GST Authority Ignored CBIC Rules? Allahabad High Court Case Unfolds

Gallantt Ispat Ltd has taken legal action before the Allahabad High Court (HC), challenging the GST authorities’ disregard of the instructions issued by the Central Board of Indirect Taxes & Customs (CBIC) regarding proper conduct during search operations.

Last week, a division bench consisting of Justice Saumitra Dayal Singh and Justice Donadi Ramesh noted that Gallantt Ispat had cited numerous circulars and letters in its case, asserting that the GST authorities had blatantly ignored these directives. According to Gallantt Ispat, despite no legal violations on their part, they were compelled to deposit an excess amount of over Rs 10.03 crore during an investigation that has been ongoing for more than a year and a half. Furthermore, the company claims its principal and senior officers are being threatened with arrest without valid justification.

Senior counsel Tarun Gulati argued that the petition aims to highlight the GST authorities’ complete disregard for CBIC instruction no 1/2022-23 dated 25 May 2022 and instruction no 2/2022-23 dated 17 August 2022. These instructions had informed all GST field formations about the discipline required during search operations and outlined specific conditions to be followed.

The CBIC instructions explicitly stated that no tax recoveries should be made during searches, inspections, or investigations. It emphasized the need for caution before initiating investigations involving listed companies, public sector units (PSUs), corporations, or government departments and advised against using summons to gather information. The instructions also warned against using ambiguous terms like “GST inquiry” or “GST evasion” in summonses and stressed that summonses should not be issued for fishing expeditions. The guidelines called for strict adherence to the law when making arrests, suggesting that such provisions should not be readily invoked.

Dhananjay Awasthi, counsel for the GST authorities, informed the HC that no further recoveries or coercive actions against Gallantt Ispat are planned while the investigation is pending.

The bench granted Awasthi six weeks to file a counter affidavit and gave Gallantt Ispat a week thereafter to submit a rejoinder affidavit.

The next hearing in the case is scheduled for 12 August 2024.