2025 (5) TMI 849 - HC - GST

Railway Goods Seizure Case: Balanced Approach Protecting Investigative Rights While Ensuring Procedural Fairness for Petitioners

Sainath Express Services Private Limited And H.L. Cargo Parcel Services Versus The Superintendent Appraiser Senior Intelligence Officer.

SC ruled on a case involving seizure of goods (cash, gold, silver) by Railway Protection Force without initial seizure memos. The Court directed ... Illegal seizure of the goods of the Petitioners - seeking direction to the Respondents to release the same forthwith - HELD THAT:- The GST Department is continuing with its investigation. The Income Tax Department also appears to have commenced some proceedings in respect of the items which have been seized. Since the investigation is already underway and both the Departments are taking action, it is deemed appropriate to direct as under :(i) The GST Department and the Income Tax Department shall ensure that the Petitioner is given notice of any proceedings they may undertake in respect of the above items. (ii) The Petitioner is free to approach both the Departments for seeking release of the goods, if permissible, in accordance with law. (iii) Both the Departments shall not dispose of the goods until the proceedings qua the said goods including investigation and adjudication, is completed. The Petitioner is accordingly free to approach both the Departments for release of the goods either under Section 129 or under Section 67 of the CGST Act and also under the Income Tax Act. Needless to add, this Court has not examined the merits of the matter - Petition disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter include:Whether the seizure of goods (cash, gold, and silver) by the Railway Protection Force (RPF) without issuance of seizure memos or show cause notices to the Petitioners was lawful and in accordance with statutory procedure.Whether the Petitioners are entitled to the release of the seized goods pending investigation and adjudication by the relevant authorities, namely the Directorate of GST Intelligence (GST Department) and the Income Tax Department.The procedural rights of the Petitioners under the Central Goods and Services Tax Act, 2017 (CGST Act) and the Income Tax Act concerning the seized goods.The scope of the Court's intervention in ongoing investigations and proceedings by statutory authorities.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Legality of the seizure of goods without issuance of seizure memos or show cause noticesRelevant legal framework and precedents: The seizure of goods under the CGST Act and allied statutes is governed by procedural safeguards including issuance of seizure memos and show cause notices to the affected parties. Section 129 of the CGST Act provides for detention, seizure, and release of goods and conveyances in transit. The procedural fairness mandates that the person whose goods are seized be informed promptly through seizure memos and given an opportunity to respond through show cause notices.Court's interpretation and reasoning: The Court noted that the Petitioners alleged that no seizure memos or show cause notices were issued at the time of seizure. However, the record indicated that summons were issued subsequently under Section 70 of the CGST Act and statements were recorded from the Petitioners' agent and the Petitioners themselves. The Court did not undertake a final determination on the legality of the initial seizure procedure but observed that the investigation was ongoing and procedural steps were being followed thereafter.Key evidence and findings: The seizure occurred on 5th/6th September 2024 by the RPF at New Delhi Railway Station. The goods seized included cash amounting to Rs. 85,72,360/-, gold bars weighing 498 grams valued at approximately Rs. 36,70,260/-, and silver ornaments/bricks weighing 365.704 Kg valued at approximately Rs. 27,95,69,995/-. No seizure memos or show cause notices were initially issued to the Petitioners, but summons and statements were recorded later.Application of law to facts: While the initial procedural lapse was noted, the Court emphasized the continuation of statutory investigation and the issuance of summons, which indicated procedural compliance at subsequent stages. The Court refrained from adjudicating on the merits of the seizure at this stage.Treatment of competing arguments: The Petitioners argued for immediate release of goods citing illegal seizure without due process. The Respondents contended that investigation was ongoing and procedural steps post-seizure were being followed. The Court balanced these by allowing the investigation to continue while safeguarding the Petitioners' rights to notice and opportunity to seek release.Conclusions: The Court did not quash the seizure but directed that the Petitioners be given notice of any proceedings and be allowed to seek release of goods in accordance with law.Issue 2: Entitlement to release of seized goods pending investigation and adjudicationRelevant legal framework and precedents: Section 129 of the CGST Act allows for release of detained or seized goods on payment of applicable tax, interest, and penalty, subject to conditions. Section 67 of the CGST Act pertains to search and seizure proceedings. The Income Tax Act also provides for attachment and release of seized property in investigations. The principles of natural justice and statutory safeguards require that goods not be disposed of arbitrarily during pendency of proceedings.Court's interpretation and reasoning: The Court recognized that the GST and Income Tax Departments were conducting investigations and had taken custody of different parts of the seized goods. The Court directed that the Petitioners be given notice of any proceedings by these Departments and be allowed to approach them for release of goods under the relevant statutory provisions.Key evidence and findings: The goods were physically in possession of the GST Department (silver items) and the Income Tax Department (gold and cash). The investigation was ongoing with statements recorded and summons issued.Application of law to facts: The Court applied the statutory provisions governing release of seized goods and emphasized that the Petitioners' right to seek release should be respected. The Departments were restrained from disposing of the goods until completion of investigation and adjudication.Treatment of competing arguments: The Petitioners sought immediate release or interim custody of goods. The Departments requested continuation of investigation and retention of goods. The Court balanced these interests by allowing investigation to proceed while ensuring Petitioners' procedural rights and providing a mechanism for release applications.Conclusions: The Court directed that any application for release be considered and disposed of within three months and that goods not be disposed of until proceedings are complete.Issue 3: Scope of Court's intervention in ongoing investigations by statutory authoritiesRelevant legal framework and precedents: Courts generally exercise caution in interfering with ongoing investigations by statutory authorities, respecting the autonomy and expertise of such agencies. Judicial intervention is limited to ensuring procedural fairness and protection of fundamental rights.Court's interpretation and reasoning: The Court explicitly stated that it had not examined the merits of the matter and refrained from interfering with the ongoing investigations. The Court's role was limited to ensuring that the Petitioners receive due notice and opportunity to be heard and that statutory procedures are followed.Key evidence and findings: The record showed active investigations by the GST and Income Tax Departments with summons and statements recorded.Application of law to facts: The Court's directions ensured procedural safeguards without prejudging the outcome of investigations or adjudication.Treatment of competing arguments: The Petitioners sought judicial intervention for release of goods; the Departments sought continuation of investigation. The Court struck a balance by protecting Petitioners' rights while allowing investigations to proceed.Conclusions: The Court limited its intervention to procedural directions and declined to decide on substantive issues pending investigation.3. SIGNIFICANT HOLDINGSThe Court held:'The Petitioner is accordingly free to approach both the Departments for release of the goods either under Section 129 or under Section 67 of the CGST Act and also under the Income Tax Act. Needless to add, this Court has not examined the merits of the matter.''Both the Departments shall not dispose of the goods until the proceedings qua the said goods including investigation and adjudication, is completed.''If any application for release of the goods is made, the same shall be considered and disposed of within a period of three months from the date of filing.'These pronouncements establish the principle that while statutory authorities may retain seized goods during investigation, the affected parties must be given due notice and opportunity to seek release under applicable laws, and that judicial intervention will focus on ensuring procedural fairness rather than adjudicating merits prematurely.In conclusion, the Court disposed of the petitions with directions safeguarding the procedural rights of the Petitioners and ensuring that investigations and adjudications proceed without undue interference, while also mandating timely consideration of any applications for release of seized goods.