TaxTMI 
TaxTMI 
2021 (7) TMI 924
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....prohibition order dated 05.03.2021. iii. To declare the search conducted on the premises of RJT as illegal since it did not align with the provisions of Section 69 [sic Section 67] of the Central Goods and Services Tax (CGST) Act, 2017 [in short "CGST Act"]. iv. Lastly, award costs. 2. Before we proceed to adjudicate the writ petition, it would be relevant to advert to certain facts, circumstances, as also assertions, made in the pleadings by the parties. Background facts: - 3. RJT claims that it obtained registration with the GST department and was, accordingly, issued a registration certificate on 20.09.2020. 3.1. RJT also claims that it is inter alia in the business of trading in cigarettes which are supplied to it by authorised dealers of well-known manufacturing companies. It is also averred by RJT that since the time it commenced business, it has traded in tobacco products, which includes, as indicated above, cigarettes, and in that regard, has complied with the provisions of not only the CGST Act but also the Delhi Goods and Services Tax Act, 2017. It is claimed by RJT that it has deposited tax from time to time as required under the said statut....
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.... A-6 Miscellaneous file Stock register details 1 to 219 3.5. As would be evident, the officers of DGGI (AZU), amongst the documents seized on 14.02.2021, resumed a miscellaneous file that contained "stock register details". 3.6. It appears that on the very same date i.e. 14.02.2021, summon's were issued to one of the partners of RJT i.e. Mr. Rajiv Kumar, inter alia, to give evidence, for the production of documents and for making a statement before the concerned SIO. 3.7. RJT claims that on 05.03.2021, at about 05:20 P.M., another set of officers from a different Commissionerate i.e. CGST Commissionerate, Gautam Budh Nagar paid a visit to its registered premises for, conducting a search. The authorisation for carrying out the search was issued by Additional Commissioner, CGST Delhi North Commissionerate. 3.8. It is RJT's case that a day before the second search, that is, on 04.03.2021, it had closed its stock, insofar as cigarettes were concerned, which reflected that it possessed 98 cartons comprising 11,32,000 sticks. RJT's version is that these cigarettes were purchased from two suppliers i.e. M/s Blue Water Agencies; an authorised supplier of ITC Limite....
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....apers and goods found during the search, I have reasons to believe that certain goods liable to confiscation and documents useful/relevant to proceedings under this Act are secreted in [the] place mentioned above." 4.2. The premises referred to is the registered office of RJT where the search was conducted. 4.3. Besides this, an order of prohibition of even date i.e. 05.03.2021 in Form GST INS - 03 was also passed. This form was accompanied by an inventory list which gave a break up of 190 cartons of cigarettes qua which the aforementioned order of detention was passed. [See page 146 of the paper book.] "and on scrutiny of the books of accounts, registers, documents/papers and goods found during the inspection search, I have reasons to believe that certain goods liable to confiscation and/or documents and/or books and/or things useful for or relevant to proceedings under this Act are secreted in place(s) mentioned above. Therefore, in [the] exercise of the powers conferred upon me under subsection (2) of Section 67, I hereby order that you shall not/shall not cause to remove, part with, or otherwise deal with the goods except without the previous permission ....
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....s. Given the fact that Mr. Singh informed us that a date had been fixed for disposal of the application, Mr. Manish chose not to press the application. Consequently, the main matter was re-notified for the date already fixed i.e. 25.05.2021. 5.3. On 25.05.2021, we were informed by Mr. Manish that respondent no. 3 had not filed its counter-affidavit. According to Mr. Manish, the counter-affidavit of respondent no. 3 was crucial for the purposes of adjudicating the instant writ petition. Given this position, further time was granted to respondent no. 3 to file a counter-affidavit. Accordingly, the matter was fixed for hearing on 03.06.2021. On that date, arguments were heard in the matter on behalf of RJT which were advanced by Mr. Manish. The matter was listed for further arguments on 04.06.2021, which was the last date before which the Court went into summer recess. 5.4. Since Mr. Manish indicated on 04.06.2021, that he would require further time, the matter was posted for 05.07.2021; being the first day of Court reopening after the summer break. The arguments in the matter were finally completed and judgement in the matter was reserved on 06.07.2021. We may also note, in the....
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.... alia, the following was recorded. [See PDF page 551 of the paper book] "On being asked about bills/invoices related to M/s Mahadev Agencies (GSTN: xxx) and M/s R.J. Trading Co. (GSTN: xxx) Shri Kirtan Pandya informs the officers that they don't keep any invoices because they return the original invoices along with goods and delivery slip to [the] consignee of goods after confirmation of payment of freight charges. The officers also did not find any invoices during the search proceeding. On being asked about the consignment related to M/s Mahadev Agencies that was returned from M/s R.J. Trading Co. Shri Kirtan Pandya informs the officers that 7 lorry receipts (LR Nos. 0024982, 0024985, 0024986, 0024987, 0024988, 0024989 and 0024990) having 87 units (no. of parcels) related to goods of M/s Mahadev Agencies reached this office cum godown yesterday i.e. 12.03.2021 approx at 11:00 hrs. Further, Shri Kirtan Pandya informs the officers that Shri Ramesh Panchal, [the] delivery office in charge made [a] call to M/s Mahadev Agencies on their mobile no. xxx on 12.06.2021 approx at 11:30 hrs to collect their consignment. Further, Shri Kirtan Pandya informs that the offic....
