Introduction:

In the case of Excellentvision Technical Academy (P.) Ltd. v. State of U.P. [Writ Tax No. 554 of 2023 dated May 20, 2024], the Hon’ble Allahabad High Court addressed the necessity of recording “reasons to believe” as a prerequisite for initiating search proceedings under the State GST Act.

Facts of the case:

M/s. Excellentvision Technical Academy (P.) Ltd. (“the Petitioner”) was subjected to a search by the UP GST department on January 4, 2018, with subsequent issuance of two INS-01 (search warrants) on different dates: January 4, 2018, and February 11, 2019. The tax department later initiated proceedings under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017, based on a show cause notice dated February 8, 2021, and subsequently passed an order on September 01, 2021. The Petitioner contested the legality of the search, arguing that the tax department failed to provide the mandatory “reasons to believe” as required under Section 67 of the State GST Act.

Issue:

Whether recording “reasons to believe” in INS-01 is a prerequisite for the tax department to initiate search proceedings?

Held:

The Hon’ble Allahabad High Court in Writ Tax No. 554 of 2023 held as follows: