SEZ unit not exempt from inspection, investigation under GST, says Gujarat High Court
In an important development, the Gujarat High Court has ruled that GST officials can initiate proceedings against a unit situated in the Special Economic Zone (SEZ). It has also imposed a penalty on the unit for not cooperating with the process initiated by the tax department.
“Respondent authorities (GST Department) are empowered to carry out proceedings in SEZ,” a division bench of Justices Ashutosh Shastri and J C Doshi said in a recent ruling, while dismissing a petition filed by RHC Global Exports Private Ltd. Further, it said the Tax Department’s jurisdiction is unquestionable as the Central Government has already authorised those officers by virtue of a notification dated August 5, 2016. Further, provision under the State GST law indicates that where any proper officer issues an order under this Act, he is also issuing an order under the CGST Act as authorised by the Act, or under intimation to the jurisdictional officer of the Central Government
Therefore, “it cannot be said that the tax officers were acting without the authority of law or jurisdiction,” the bench added. Further, by virtue of a circular dated July 7, 2017, the functions of proper officers under the CGST Act are also defined. Hence, “once the Central Government has notified the functions of proper officers, the said functions shall also be applicable to be carried out by the officers under the CGST Act and, hence, it cannot be said there was a lack of authority on the part of the respondents, as contended,” the bench said.
The petitioner company, after an ostensible oral communication from an officer of the Enforcement Directorate, was subjected to a search and seizure operation, and the premises was sealed. The sealing memo, according to the petitioner, does not reflect due process, and was carried out without arriving at any satisfaction as required under Section 67(1) of GST Act.
The premises of the petitioner was sealed as all the employees were recording statements before the office of the DRI Surat. Simultaneously, the directors of the company were summoned to appear for recording statements.
Tax-neutral area
The petitioner submitted that since the petitioner’s unit was within the area earmarked and is a SURSEZ unit, which is a distinctly foreign territory and, as such, is a tax-neutral or revenue-neutral area, it is outside the ambit of the provisions of the CGST Act, 2017 or the SGST Act, 2017. The state authorities are not empowered to initiate any action since every SEZ unit is a tax-neutral zone.
After going through all the facts submitted and arguments made, the bench found this an attempt by the petitioners to thwart and delay the legal proceedings initiated by respondent authorities and as such the petitioners’ move appears to be an abuse of the process of law, looking to the manner in which the irregularities are alleged to have been committed. “Such an attempt on the part of petitioners deserves to be dealt with firmly so that litigants do not take advantage of the situation by bringing such kinds of litigation,” the bench warned.
Accordingly, the bench said it deemed “it proper to dismiss the petitions with costs of Rs 10,000 for each petition to be paid to the Gujarat State Legal Service Authority within 10 days from today, “ the bench ruled.