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....s were found in the registered premises of RJT, they were not secreted in any place as contemplated under the said provision. Second, before exercising powers of search and seizure the proper officer was required to form reasons to believe that the goods were liable for confiscation or any documents or books or thing useful for or relevant to any proceedings under the CGST Act had been secreted. Third, the power of search and seizure could only have been exercised by an officer, not below the rank of Joint Commissioner or any other officer who had been duly authorised by the proper officer. None of the ingredients which are prerequisites for the exercise of powers under Section 67(2) of the CGST Act, were present. In other words, the impugned order of prohibition has been issued without authority of law and jurisdiction. v. The reason trotted by the respondents for carrying out the impugned actions is predicated on an investigation carried out at the instance of Chief Commissionerate, Meerut in respect of some persons/entities including an entity going by the name M/s Mridul Tobie Inc. who is said to have been supplied goods by RJT. It is claimed that an enquiry was triggered ag....
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....ted 04.03.2021 was[sic: were] actually transported to Delhi. Answer: Yes. All the goods mentioned in GR No. 958 dated 04.03.2021 [were] actually transported to Delhi from my Bus bearing HR 68 B 1447. Question: Do you know the supplier of goods M/s Blue Water Agencies? Answer: I know M/s Blue Water Agencies. The firm is my regular client. He is [a] supplier of cigarettes. Question: Your GSTIN is not valid. What do you have to say about this? Answer: I use to generate part B of [the] e-way bill wherever required from this ID only. My ID is functional. Question: So, this is basically e-way ID, not GSTIN. Answer: I am not aware of this technically. Whenever any supplier asked me for my GSTIN for transportation of goods I gave them this no. and till date, no one raised any objection. Question: How was the order placed? Answer: Telephonically. Question: Who placed the order? Answer: Employee of firm Sh. Vishal. Question: Whether you checked the goods at the time of receipt from [the] party? Answer: Yes We open all boxes and do check. The goods sent on 04.03.2021 through GR....
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.... and the resultant issuance of the impugned prohibition order and resumption of documents had no legal basis: the goods detained are supported by relevant documents i.e. e-invoices/tax invoices/e-waybills and transporter challans, and the respondents have made enquiries both with the suppliers as well as the transporters all of which only goes to establish that there was no attempt to carry out "illicit trade or supply" of goods. vii. In support of his submissions, Mr. Manish has relied upon the following judgements. a) Valerius Industries vs. Union of India, 2019 (30) G.S.T.L. 15 (Guj.) b) Golden Cotton Industries Vs. Union of India, 2019 (29) G.S.T.L. 587 (Gui.) c) Mahendra Kumar Indermal Vs. Dy. Asst. Commr. (ST), Vijaywada reported as 2020 (37) G.S.T.L. 168 (A.P). d) Exim Incorporation Vs. Union of India & Ors., 2020-TIOL-2 124-HC-MUM-CUS e) Ganesh Yadav Vs. Union of India, 2015 (320) E.L.T. 711 (All.) f) Subhlmpex Vs. Union of India, 2018 40-4 1 (14) G.S.T.L. 4 (Del.) g) G.B. International Versus Union of India, 2017 (347) ELT 406(Del.) h) Vega Auto Accessories (Pvt.) Ltd. Vs. Registrar, 2018 (14) G.S.T....
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....gave the Additional Commissioner, who authorized the search at RJT's premises, "reasons to believe" that the goods that may be found therein were liable to be confiscated. Therefore, the exercise of power under Section 67(2) of the CGST Act was in consonance with the provisions of law. vi. RJT was required to maintain the stock register on a real-time basis. The obligation to maintain a stock register is embedded in Section 35 of the CGST Act read with Rule 56 of the Rules. The mere fact that RJT's stock register was seized, on 14.02.2021, by officers of DGGI (AZU) cannot absolve RJT of the obligation to maintain a stock register. RJT could have applied to DGGI (AZU) for copies of the seized documents including the stock register. vii. Investigations, as indicated above, in RJT's case are only being carried out by CGST Noida and that officers of CGST Delhi North Commissionerate were only assisting the officers of CGST Noida [when the search was carried out on 05.03.2021] since RJT's premises fell within the territorial jurisdiction of CGST Delhi North Commissionerate. The "seizure action" was taken by CGST Delhi North Commissionerate. Thereafter, on an applica....
