2017 (9) TMI 749 - HC - GST

Court Seizure Challenge: Bureau's Authority Questioned

Kumar Traders And Company Versus State of Assam

The Court directed the Bureau of Investigation for Economic Offences (BIEO) to provide specific instructions on the legal basis of the search and seizure ... Seizure - powers of the police team / Bureau of Investigation for Economic Offences (BIEO) under GST - areca nuts - the BIEO team suspected that the areca nuts stored in the godown, were of Burmese origin and were smuggled through Mizoram border and was stored in the Guwahati godown, for onward transportation to other parts of the country - Assam Goods & Service Tax Act, 2017 - Held that: - The stored areca nuts were neither stolen nor were kept in suspicious circumstances. At best, tax is payable for dealing in areca nuts but that would be in the domain of the Finance & Taxation Department. The submissions made by the Addl. Advocate General and the Asstt. Solicitor General reflect that the BI(EO) team may have acted beyond their jurisdiction. Therefore, the learned Govt. Advocate has prayed for and is granted three weeks time to file counter affidavit In the interim, to facilitate the petitioners to carry on their legitimate business and taking note of the fact that rate of tax is @2.5% for areca nuts, under the Assam Goods & Service Tax Act, 2017 and they are to pay further 2.5% tax to the Central Govt. coffer, subject to the petitioners' furnishing Bank guarantee for ₹ 30 lakh towards the estimated tax, to the Commissioner of State Tax, the seized goods should be released to the custody of the petitioners. Issues:1. Unauthorised inspection, search, and seizure by Bureau of Investigation for Economic Offences (BIEO) at the godown.2. Competency of BIEO officers to conduct search and seizure under GST Act.3. Alleged harassment of bonafide business group under the GST regime.4. Jurisdiction of BIEO team in relation to evasion of customs duty.5. Release of seized goods and payment of taxes by the petitioners.Issue 1: Unauthorised inspection, search, and seizure by BIEO:The case involved the unauthorised inspection, search, and seizure of a godown by the Bureau of Investigation for Economic Offences (BIEO) officers. The petitioners, registered under the GST Act, contended that the seizure was unnecessary and questioned the bonafide of the action. The BIEO officers seized Dried Areca Nuts and requested irrelevant documents from the dealers. The petitioners argued that such intervention was unwarranted, especially considering the early stage of the GST regime and the lack of infrastructure for compliance. The Court directed the department to provide specific instructions on the legal basis of the search and seizure.Issue 2: Competency of BIEO officers under GST Act:The learned Govt. Advocate stated that the BIEO officers conducted the raid under Section 102 of the CrPC, suspecting the areca nuts to be of Burmese origin and smuggled. However, questions were raised regarding the competency of BIEO officers to conduct such actions under the GST Act. The Addl. Advocate General of Assam highlighted that tax collection and prosecution fall under the Finance & Taxation Department, suggesting that the BIEO team might have exceeded their jurisdiction. The Court granted time to file a counter affidavit on this matter.Issue 3: Alleged harassment of bonafide business group:The petitioners alleged harassment by the BIEO officers, claiming unnecessary intervention and inadequate justification for the seizure. The petitioners' counsel emphasized that harassment of legitimate businesses was unwarranted, especially in the early stages of the GST regime. The Court directed that the petitioners should not face further harassment until the matter was resolved.Issue 4: Jurisdiction of BIEO team in relation to evasion of customs duty:The Asstt. Solicitor General of India raised concerns about the BIEO team's actions in a potential case of evasion of customs duty. It was suggested that the team should have involved Customs Authorities if such suspicions arose. The Court acknowledged that the stored areca nuts were not stolen and might fall under tax liabilities, primarily under the Finance & Taxation Department's purview.Issue 5: Release of seized goods and payment of taxes:To facilitate the petitioners' legitimate business activities, the Court ordered the release of the seized goods upon the petitioners furnishing a bank guarantee towards estimated taxes. The petitioners were required to pay tax to both the State and Central Governments, subject to the Bank guarantee. The Finance & Taxation Department was tasked with estimating the precise tax payable and making the assessment accordingly.This detailed analysis covers the various issues raised in the judgment, addressing the legal complexities and implications of the case.