2023 (9) TMI 996 - HC - GST

Section 67(2) CGST prohibition orders equivalent to seizure orders require reason to believe goods liable for confiscation before issuance

Best Crop Science Pvt. Ltd. Versus Superintendent, CGST, Delhi West And Ors.

Delhi HC held that orders of prohibition under Section 67(2) of CGST Act are equivalent to seizure orders and require 'reason to believe' goods are liable ... Validity of search and seizure - reason to believe present or not - order of prohibition - impugned SCN issued beyond the period of six months, as contemplated under Sub-section (7) of Section 67 of the CGST - HELD THAT:- Sub-section (2) of Section 67 of the CGST is applicable only when it is not practicable to seize the goods. The contention that it is open for the concerned authorities conducting search, to first pass an order under the first proviso to Sub-section (2) of Section 67 of the CGST and, thereafter, take an informed decision whether to seize the goods, is unmerited. The action for seizure of the goods is required to be predicated on a reason to believe that the goods are liable for confiscation. This condition is required to be satisfied, before passing any order under the proviso to Sub-section (2) of Section 67 of the CGST as well. The first proviso permits the concerned authorities to pass an order prohibiting the tax payer from parting with the goods in cases where goods are liable for seizure, but is not practicable to do so. The order of prohibition is not a stop gap arrangement for the department to take an informed decision whether to seize the goods or not seize the goods. Although Sub-section (7) of Section 67 of the CGST Act refers to seizure of goods under Sub-section (2), it is clear from the scheme of Sub-section (2) of Section 67 of the CGST Act that an order of prohibition, is for all intents and purposes, an order of seizure. However, instead of physically seizing the goods, the taxpayer is directed not to part with or deal with the said goods if it is not practicable to seize the same. The contention that while the concerned authorities are required to return the seized goods if a notice is not issued within a period of six months; the order of prohibition can continue indefinitely, clearly militates against the scheme of Section 67 of the CGST Act. No further orders are required to be passed in this regard as the order of confiscation has already been passed by the concerned authority, and the same is the subject matter of another writ petition filed by the petitioner. The question whether the order of confiscation of goods is valid or is liable to be interfered with by this Court, is a matter to be considered in that petition and no order can be passed in this petition. The contention that the impugned show cause notice is liable to be set aside because it has not been issued within the period of six months from the date of the order of prohibition is unmerited. The consequence of Sub-section (2) of Section 67 of the CGST Act merely provides that if no notice is issued within the stipulated period, the goods seized are liable to be returned. It does not postulate that the notice, issued after six months, is invalid. Thus, the petitioner’s challenge to the impugned show cause notice on the ground that it was issued after six months of the order of prohibition is rejected. Petition disposed off. 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 ActThe 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 ActThe 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 monthsThe 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.