M/S R.C. Infra Digital Solutions Thru. ... vs Union Of India Thru. Secy. Ministry Of ... on 5 January, 2024

Judgment Summary

1. Outcome
The writ petition was dismissed with no order as to costs. The Court found no merit in the petitioner's challenges to the validity of the notification, the jurisdiction of the DGSI officers, the legality of the summons, or the claim of coercive recovery.

2. Core Issue
The central legal questions before the High Court were:
* Whether Notification No. 14/2017-Central Tax, which appoints officers of the Directorate General of Goods and Services Tax Intelligence (DGSI) as 'Central Tax Officers' and invests them with powers, is ultra vires the CGST Act, 2017.
* Whether DGSI officers have the legal authority and jurisdiction to conduct search/inspection proceedings under Section 67 and issue summons under Section 70 of the CGST Act.
* Whether the investigation initiated by DGSI constituted an impermissible "parallel proceeding" given an ongoing inquiry by the CGST Anti-Evasion Wing.
* Whether the deposit of ₹40 lakhs by the petitioner was voluntary or made under coercion.

3. Key Facts
* The petitioner, a partnership firm, was subjected to an inspection and search on June 6, 2023, by Intelligence Officers from DGSI, authorized by the Additional Director General, DGSI.
* During the search, the petitioner was allegedly coerced into depositing ₹40 lakhs, which was paid via Form GST DRC-03.
* The DGSI officers issued summons under Section 70 of the CGST Act, 2017, requiring the production of ledgers and bank statements for the period from November 2018 onwards.
* At the time of the DGSI action, the petitioner was already facing an inquiry by the Anti-Evasion Wing of CGST for a similar period and on similar issues (irregular ITC availment).

4. Arguments
Petitioner's Arguments:
* On Jurisdiction: The Central Government, under Section 3 of the CGST Act, only has the power to appoint classes of officers. The power to assign functions or delegate powers of a 'proper officer' is vested exclusively with the 'Commissioner in the Board' under Sections 2(91), 5(3), and 168(2) of the Act.
* On Notification 14/2017: By both appointing and investing powers in DGSI officers, the Central Government usurped the statutory function of the Board, rendering Notification 14/2017 ultra vires. Consequently, the DGSI officers were not 'proper officers' and lacked jurisdiction to conduct searches or issue summons.
* On Parallel Proceedings: The DGSI investigation on the same subject matter for the same period was an illegal parallel proceeding, as the Anti-Evasion Wing was already conducting an inquiry.
* On Coercion: The deposit of ₹40 lakhs was not voluntary but was made under threat of arrest, which is contrary to law and official instructions.

Respondent's (Revenue's) Arguments:
* On Jurisdiction & Notification 14/2017: The Government has the primary power to appoint officers under Section 3. The DGSI officers were validly appointed as 'Central Tax Officers' through Notification 14/2017. Subsequently, the Board, exercising its power under Section 2(91), assigned them the functions of a 'proper officer' for various sections of the Act (including Section 70) via Circular No. 3/3/2017-GST dated 05.07.2017. The process was legally sound.
* On Parallel Proceedings: The inquiries were not overlapping. The Anti-Evasion wing's inquiry was limited to irregular ITC, whereas the DGSI's investigation was broader, covering all activities under the GST Act. At the inquiry stage, no prejudice is caused.
* On Coercion: The payment was declared as "voluntary" by the petitioner in Form GST DRC-03 under Section 74(5). No contemporaneous complaint of coercion was filed, disproving the petitioner's claim.

5. Court’s Reasoning
* Validity of Notification and Jurisdiction: The Court held that the legal empowerment of DGSI officers was a two-step process that was correctly followed:
1. Appointment: The Central Government, under its power in Section 3, validly appointed DGSI officers as 'Central Tax Officers' through Notification No. 14/2017.
2. Assignment of Function: The Board, in line with the definition of 'proper officer' under Section 2(91), validly assigned the functions related to specific sections (like Section 70) to these newly appointed officers through Circular No. 3/3/2017-GST.
Therefore, the combined effect of the Notification and the Circular made the DGSI officers 'proper officers' with the requisite jurisdiction. The Court found no infirmity in this process and held that the Notification was not ultra vires.

• Parallel Proceedings: The Court rejected this argument, stating that the scopes of the two inquiries did not appear to be overlapping. Furthermore, since the proceedings were only at the inquiry stage and not yet at adjudication, no prejudice was caused to the petitioner by cooperating with the summons.

• Coercive Recovery: The Court noted that the petitioner itself had filed Form GST DRC-03 marking the payment as "voluntary" under Section 74(5). The absence of any contemporaneous protest or complaint to a higher authority led the Court to conclude that it could not be prima facie held that the payment was made under duress.

6. Statutory References
* CGST Act, 2017: Sections 2(16), 2(24), 2(25), 2(53), 2(91), 3, 4, 5, 5(1), 5(2), 5(3), 67, 69, 70, 71, 72, 74(5), 167, 168, 168(2).
* IGST Act, 2017: Section 20.
* Central Boards of Revenue Act, 1963: Section 3.
* Other Statutes: Code of Civil Procedure, 1908; Indian Penal Code, 1860.
* Notifications & Circulars: Notification No. 14/2017-Central Tax, Notification No. 02/2017-Central Tax, Circular No. 3/3/2017-GST.

7. Precedents Cited
* J.K. Industries Ltd. Vs. Union of India (2007) 13 SCC 673
* State of U.P Vs. Renusagar Co. AIR 1988 SC 1737
* Commissioner of Customs Vs Sayed Ali 2011 (265) ELT 179 (S.C)