Unlawful Search & Seizure Ruled Invalid

The court deemed the search and seizure by CGST Delhi North Commissionerate unlawful due to lack of legal basis for authorization. Orders of seizure and prohibition were set aside, with seized documents to be released to the party, allowing officer retention of copies for investigation. The court disposed of the writ petition and pending applications without costs.

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Issues Involved:
1. Legality of the search and seizure conducted by CGST Delhi North Commissionerate.
2. Validity of the authorization issued for the search and seizure.
3. Compliance with statutory provisions under Section 67(2) of the CGST Act.
4. Maintenance and availability of stock register and supporting documents.
5. Provisional release of goods and the terms thereof.

Detailed Analysis:

1. Legality of the Search and Seizure Conducted by CGST Delhi North Commissionerate:
The court examined whether the requisite statutory ingredients were present to enable the concerned respondents to exercise the power vested upon them under Section 67(2) of the CGST Act. It was noted that the search and seizure were conducted based on an authorization issued by the Additional Commissioner, CGST Delhi North Commissionerate, at the behest of Joint Commissioner (AE), Gautam Budh Nagar. The search was conducted to verify the existence of RJT, an L2 supplier of M/s Mridul Tobie Inc. However, the court found that the communication from Joint Commissioner (AE), Gautam Budh Nagar did not provide any basis to believe that RJT’s goods were liable for confiscation or that any documents or books were secreted, which are prerequisites for forming a belief under Section 67(2).

2. Validity of the Authorization Issued for the Search and Seizure:
The court scrutinized the authorization issued by the Additional Commissioner, CGST Delhi North Commissionerate, and found it legally untenable. The authorization was based on a request to verify the existence of RJT without any independent application of mind by the Additional Commissioner. The court held that the authorization did not meet the statutory requirements of Section 67(2) of the CGST Act, which mandates that the proper officer must have "reasons to believe" that goods are liable for confiscation or documents are secreted.

3. Compliance with Statutory Provisions under Section 67(2) of the CGST Act:
The court noted that the expression "reasons to believe" controls the exercise of powers under Section 67(2) and requires actionable material that has a nexus with the formation of the belief. The court found that the search and seizure were conducted without such actionable material. The panchnama recorded during the search indicated that the goods were detained because the stock register was not produced, but this was explained by the fact that the stock register had been seized earlier by DGGI (AZU).

4. Maintenance and Availability of Stock Register and Supporting Documents:
The court observed that RJT had provided primary documents such as e-invoices, tax invoices, e-way bills, and transporter challans to support the purchase transactions of the goods found during the search. The respondents' claim that the documents were unrelated was not substantiated with evidence. The court also noted that RJT's stock details were available in electronic form, as permitted under Section 35 of the CGST Act.

5. Provisional Release of Goods and the Terms Thereof:
The court did not delve into the terms of the provisional release order dated 12.05.2021, as it found the authorization for the search and seizure itself to be legally untenable. Consequently, the court set aside the orders of seizure and prohibition dated 05.03.2021 and directed the release of the documents seized during the search.

Conclusion:
The court declared the search and seizure conducted by CGST Delhi North Commissionerate as unlawful. Both the orders of seizure and prohibition dated 05.03.2021 were set aside. The court directed the release of the seized documents to RJT, allowing the concerned officer to retain copies for further investigations if required. The writ petition and pending applications were disposed of, with no order as to costs.

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