2024 (3) TMI 680 - HC - GST

GST seizure prohibitory order on goods challenged; writ declined until taxpayer seeks release u/s67(6) mechanism

The dominant issue was whether a prohibitory order issued under the first proviso to s.67(2) CGST/WBGST Act could be interfered with in writ jurisdiction ... Prohibitory order under Section 67(2) of the CGST/WBGST Act - provisional release of seized goods under Section 67(6) - return of goods where no notice issued within six months under Section 67(7) - obligation to invoke statutory remedy before seeking judicial relief - prohibition on indefinite continuation of a prohibitory orderProhibitory order under Section 67(2) of the CGST/WBGST Act - provisional release of seized goods under Section 67(6) - return of goods where no notice issued within six months under Section 67(7) - obligation to invoke statutory remedy before seeking judicial relief - Whether the prohibitory order dated 25th March, 2023 could be quashed when the assessee had not sought release of the goods under the statutory mechanism in Section 67(6) of the GST Act - HELD THAT: - The Court noted that the order impugned was passed by invoking the first proviso to Section 67(2) and that the petitioners had not availed the remedy of provisional release provided by Section 67(6). Reliance was placed on the Supreme Court's observation that assessees must take recourse to the mechanism in the Act for release on provisional basis (including bond, security or payment as prescribed). Section 67(7) operates to mandate return where no notice of seizure is issued within six months, but that provision applies in the specific circumstances where no notice has been given; it does not absolve the assessee from first seeking release under Section 67(6). The Court further recognised the principle that a prohibitory order cannot be permitted to continue indefinitely but observed that, in the present case, there is no grounds for interference at this stage because the petitioners have not invoked Section 67(6). The Court therefore declined to quash the prohibitory order, while directing that if the assessee makes an application under Section 67(6), the competent authority shall consider it in accordance with law. [Paras 11, 12, 13]Writ petition dismissed without quashing the prohibitory order; petitioners must invoke Section 67(6) for provisional release and any application so made shall be considered in accordance with law.Final Conclusion: The petition for quashing of the prohibitory order is dismissed: the assessee has not sought provisional release under Section 67(6) and the Court will not interfere; if an application under Section 67(6) is filed, the authority must consider it in accordance with law. Issues:The issues involved in the judgment are the quashing of the order of prohibition dated 25th March, 2023 issued under Section 67(2) of the CGST/WBGST Act, 2017, and the request for release of seized goods covered under the prohibitory order.Quashing of Prohibition Order:The petitioners filed a writ petition seeking the quashing of the prohibition order issued under Section 67(2) of the GST Act. A search and seizure procedure was initiated at the petitioners' registered place of business, followed by the issuance of a prohibitory order on 25th March, 2023. The petitioners participated in the proceedings and requested the release of the seized stock of timber. The respondent's office, in response, informed about the issuance of a show-cause notice under Section 122 of the GST Act without addressing the release request.Legal Arguments - Petitioners' Counsel:The petitioners' advocate highlighted Section 67(2) of the GST Act, empowering the proper officer to search and seize goods. He also referred to the first proviso to Section 67(2), allowing for the issuance of prohibitory orders. Citing Section 67(7), he argued that goods seized must be returned if no notice is given within six months. Relying on legal precedents, including judgments by the Supreme Court and the High Court of Delhi, the advocate contended that the goods should be returned due to the delayed show-cause notice.Legal Arguments - Respondents' Counsel:The respondents' advocate referred to Section 67(7) and Section 67(6) of the GST Act. He argued that the provision for return of goods applies only if no seizure notice is issued within six months. He pointed out that the petitioners did not seek provisional release of goods as per Section 67(6) and did not approach the respondents for the same.Judgment and Observations:The Hon'ble Court noted the prohibitory order passed under Section 67(2) and the petitioners' failure to request the release of goods under Section 67(6) of the GST Act. Citing a Supreme Court judgment, the Court emphasized that the assessee must follow the prescribed mechanism for seeking release of goods. Referring to a Delhi High Court judgment, the Court stated that the prohibitory order cannot continue indefinitely, but since the petitioners did not approach the respondents under Section 67(6), there was no basis for interference. The Court disposed of the writ petition with no costs, directing that any future application by the assessee for release of goods under Section 67(6) shall be considered in accordance with the law.Conclusion:The judgment primarily focused on the procedural aspects of seeking release of seized goods under the GST Act, emphasizing the need for compliance with the prescribed mechanisms. The Court highlighted the importance of following legal provisions and mechanisms for the release of goods, as outlined in the relevant sections of the GST Act.