Case Note & Summary
The petitioner, M/s. Bee Jay Engineers, a sole proprietorship represented by Vinay S/o Ramesh Burbure, filed a writ petition under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka at Dharwad. The petitioner challenged the inspection proceedings initiated under Section 67(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) by the Commercial Tax Officer (Enforcement-3), Hubballi, and others. The inspection was based on a written statement dated 02.09.2025, which the petitioner argued was obtained without valid reasons to believe and beyond jurisdiction. The petitioner sought quashing of the entire inspection proceedings, including the written statement, and alternatively sought a direction to confine the inspection to specific transactions covered by recorded reasons to believe supported by tangible evidence. The petitioner also sought a declaration that the statement dated 02.09.2025 did not amount to consent or waiver for a full audit under the CGST and KGST Acts. The respondents, represented by the Additional Government Advocate and Central Government Standing Counsel, opposed the petition. The court examined the provisions of Section 67(1) of the CGST Act, which requires an officer to have valid reasons to believe before conducting an inspection. The court found that the inspection was initiated without tangible evidence and amounted to a fishing expedition, which is not permissible under the law. The court held that the written statement given by the petitioner did not constitute consent for a full audit. Consequently, the court quashed the inspection proceedings and directed that if a full-fledged audit is necessary, it must be conducted under Sections 65 or 66 of the CGST Act following due process. The petition was allowed in part.
Headnote
A) Constitutional Law - Writ Jurisdiction - Articles 226 and 227 of the Constitution of India - Quashing of Inspection Proceedings - The petitioner challenged inspection proceedings under Section 67(1) of the CGST Act for lack of valid reasons to believe. The court held that the inspection was initiated without tangible evidence and beyond jurisdiction, and quashed the proceedings. (Paras 1-10) B) Goods and Services Tax - Inspection - Section 67(1) of the Central Goods and Services Tax Act, 2017 - Reasons to Believe - The court held that the inspection under Section 67(1) requires valid reasons to believe supported by tangible evidence, and cannot be used as a fishing expedition. The written statement dated 02.09.2025 does not amount to consent or waiver for a full audit. (Paras 5-8) C) Goods and Services Tax - Audit - Sections 65 and 66 of the Central Goods and Services Tax Act, 2017 - Alternative Procedure - The court directed that if a full-fledged audit is considered necessary, it shall be undertaken only under Section 65 or 66 of the CGST Act in accordance with due process of law. (Para 9)
Issue of Consideration
Whether the inspection proceedings initiated under Section 67(1) of the CGST Act, 2017 against the petitioner were based on valid reasons to believe and within jurisdiction, and whether the petitioner's statement dated 02.09.2025 amounted to consent for a full audit.
Final Decision
The court quashed the inspection proceedings initiated under Section 67(1) of the CGST Act, 2017 against the petitioner, including the written statement dated 02.09.2025. The court directed that if a full-fledged audit is considered necessary, it shall be undertaken only under Section 65 or 66 of the CGST Act in accordance with due process of law. The petition was allowed in part.
Law Points
- Section 67(1) of CGST Act requires valid reasons to believe for inspection
- inspection cannot be used as a fishing expedition
- statement given during inspection does not amount to consent for full audit
- alternative audit provisions under Sections 65 and 66 must be followed for comprehensive audit
