2021 (3) TMI 1086 - HC - GST

High Court intervenes in challenge to prohibition order under Central Goods and Services Act, 2017

The High Court intervened in a case challenging a prohibition order under the Central Goods and Services Act, 2017, due to a mismatch between physical ... Prohibition order - inspection under Section 67(1) and (2) of the Central Goods and Services Act, 2017 - reconciliation of stock variation - opportunity of hearing and speaking order - retraction of statement - provisional release under Section 67(6)Reconciliation of stock variation - inspection under Section 67(1) and (2) of the Central Goods and Services Act, 2017 - Prohibition order set aside for fresh consideration by the concerned officer after reconciliation of alleged variation in stock. - HELD THAT: - The Court did not adjudicate the merits of the alleged mismatch between physical stock and stock register. Instead, it directed that the petitioner's authorised representative or advocate shall appear before the concerned officer for reconciliation of the alleged variation, produce relevant documents and assist further if required. The officer is to examine the material placed, grant a hearing and thereafter pass a speaking order. This exercise is to be completed at the earliest and in any event not later than 02.04.2021. These directions constitute a remand to the concerned officer for fresh consideration of the factual dispute arising from the inspection carried out under Section 67(1) and (2) of the Act. [Paras 3, 4, 8]Proceedings remitted to the concerned officer for reconciliation and fresh speaking order after hearing, within the timeframe directed.Opportunity of hearing and speaking order - retraction of statement - provisional release under Section 67(6) - Obligations of the concerned officer on remand and treatment of the retraction; right of the petitioner to seek provisional release or to challenge any adverse order. - HELD THAT: - The Court mandated that the officer must grant the petitioner a hearing and record reasons in a speaking order, including a specific statement of the quantum of variation in monetary terms if unsatisfied with the explanation. The officer is to take into account the communication in which the employee retracted his statement insofar as it is relevant, noting that the retraction did not expressly negate all paragraphs of the earlier statement. The Court also observed that, if the officer's order is adverse, the petitioner may either assail the order by appropriate proceedings or opt to seek release of the goods on a provisional basis in accordance with Section 67(6) of the Act by furnishing security to the extent indicated by the officer. [Paras 5, 6, 8, 9, 10]Officer to consider the retraction, pass a reasoned/speaking order after hearing, and the petitioner may challenge any adverse order or seek provisional release under Section 67(6).Final Conclusion: Writ petition disposed by remitting the matter to the concerned officer for reconciliation of stock variation, consideration of the retraction, and issuance of a speaking order after hearing; timelines and rights to seek provisional release or to challenge any adverse order were directed. Issues:1. Challenge against prohibition order dated 15.03.2021 under Central Goods and Services Act, 2017.2. Allegations of mismatch between physical stock and stock register.3. Lack of opportunity for reconciliation and coercion during inspection.4. Dispute over the value of goods and formation of opinion for confiscation.5. Retraction of statement by the officer present during inspection.6. Petitioner's entitlement to seek release of goods under Section 67(6) of the Act.7. Exercise of power by the concerned authority and approach to the High Court under Article 226 of the Constitution.Analysis:1. The writ petition challenged a prohibition order dated 15.03.2021 under the Central Goods and Services Act, 2017. The inspection at the petitioner's premises revealed a mismatch between the physical stock and the stock register, leading to allegations by respondent nos. 2 to 4. The petitioner contended that no opportunity was given for reconciliation and that the order was an overreach, prohibiting dealings with goods worth nearly Rs. 8.00 crores.2. Ms. Lakshmikumaran argued that the impugned order lacked the authority's opinion for confiscation of goods and highlighted coercion during the inspection. On the other hand, Mr. Narayan stated that the petitioner did not seek reconciliation and emphasized the value of the mismatched goods as approximately Rs. 3.00 crores. He mentioned the petitioner's right to approach under Section 67(6) of the Act for provisional release of goods.3. The petitioner disputed the formation of opinion by the concerned authority for confiscation, prompting the High Court intervention under Article 226 of the Constitution. After hearing both parties, the Court directed the petitioner's representative to reconcile the stock variation with the concerned officer by a specified date, ensuring a fair hearing and a speaking order.4. A retraction of the officer's statement was presented, with specific denials regarding the value of goods. The Court acknowledged the retraction and directed its consideration by the concerned officer. The interlocutory application was closed, emphasizing the importance of due process and fair adjudication in matters of goods confiscation and release under the Act.