In MAT/1054/2023 -CAL HC- Calcutta High Court directs Anti-Fraud & GST Departments to conduct ‘Assessee-Centric’ investigations & avoid generalized public notices in Revenue fraud cases
Chief Justice T. S. Sivagnanam & Justice Hiranmay Bhattacharyya [14-06-2023]

Read Order: Himangshu Kumar Ray V. State of West Bengal

Chahat Varma

New Delhi, July 26, 2023: The Division Bench of the Calcutta High has clarified the scope of a previous direction given by a Single Bench and emphasized the need for focused and individualized investigations in cases of revenue fraud.

The case revolved around a directive issued by the Single Bench to the police authorities, instructing them to investigate the extent of fake writ petitions filed in the past, that resulted in revenue loss and defrauded the government.

The Division bench comprising of Chief Justice T. S. Sivagnanam and Justice Hiranmay Bhattacharyya first addressed the maintainability of the appeal and concluded that it was indeed maintainable. This was based on the fact that soon after the impugned order was passed by the Single Bench, the Anti-Fraud Department of the Kolkata Police and the GST Department issued notices to the advocates who regularly appeared for clients in cases related to Goods and Services Tax, West Bengal Value Added Tax, West Bengal Sales Tax and other related enactments. However, when this matter was brought to the attention of the court, it was advised that the authorities had no jurisdiction to issue notices to the advocates seeking information about their clients, as, such information was privileged communication between clients and their advocates. Section 126 of the Evidence Act was cited, which prohibits attorneys from disclosing attorney-client communication without the express consent of the client concerned. The bench noted that after receiving proper advice from the State counsel, the notices sent to the advocates were withdrawn by emails dated 5th June 2023.

Next, the bench observed that the police authorities were directed to investigate the filing of fake cases, but the Anti-Fraud Department misunderstood the scope of the direction. The department had issued notices under Section 160 Cr.P.C. to the directors of various assesses without disclosing any details about the concerned assessee, using a standardized format. The bench clarified that investigations should be assessee-centric and issuing generalized public notices, should be avoided. Thus, the notices issued under Section 160 Cr.P.C., which were in a standardized form, were set aside. The authorities, both revenue and police, were directed to conduct a thorough study of the documents available with the GST Department and then proceed with a proper investigation that was accordance with the law. The bench emphasized that the approach of considering all assesses throughout the State of West Bengal as fraudsters was not in accordance with the law.

Lastly, the bench held that the GST authorities should conduct a thorough study and investigation to determine whether there had been any illegal availment of GST. If they find any violations, they can initiate proceedings under the provisions of the GST Act. However, if the authorities suspect the involvement of a criminal overt act, they should hand over the matter to the appropriate investigation authority to proceed in accordance with the law.

With the above directions, the appeal was disposed of.