The Hon’ble High Court of Patna in the case of Sri Sai Food Grain & Iron Stors v. State of Bihar [Civil Writ Jurisdiction Case No. 13674/2024 dated April 25, 2025] set aside the demand order against the Assessee due to procedural violations during inspection and confirmed tampering of the seizure order by a tax officer. The Court emphasized the mandatory requirement of independent witnesses during inspection under Section 67 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”)/ Bihar Goods and Services Tax Act, 2017 (“the BGST Act”) and condemned the misconduct of the tax officer.
Facts:
M/s Sri Sai Food Grain & Iron Stors (“the Petitioner”) premises were inspected in the capacity of Assistant Commissioner, State Tax on January 18, 2024 and had prepared the order of seizure.
The Court passed an order dated February 05, 2025 for furnishing the original records relating to inspection and seizure said to have been conducted on January 18, 2024.
The original records relating to the present case were produced. It was found that the original order of seizure had been tampered/interpolated. In the order of seizure (Annexure ‘1’ to the Counter affidavit), as against Column No. (A)- Details of Goods Seized, the words ‘As Per Physical Verification’ were not mentioned but in the original order of seizure the words ‘As Per Physical Verification’ had been inserted/interpolated by Ms. Kumari Anu Soni who had signed and prepared the order of seizure. It is due to this reason that by order dated March 26, 2025, ordered for personal appearance of Ms. Kumari Anu Soni, who is now posted as Deputy Commissioner of State Tax, was passed.
While physically appearing before the Court on April 09, 2025, she admitted that she had entered the words ‘As Per Physical Verification’ in the original order of seizure. She also admitted to have done this tampering/ interpolation in the original order of seizure when the present case was pending and the entire matter was subjudice. After having accepting her mistake she begged for apology. The Court directed Ms. Kumari Anu Soni to file her personal affidavit admitting to have tampered/interpolated Annexure ‘1’ i.e. the order of seizure and to give an undertaking that she will not commit such mistake in future. During the course of the day, personal affidavit was filed by Ms. Kumari Anu Soni wherein she has submitted that, the deponent have no previous experience of search and seizure as a team leader. Therefore, while undertaking such exercise, noticing the huge gathering of the nearby local people she could not mention about the separate list of seized items as per physical verification at the appropriate and specified place of INS-02 i.e. Column (A).
The Petitioner has challenged the demand letter dated May 09, 2024 (“the Impugned Order”) issued by the Respondent no. 4 which is purported to have been issued under Section 74 (9) of BGST/CGST Act, demanding tax, interest and penalty to the tune of Rs. 44,32,250.25/- under CGST and, Rs. 44,32,250.25/- under BGST, thereby totalling to Rs. 88,64,550.50/- for the period April, 2023 to January, 2024.
The Petitioner has assailed this demand contending that it is based on an inspection/search carried out on January 18, 2024 of the Petitioner’s establishment, which as per the Petitioner is in complete violation of the provision contained in Section 67(10) of BGST/CGST Act read with Section 100(4) of the Code of Criminal Procedure, 1973 (“the CrPC”) because as per the Petitioner the inspection/search was made in absence of two independent witnesses.
As per the Petitioner, the search/inspection was also in violation of Instructions No. 01/2020-21 GST-Investigation dated February 02, 2021, wherein in para 2(vii) it has been mandated “that the search authorisation shall be executed before the start of the search and the same shall be shown to the person In-charge of the premises to be searched and his or her signature with date and time shall be obtained on the body of the search authorisation. The signature of the witnesses with date and time should also be obtained on the body of the search authorisation“.
Since as per the Petitioner, the search/inspection was in violation of Section 67(10) of BGST/ CGST Act, therefore the demand was based on such inspection was not proper and thus fit to be set-aside.
Per Contra, the Respondents have defended the inspection report and have admitted that the order of seizure prepared on the same date i.e. January 18, 2024, and was interpolated/ tampered by Ms. Kumari Anu Soni who had made the said document and was also leading the inspection team.
Issue:
Whether the inspection is required to be conducted with two independent witnesses?