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....r of an entity, which was being investigated by his office. The entity, which was being investigated, was M/s Mridul Tobie Inc. and its L2 supplier, whose existence was to be established, was none other than RJT. This communication also requested that a search be conducted at the principal place of business of RJT (as detailed out therein) since it would aid in investigating the affairs of M/s Mridul Tobie Inc. Pertinently, this communication was not filed with the counter-affidavit and it was submitted to the Court only when a query was raised as to what was the basis for issuance of authorization of even date, i.e., 05.03.2021 by the Additional Commissioner, CGST Delhi North Commissionerate. iv. The stated stand of CGST Delhi North Commissionerate is that it was only assisting CGST Gautam Budh Nagar/Noida and that it had conducted the search at RJT's premises at the behest of CGST Gautam Budh Nagar/Noida. v. On 05.03.2021, when the search was conducted at RJT's premises, three documents were generated, i.e., the panchnama, the order for seizure of documents in Form GST INS - 02 and an order of prohibition in Form GST INS - 03. Pertinently, the panchnama, which b....
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.... Joint Commissioner, power of inspection, search and seizure. Subsection (1) of Section 67 deals with, inspection. This power can be exercised only if the proper officer has reason to believe that eventualities provided in subclause (a) or (b) of subsection (1) of Section 67 have occurred. Subsection (2) of Section 67, on the other hand, confers, on the proper officer, not below the rank of the Joint Commissioner, the power to search and seize goods, documents or books or things, either pursuant to an inspection carried out under subsection (1) or otherwise, if he has reason to believe, that any goods liable to confiscation or any documents or books or things, which in his opinion, shall be useful for or relevant to any proceedings under the CGST Act are secreted in any place. The proper officer is empowered to either carry out the search and seizure himself or authorize in writing, any other officer of Central Tax, to carry out such search and seizure. 9.2. The first proviso to subsection (2) of Section 67 states that wherever it is not practicable to seize any such goods, the proper officer or any officer authorized by him, may serve on the owner or the custodian of the goods,....
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....proceedings under the CGST Act, are secreted in "any" place. In this case, as noted above, the search and seizure was conducted by an Inspector of the CGST Delhi North Commissionerate based on the authorization of the Additional Commissioner of the same department i.e. CGST Delhi North Commissionerate. Admittedly, in the instant case, no investigations were carried out against RJT by the CGST Delhi North Commissionerate. The authorization, as noticed above, (and qua which there is no dispute) was based on the communication dated 05.03.2021 addressed by Joint Commissioner (AE), Gautam Budh Nagar to the Additional/Joint Commissioner, CGST Delhi North Commissionerate. A careful perusal of this communication would show (something that we have noticed hereinabove) that the Joint Commissioner (AE), Gautam Budh Nagar wanted to know, in connection with the investigation of an entity going by the name M/s Mridul Tobie Inc., as to whether RJT, which was its L2 category supplier, actually existed. There is nothing stated in the document which could have formed the basis for issuing an authorization of even date by the Additional Commissioner CGST Delhi North Commissionerate. In other words, t....
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....rt of their plea that maintenance of stock register was mandatory, states in no uncertain terms, in the second proviso, that the registered person (in this case, RJT) may keep and maintain such accounts (which includes stock of goods) and other particulars in electronic form, in such manner, as may be prescribed. RJT claims [and there is no rebuttal qua this aspect], that details of stock were available, in electronic form. [See Annexure P-9 appended on page 100 of the paper book] 10. Furthermore, what the respondents have not explained (something which they should have dilated upon) is: why the documents seized on that date had nothing to do with the 190 cartons found at the premises of RJT. This attains significance as RJT has made specific averments in the writ petition that supporting documents such as e-invoice, tax invoice, e-way bills and transporter challans were available; an aspect we have noted above. The respondents, apart from making a bald assertion that the documents seized were not relevant, have not dwelled on this aspect of the matter or, filed copies of documents and registers which included sales and purchase registers that were resumed by them. What is even ....
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....prohibition and seizure, would show that the inspector has exercised the power on his own and not based on the authority of the proper officer i.e. the Additional Commissioner, we need not delve on this aspect any further, as it appears, the concerned officer, i.e., the inspector used a prescribed form without taking the trouble of modifying having known that he was not the proper officer but someone who was authorised to act on behalf of the proper officer. Because we have concluded, that the authorization accorded by the Additional Commissioner is legally untenable, this facet of the case need not be, dwelled upon any further. However, the respondents would do well, in future, to bear in mind that prescribed forms i.e. GST IN - 02 and GST IN - 03 are for guidance, and that necessary modification is made while passing orders depending upon who is conducting search and seizure. 15. For the very same reason, we are also of the view, that the application filed on behalf of RJT [i.e. CM No. 16668/2021] which inter alia seeks a direction for setting aside the order dated 12.05.2021, directing the provisional release of goods, based on the terms contained therein, need not detain us ....