2025 (4) TMI 1691 - HC - GST

Ruling upholds police seizure of trucks and areca nuts over forged GST documents; auction proceeds refundable if ownership proved

HC dismissed the petition and upheld the seizure of trucks and betel/areca nuts by police, finding no valid ownership documents and reasonable suspicion ... Seizure of trucks and betel nuts - petitioner failed to produce any authentic document in support of ownership - jurisdiction of police/BNSS to investigate and prosecute offences - prevalence of CGST Act over the general laws and the BNSS-2023 - HELD THAT:- Section 67(1) of the Act provides that where the proper officer not below the rank of joint commissioner has reason to believe that there is any violation or evasion of tax under the GST Act, he may authorise in writing any other officer of the department to inspect any of the places of business of the taxable persons and under section 67(2), where such officer either pursuant to an inspection, carried out under section 67(1) or otherwise has reason to believe that any goods liable for confiscation or any document or books or things which in his opinion shall be useful for all relevant to any proceeding under the Act are secreted in any place, he may authorise in writing any other officer for search and seizure, of such goods or documents and it also provides that prior to such inspection or search or seizure a recording of reasons by the proper officer for such relief, is required and only thereupon the process of search seizure or confiscation can take place. It is settled Principe of law that as the seizure of the property by a government servant amounts to a clear entrustment of the property to a government servant, and the idea is that the property should be restored to the original owner after the necessity to retain it ceases. In Basavva kom Dyamangouda patil Vs. State of Mysore and another [1977 (4) TMI 170 - SUPREME COURT] the Hon’ble Supreme Court held that there may be two stages when the property may be returned to the owner. In the first place it may be returned during any enquiry or trial particularly where the property concerned is subject to speedy or natural decay and there may other compelling reasons also which may be justified the disposal of the property to the owner or otherwise in the interest of justice and for that it is not must for the investigating agency to produce the seized articles before the court. In the instant case the documents made available on the record so far it relates to violation of the provisions of GST Act are not being relied upon by the prosecution to indicate any such violation under the provision of GST Act but what is contended is that some such documents are either fraudulent or it contains forged signature, resulting offence under sections 318(4)/336(3)/340(2)/303(2)/317(2)/317(5) of BNS with the specific allegation that the petitioners were involved in fraud and forgery as regards certain documents related to GST - there are no substance in the petitioners argument that since CGST Act 2017 is special law carving out a special jurisdiction, providing special powers, it would prevail over the provision of Indian Penal Code/BNS or the search and seizure of the alleged offence can only be conducted in accordance with the provision of the GST Act. Moreover, even if there is a violation of customs Act and GST Act as well, there would be no bar to hand over the Investigation to the customs authority so far as it relates to the allegations of smuggling is concerned. Similarly, for the violation of the taxation or loss under the GST Act, the investigation ought to be undertaken simultaneously and as such the seizure of the betel nuts/areca nuts and the trucks by the police authorities cannot be said to be without authority - Investigation further reveals that during interrogation drivers of the offending vehicle made contradictory statement and on prolonged interrogation admitted that some persons are running this business for their wrongful gain. Moreover, till date no one produced any valid document in respect of purchase of seized betel nuts and as such there is reasonable suspicion that the nuts was transporting in illegal way and has been procured in illegal manner. The report relating to investigation raises serious doubt over the authenticity of the documents, the petitioner relied. The suspected documents are subjected to scrutiny in the investigation conducted by police, where the specific allegation is that the documents are fabricated, manipulated and has been used at the behest of other persons indulging in illegal business of betel nuts/areca nuts, using documents in the name of planted persons - Moreover, if auction is conducted, there would be no loss to the petitioner as in that case it would be deposited in refundable fund and if petitioner succeeds to establish his ownership in trial, the entire amount may be directed to be transferred to his account. The learned trial court has rightly appreciated the real aspect of the matter and there appears no irregularity in the order impugned, which can call for interference by this court, invoking court’s inherent jurisdiction. Application dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether seizure of trucks and betel/areca nuts and institution of criminal proceedings under the Bharatiya Nyay Sanghita, 2023 (BNSS) is lawful when the carriers produced tax invoices, e-way bills and GST registration documents. 2. Whether the CGST Act, 2017 (a 'special law') ousts the jurisdiction of police/BNSS to investigate and prosecute offences (forgery, cheating, use of forged documents, smuggling) alleged in relation to purportedly fraudulent GST documents and transported goods. 3. Whether possession of a tax invoice, e-way bill and GST registration by the drivers establishes lawful ownership/entitlement sufficient to preclude offences of theft/receiving stolen property and to require immediate return of perishable seized goods. 4. Whether the trial court erred in refusing to release the seized goods and in directing disposal under statutory provisions where ownership remained unascertained and investigation raised suspicion of document fabrication. