GST goods dealing prohibition orders u/s67(2) treated as seizure; show-cause notice after six months upheld.

An order under the first proviso to s.67(2) CGST Act (prohibiting dealing with goods) can be made only where the authority already has "reason to believe" the goods are liable to confiscation and seizure is not practicable; it is not a provisional measure to decide later whether to seize. The prohibition order operates, in substance, as seizure, so it cannot be treated as continuing indefinitely contrary to the s.67 scheme. However, s.67(7) only mandates return of seized goods if no notice issues within six months and does not invalidate a show cause notice issued after six months; accordingly, the challenge to the SCN on limitation was rejected and no relief was granted in view of a separate pending challenge to confiscation.

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Issues Involved:
1. Legality of the search conducted under Section 67(2) of the CGST Act.
2. Validity of the impugned show cause notice issued beyond the period specified under Section 67(7) of the CGST Act.
3. Whether the seized goods are liable to be returned if the notice is not issued within six months.

Summary:

Issue 1: Legality of the search conducted under Section 67(2) of the CGST Act

The petitioner challenged the searches conducted on 05.05.2022 and 26.08.2022, claiming they were done without any reason to believe that there was suppression of transactions or stock. The court noted that the proper officer must have reasons to believe that the goods are liable for confiscation before passing any order under the proviso to Sub-section (2) of Section 67 of the CGST Act.

Issue 2: Validity of the impugned show cause notice issued beyond the period specified under Section 67(7) of the CGST Act

The petitioner argued that the show cause notice issued on 01.03.2023 was beyond the six-month period specified under Sub-section (7) of Section 67 of the CGST Act, making it liable to be quashed. The court observed that the goods were seized on 21.09.2022, and the show cause notice was issued within six months from the seizure date. The court held that the notice issued after six months of the order of prohibition is not invalid and rejected the petitioner's challenge on this ground.

Issue 3: Whether the seized goods are liable to be returned if the notice is not issued within six months

The petitioner contended that the goods seized should be returned as the notice was issued beyond the six-month period. The court referred to the Gujarat High Court's decision in Devesh Radheshyamji Kabra v. State of Gujarat and noted that if no notice is issued within six months from the date of seizure, the goods must be returned. However, since an order of confiscation was already passed and is the subject of another petition, the court did not pass any further orders regarding the return of goods.

Conclusion:

The court concluded that no further orders were required in this petition as the order of confiscation is subject to another writ petition. The challenge to the impugned show cause notice on the ground of being issued after six months was rejected. The petition was disposed of with all rights and contentions of the parties regarding the confiscation of goods reserved.

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