In a significant ruling, the Patna High Court has quashed a tax demand of ₹88,64,550.50 raised under the CGST/BGST regime, citing non-compliance with mandatory legal procedures outlined in Section 67 of the CGST/BGST Act, 2017 and Section 100 of the Code of Criminal Procedure (CrPC), 1973.
Illegal GST Inspection Without Independent Witnesses
The Division Bench comprising Justice P.B. Bajanthri and Justice Alok Kumar Sinha ruled in favor of the petitioner, M/s Sri Sai Food Grain and Iron Stores, who had challenged the demand order issued under Section 74(9) of the CGST Act. The petitioner contended that the GST inspection, conducted on 18.01.2024, was illegal as it was carried out without the presence of two independent witnesses—a clear violation of both the CGST Act and CrPC.
As per Section 67 of the CGST/BGST Act, any inspection must adhere to procedures laid down under the CrPC, and Section 100(4) of the CrPC mandates the presence of two independent witnesses during a search or seizure operation.
Court Criticizes Procedural Lapses and Document Tampering
The High Court found that the inspection report lacked the signatures and names of independent witnesses. Instead, only individuals closely connected to the petitioner—namely, the proprietor’s son Sandeep Jaiswal and staff member Ram Pravesh Yadav—were listed as witnesses, which undermined the independence and credibility of the procedure.
Although the State claimed that Santosh Kumar and Ramashish Prasad acted as independent witnesses and signed the seizure order, the Court rejected this defense, observing that their names were absent from the inspection report. Furthermore, there was no explanation as to why the petitioner’s representatives, who signed the report, were not included in the seizure order.
The Court also highlighted alleged tampering of the seizure order by Assistant Commissioner Ms. Kumari Anu Soni. It was found that the words “As Per Physical Verification” were interpolated into the seizure document post-signing—an act that the Court sternly condemned.
High Court Ruling and Reprimand to Tax Official
After reviewing all submissions and documents, the Court concluded that the search and seizure operation was not legally sustainable, and thus, the resultant tax demand was invalid. The High Court quashed the ₹88.64 lakh demand and issued a strong warning to Ms. Kumari Anu Soni, stating that any future tampering with departmental or court records could lead to disciplinary action.
Case Title: M/s Sri Sai Food Grain and Iron Stores vs. The State of Bihar & Others
Key Legal Takeaway:
This judgment reinforces that any inspection under the GST law must comply strictly with Section 67 of the CGST/BGST Act and Section 100 of the CrPC, particularly concerning the requirement of two independent witnesses. Non-adherence to these procedural safeguards renders the entire inspection and resulting tax demand invalid in the eyes of the law.