Court upholds prohibition order on goods under GST Act, finding compliance with natural justice and procedural requirements.

The court upheld the legality of the order of prohibition of goods, finding that the Proper Officer had valid reasons to believe the applicant had contravened GST Act provisions. It determined that the order complied with principles of natural justice and was not premature, as confiscation proceedings were initiated. The court also validated the seizure order, emphasizing strict compliance with statutory provisions. Procedural requirements under Section 67 of the GST Act were deemed met. The court allowed the applicant to seek release of seized goods under specified conditions, ultimately disposing of the writ application accordingly.

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Issues Involved:
1. Legality of the order of prohibition of goods.
2. Compliance with principles of natural justice.
3. Prematurity of the prohibition order.
4. Validity of the seizure order.
5. Procedural compliance under Section 67 of the GST Act, 2017.

Detailed Analysis:

1. Legality of the order of prohibition of goods:
The court examined whether the Assistant Commissioner of State Tax (Enforcement) Division-3, Gandhinagar, committed any error in passing the order of seizure and prohibition. The court noted that the Proper Officer, not below the rank of Joint Commissioner, had reasons to believe that the writ applicant had contravened the provisions of the GST Act to evade tax, thus justifying the authorization for search and seizure under Section 67 of the Act. The court emphasized that the belief must be that of an honest and reasonable person based on relevant materials and circumstances. The court found that the proper officer authorized the Assistant Commissioner to carry out the search and seize goods, documents, or books, and pending confiscation proceedings, action was taken under Section 67 of the Act.

2. Compliance with principles of natural justice:
The petitioner argued that the impugned order of prohibition was in clear violation of the principles of natural justice and contrary to the powers conferred under Section 67(2) of the GST Act. The court, however, found that the statutory requirement of reasonable belief, rooted in the information in possession of the Proper Officer, was to safeguard the citizen from vexatious proceedings. The court noted that the satisfaction of the Proper Officer was based on the belief that the goods were liable to confiscation and likely to be secreted, which justified the issuance of the order of prohibition.

3. Prematurity of the prohibition order:
The petitioner contended that the order of prohibition was premature as the department had neither determined any liability in adjudication proceedings nor issued any assessment order determining any liability contemplated in law. The court observed that the confiscation proceedings had been initiated against the writ applicant by issuing notice under Sections 73 and 74 of the Act, and pending these proceedings, action was taken under Section 67 of the Act regarding search, seizure, and prohibition. The court found that the whole object was to preserve and protect the goods or books or documents pending the determination of the tax liability.

4. Validity of the seizure order:
The petitioner argued that the seizure order lacked details of the goods seized, implying no valid seizure of goods in accordance with law. The court referred to the statutory provisions and case law, emphasizing that the power to search and seize under Section 67 of the GST Act is a general power, and it is essential that the preliminary conditions required by the section must be strictly satisfied. The court found that the Assistant Commissioner of State Tax (Enforcement) was authorized by the Proper Officer to carry out the search and seizure, and the order of seizure was in accordance with law.

5. Procedural compliance under Section 67 of the GST Act, 2017:
The court examined whether the procedural requirements under Section 67 of the GST Act were met. The court noted that the words "where the proper officer has reasons to believe" suggest that the belief must be based on relevant materials and circumstances. The court found that the satisfaction of the Proper Officer was based on the belief that the goods were liable to confiscation and likely to be secreted. The court observed that the statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings, and the belief must be that of an honest and reasonable person based on relevant materials and circumstances.

Conclusion:
The court concluded that the order of prohibition was in accordance with law. The court permitted the writ applicant to invoke clause (6) of Section 67 of the GST Act and prefer an appropriate application for the release of the seized goods on a provisional basis upon execution of a bond and furnishing a security to the satisfaction of the concerned authority. The writ application was disposed of accordingly.

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