HC Grants Protection from Arrest on Cooperation, Directs Speaking Order on Objections.

Issue

Whether a taxpayer, who is under investigation (summons stage) for alleged fake Input Tax Credit (ITC), can seek protection from coercive action (like arrest) from the High Court, and simultaneously request a direction for the authorities to pass a reasoned, speaking order on their written objections.

Facts

GST authorities initiated an enquiry against the petitioners (traders) for alleged fake ITC availed on invoices linked to two specific suppliers: M/s Taj Enterprises and M/s Agastya Enterprises.
A notice was issued, to which the petitioners filed a detailed reply and objections.
Summons under Section 70 of the CGST Act were also issued, requiring the petitioners to appear in person and provide oral evidence.
The petitioners filed a writ petition seeking two main reliefs:
1. Protection from coercive action (like arrest) during the pendency of the enquiry.
2. A direction for the GST officers to expeditiously decide on their written objections by passing a reasoned, speaking order.

Decision

The High Court disposed of the writ petition with the following key directions:

The petitioners were directed to appear before the investigating officers on the specified date and cooperate fully with the investigation.
The court ordered that, provided the petitioners cooperate, no coercive steps (such as arrest) shall be taken against them concerning the investigation related to the two named suppliers.
The GST authorities were directed to consider the detailed objections filed by the petitioners and dispose of them “as early as possible” by passing a reasoned, speaking order in accordance with the law.

Key Takeaways

Cooperation as a Shield: This judgment reinforces that a taxpayer’s full cooperation during an investigation is a key factor in obtaining protection from coercive measures like arrest at the summons stage.
Right to a Reasoned Order on Objections: Taxpayers have a right to a formal, reasoned decision on the written objections they file during an enquiry. The department cannot simply ignore these submissions.
Balancing Act by the Court: The High Court balanced the department’s power to investigate (by compelling the assessee’s appearance) with the assessee’s right to liberty (by granting conditional protection from arrest).
Limited Protection: The protection granted was not a blanket immunity; it was strictly conditional on cooperation and limited only to the specific matter under investigation (the two suppliers).

HIGH COURT OF CHHATTISGARH

Harsh Wadhwani

Additional Director General Directorate General of GST Intelligence, Raipur

Naresh Kumar Chandravanshi, J.

WPT No. 148 of 2025

OCTOBER 16, 2025

Manoj Paranjpe, Sr. Adv. and Siddharth Dubey, Adv. for the Petitioner. Maneesh Sharma, Amandeep Singh, Pankaj Singh, Advs. and Ms. Anuradha Jain, Panel Lawyer for the Respondent.

ORDER

1. Heard.

2. This petition has been preferred by the petitioners seeking following relief(s) :

“‘10.1 Quashing/setting-aside Annexure “P/1”, Annexure “P/2” andAnnexure “P/14″(Colly).

10.2 Directing respondent No. 1 to withdraw the negative balance/block created in the Electronic Credit Ledger (ECL) of the petitioner/assessee by the aforesaid authority.

10.3 Grant any other relief(s), and/or pass any such order(s) that this Honble Court may deem fit in facts and circumstances of the case. “

3. Learned counsel for petitioners would submits that petitioners had run a trading business in the name and style of Ms. Vijay Laxmi Trade Company, Raipur (C.G.) for which they had filed return in Form GSTR-3B and claimed Input Tax Credit (ITC) for the financial year 2024-2025 to which respondent No.3 issued notice (Annexure P/6) dated 02.07.2025 under Section 70 of the Central Goods and Services Act, 2017 (henceforth, ‘the Act’), which was responded by the petitioner by filing reply dated 28.07.2025. Thereafter, respondent No.3 again sent summons (Annexure P/14) dated 11.09.2025 and 23.09.2025, but in that summons, respondent No.3 only directed the petitioner to appear in person and tender oral evidence and it has not been specified in those summons that respondent want their oral evidence pertaining to which parties, whereas, in first summons, the respondent had mentioned about two parties namely (1) M/s. Taj Enterprises and (2) M/s. Agastya Enterprises. He further submits that petitioners are ready to cooperate in enquiry and record their oral evidence by satisfying all the queries needed by the respnodent officers/authorities pertaining to aforesaid two firms. He further submits that this petition may be disposed of, the respondent officers/authorities may be directed that no coercive steps shall be taken against the petitioners pertaining to the enquiry conducted for aforesaid two firms.

4. In reply, learned counsel for the respondents No.1 & 3 who is main contesting party would submits that upon scrutiny of return in Form GSTR-3B filed by the petitioners with respect to evasion of tax by obtaining and passing fake Input Tax Credit (ITC) for the financial year 2024-2025 was found to be filed on the basis of fake invoices, therefore, notice (Annexure P/6) dated 02.07.2025 was sent to the petitioners pertaining to aforesaid two firms. Though they have filed reply, but, there-were some discrepancies which were revealed and some clarifications were required, thereby, subsequent summons (Annexure P/14) dated 11.09.2025 and 23.09.2025 have been sent to the petitioners for tendering their oral evidence.

5. Learned counsel for the respondents 1 & 3 further submits that upon enquiry after recording oral evidence of petitioners, if any discrepancies /false claim/ evasion of tax is found, then appropriate steps may be taken against the petitioners in accordance with law. He further submits that if the petitioners will cooperate in the enquiry proceeding and respondent officers/authorities satisfied, then there will be no need to take any coercive steps against the petitioners. The issue persists between parties is enquiry pertaining to the return in Form GSTR-3B filed by the petitioners and claiming fake Input Tax Credit (ITC) for the financial year 2024-2025 on the basis of fake invoices, which is to be enquired by the respondent officers/authorities pertaining to the issue particularly in respect of aforesaid two firms namely (1) M/s. Taj Enterprises and (2) M/s. Agastya Enterprises, to which respondent officers/authorities want to record statements of the petitioners.

6. In view of the above discussions, this Court directs that petitioners shall remain present before the concerned investigating officers/authorities in the O/o. Director General, GST Intelligence, Raipur on 28^th October, 2025 for the purpose of enquiry and thereafter as and when required by the respondent officers/authorities. If the petitioners cooperate in the investigation, the Central GST Authority shall not take any coercive steps against the petitioners in respect to aforesaid two firms namely (1) M/s. Taj Enterprises and (2) M/s. Agastya Enterprises.

7. Having considered the contentions made by learned counsels for both the parties, it is further observed that the objections filed by the petitioners (Annexure P/13 Colly) shall be disposed of by the respondent officers/authorities as early as possible, by passing speaking order in accordance with law.

8. This writ petition is accordingly disposed of in the above terms. However, there shall be no order as to costs.

9. In view of the disposal of the writ petition, interim application(s), if any, shall also stands disposed of.