Held:
The Hon’ble High Court of Patna in Civil Writ Jurisdiction Case No. 13674/2024 held as under:
- Observed that, although the conduct of Ms. Kumari Anu Soni is a serious misconduct for which the Court could have ordered for initiating disciplinary proceedings against her but given the fact that she had no previous experience of search and seizure and she being a young officer, the Court took a lenient view in the matter by admonishing her. Henceforth, if she commits a misconduct of this nature, she should be subjected to a disciplinary proceeding for being appropriately punished by disciplinary authority or court of law.
- Opined that, after having carefully heard the submissions of the parties and after having perused the relevant documents brought on record particularly the inspection report and the order of seizure, the inspection/search was not carried out in accordance with Section 67 of the BGST/CGST Act.
- Noted that, Section 67 of the CGST Act specifically mandates an inspection to be conducted in accordance with the CrPC. Section 100 of the CrPC stipulates that there shall be two witnesses when the inspection is conducted. It is evident that it has been signed by two witnesses, namely-Sri Sandeep Jaiswal and Sri Ram Pravesh Yadav. Sri Sandeep Jaiswal admittedly happens to be the son of the proprietor of the Petitioner and Sri Ram Pravesh Yadav happens to be the staff of the Petitioner. Both are, therefore, connected to the Petitioner and have no independent status as a witness. The inspection report, therefore, does not contain the names and signatures of two independent witnesses which is the mandatory requirement of Section 67 of the CGST Act. To cover up this serious deficiency, the Respondents have mentioned the name of two persons, namely- Santosh Kumar, Barauli, Gopalganj and Ramashish Prasad, Gopalganj as witnesses in the order of seizure and contended that they were the independent witnesses at the time of the inspection. Clearly this appears to be an afterthought done with the motive to simply cover-up the lacuna because if Santosh Kumar and Ramashish Prasad were present as independent witnesses at the time of inspection and seizure then why their signatures were not taken as independent witnesses on the inspection report and further as to why the order of seizure purported to have been prepared on the site of the inspection did not contain the signature of the proprietor or their two representatives, namely- Sri Sandeep Jaiswal and Sri Ram Pravesh Yadav who had signed the inspection report. There is also nothing to co-relate that the order of seizure actually prepared on the same date as there is no endorsement or any reference in the inspection report about the order of seizure being part of it. As observed above, the order of seizure appears to have been prepared not on the spot but later only to cover up the serious lacunas existing in the inspection report wherein the presence of the two independent witnesses was not recorded which made the inspection/seizure unsustainable in law. Further, taking note of the fact that the order of seizure had been admittedly tampered/interpolated by Ms. Kumari Anu Soni who is the maker of the said document, further makes the order of seizure totally invalid and unreliable.
- Held that, the inspection was carried out without any independent witnesses and even the order of seizure is invalid due to tampered/ interpolated documents, on both these counts they are against the provision as contained under Section 67 of the CGST Act read with Section 100 of the CrPC. Hence, the Impugned Order was set aside.
Our Comments:
Section 67 of the CGST Act specifically mandates an inspection to be conducted in accordance with the CrPC. Section 100 of the CrPC stipulates that there shall be two witnesses when the inspection is conducted.
Section 100(4) of the CrPC provides that “Before making a search under this Chapter, the officer or other person about to make it shall call upon two or more independent and respectable inhabitants of the locality in which the place to be searched is situate or of any other locality if no such inhabitant of the said locality is available or is willing to be a witness to the search, to attend and witness the search and may issue an order in writing to them or any of them so to do”.
In the case of Commercial Taxes Officer, Bharatpur v. Krishna Oil Industries [S.B. Sales Tax (Vat) Revision Petition No. 537/2011 dated March 26, 2015 held that Assessing Authority based on survey report passed assessment order on assessee and also imposed penalty under section 77(8) at the time of survey there were no independent witnesses, when rule 50 prescribed about two independent witnesses whether no credence could be placed on survey report which prima facie appeared to be on estimate basis whether therefore, imposition of penalty was improper and illegal.
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