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Lawfulness of seizure and criminal proceedings despite production of tax invoice, e-way bill and GST registration Legal framework: Seizure and investigation powers under BNSS for cognizable offences; provisions of CGST Act 2017 (inspection/search/seizure under ss. 67, arrest/powers under s. 71 and s. 132 offences); principles governing return of seized property and disposal (BNSS provisions on disposal cited by court). Precedent treatment: The Court referred to authorities on restoration/disposal of seized property where perishable goods are involved (principles in Sunder Bhai Ambalal Desai and Basavva Kom). The petitioner relied upon precedents stressing admissibility/value of statutory documents (Rajiv Thapar, Dipak Babaria) but the Court treated those precedents in light of the factual finding of document suspicion. Interpretation and reasoning: The Court examined investigation material showing that consignor and logistics entries on GST portal did not correspond to physical business presence and that logistics provider details were inactive/forged. Given those investigative findings, the Court held that documents produced (tax invoice, e-way bill, GST number) were susceptible to being fabricated or manipulated and therefore could not conclusively establish lawful character of the goods. The presence of statutory documents does not immunize parties from criminal inquiry where prima facie evidence suggests forgery or fraud. Ratio vs. Obiter: Ratio - where investigating material raises reasonable suspicion about the authenticity of tax/GST documents, seizure and criminal investigation by police under BNSS is permissible notwithstanding production of such documents. Obiter - reference to perishable-good principles (restoration in interest of justice) applied as guidance. Conclusion: Seizure and initiation of criminal proceedings under BNSS were lawful in the circumstances; production of tax invoice/e-way bill/GST registration did not preclude criminal inquiry when authenticity was seriously doubted by investigation. Issue 2 - Whether CGST Act ousts BNSS/police jurisdiction to investigate alleged frauds in tax documents Legal framework: Doctrine of special law: special statutes prevail over general laws where applicable; specific statutory provisions in CGST Act for inspection/search/seizure and for prosecution of tax offences (ss. 67, 71, 132, etc.); BNSS criminal provisions for forgery, cheating, use of forged documents and cognizable offences permitting police action. Precedent treatment: Petitioner argued exclusivity of CGST remedies (Dipak Babaria reliance) and that GST regime provides a complete code. The Court distinguished that where offences independent of tax evasion (e.g., forgery/cheating/smuggling) are alleged, general criminal law/BNSS investigation is not ousted. The Court noted established practice that customs/tax authorities may be involved where appropriate but concurrent jurisdiction is permissible. Interpretation and reasoning: The Court accepted that CGST Act governs taxation matters and prescribes procedures/powers for tax enforcement, but held that this does not exclude criminal investigation under BNSS where distinct cognizable offences (forgery, fraud, smuggling) are alleged. The Court emphasized that where the police have reason to suspect independent criminality in the documentation or conduct (fabrication, use of forged documents to cheat), police action under general criminal law is maintainable; simultaneous tax investigation or referral to tax/customs authorities can occur but does not preclude police investigation. Ratio vs. Obiter: Ratio - CGST Act does not constitute an absolute bar to criminal investigation under BNSS/other criminal statutes where separate cognizable offences (fraud/forgery/smuggling) are alleged; special law does not necessarily oust concurrent criminal jurisdiction in such cases. Obiter - procedural interactions between tax and criminal investigations and administrative remedies noted as permissible. Conclusion: The CGST Act does not preclude police/BNSS prosecution for alleged forgery/cheating/smuggling where investigation discloses material raising reasonable suspicion; therefore BNSS proceedings were not barred merely because GST provisions exist. Issue 3 - Sufficiency of statutory GST documents to negate theft/receiving stolen property and to mandate return of perishable seized goods Legal framework: Elements of theft and receiving stolen property (dishonest intention, possession transferred from prior owner); statutory evidentiary/status implications of tax invoice, e-way bill and GST registration; principles on return of seized property (expeditious exercise of power, special caution where goods are perishable - Basavva, Sunder Bhai). Precedent treatment: The Court considered authorities indicating that return may be ordered where ownership is conclusively proved or where retention causes prejudice (perishable goods). However, those precedents presuppose that entitlement/ownership is established or no reasonable suspicion exists regarding provenance. Interpretation and reasoning: The Court held that statutory transport/tax documents are necessary for lawful inter-state movement but are not ipso facto proof of ownership or bona fides when investigative material contradicts their authenticity. Theft/receiving stolen property require dishonest intent and proof of prior lawful possession by another; here the prosecution alleged forgery and absence of legitimate source documents (purchase invoices, correct portal entries), so the presumption of lawful possession could not be accepted. Given absence of corroborative ownership proof and active investigative doubts, immediate return was not justified. The Court noted that disposal by auction with refundable deposit protects petitioner's monetary interest pending proof of ownership at trial. Ratio vs. Obiter: Ratio - possession of tax invoice/e-way bill/GST number does not conclusively establish ownership or negate criminality where independent investigation raises reasonable suspicion about fabrication; return of perishable seized goods requires clear entitlement, absent which trial court may refuse release. Obiter - practical guidance on auction/refundable fund to protect claimants' financial interest. Conclusion: The documents produced were insufficient to mandate return of seized perishable goods; trial court correctly refused release where ownership was unestablished and authenticity of documents was under investigation. Issue 4 - Validity of trial court's refusal to release goods and direction for disposal Legal framework: Authority of Magistrate under BNSS provisions to order disposal (cited statutory disposal provisions); duties of court in evaluating entitlement and risk of misuse or decay; requirement of scrutiny where ownership is disputed. Precedent treatment: Decision applied the principle that courts must exercise disposal/return powers judicially and expeditiously (Sunder Bhai, Basavva) but only when claimant establishes entitlement or where retaining property would cause prejudice; otherwise, preservation for investigative/trial purposes is warranted. Interpretation and reasoning: Court found trial court's conclusion-that ownership was not yet ascertained and material raised suspicion-was supported by investigation reports and therefore not vitiated by error. The trial court's direction for disposal under relevant BNSS provision and refusal to release to the petitioner were reasonable safeguards given risk of loss and questionable provenance. The Court emphasized that if petitioner later establishes ownership, monetary relief from auction proceeds is available. Ratio vs. Obiter: Ratio - where investigation raises bona fide doubts about entitlement and authenticity of documents, the magistrate may lawfully refuse restoration and order disposal in accordance with statutory scheme; reversal not warranted absent miscarriage of justice. Obiter - procedural observation that auction/deposit mechanisms protect successful claimants. Conclusion: Trial court did not err in refusing release of goods and directing disposal; appellate interference was unwarranted on the record.