertinent to discuss here that that even for acting under Rule 99(1) of the APGST Rules r/w Section 61 of the APGST Act, whether the 3rd respondent requires any authorization. That from the perusal of Rule 99 as well as Section 61, the word ‘Proper Officer’ is employed and it is stated that the Proper Officer may scrutinize the returns submitted by the registered person.
- The Hon’ble Court on perusal of Section 2 (91) of the APGST Act, which defines ‘Proper Officer’, found that the 3rd respondent who issued the impugned notices is the Deputy Commissioner (ST) but not the Chief Commissioner. Therefore, in order to issue the impugned notices, the 3rd respondent requires the authorization of the Chief Commissioner assigning the task of issuing notices under Rule 99 r/w Section 61 of the Act. The impugned notices suffer the vice of lack of authorization by the ‘Proper Officer’ i.e., Chief Commissioner and thus, the impugned notices are liable to be set aside.
The Hon’ble Court with the above observations and findings, allowed the writ petitions by setting aside the impugned notices dated 28.02.2023. The respondent authorities are at liberty to issue fresh notices under Rule 99 of the APGST Rules r/w Section 61 of the APGST Act either through the Chief Commissioner or any other Officer of the State Tax authorized by the Chief Commissioner in that regard. In such event, the petitioner shall submit its objections within the time stipulated in the notices and thereupon the Proper Officer after affording personal hearing to the petitioner pass an appropriate order on merits in accordance with law.