TaxTMI 
TaxTMI 
2021 (7) TMI 924
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....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 statutes. The details of the tax deposited and copies of challans have been filed ....
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....nts 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 Limited and M/s Mahadev Agencies. RJT asserts that supplies made by the aforesaid entities were supported by necessary documents i.e. e-invoice/tax invo....
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....er 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 of the undersigned" 4.4. The order of prohibition was issued by one Mr. Naveen Sharma, Inspector, CGST. 4.5. Immediately thereafter, i.e. on 06.03.2021, two separate summons....
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....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 interregnum, the application filed on behalf of RJT for release of detained goods was disposed of via order dated 12.05.2021. The order was placed on record by RJT along with an interlocutory ....
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....a 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 officers approx. 15:15 hrs to 18:30 hrs M/s Mahadev Agencies collected their consignment from the godown of M/s Shrinath Cargo (P) Ltd. situated at basement "Sahajanand Park", Nr. Police Commissioner's Office, Shahibaug, Ahm....
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....ve 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 against tobacco leaf suppliers who had purchased tobacco leaf from farmers but had not deposited the requisite tax in consonance with the reverse credit mechanism. The stand of the respondents has several anomalies. Firstly, RJT is in the bu....
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.... 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 No. 958 was also checked at the time of receipt from [the] party and was found containing[ sic: to contain] cigarettes. Question: How is the freight charges determined? Answer: Freight charges is Rs. 130/- per box and includes delivery of recipient door Normally a box contains 24 small boxes and each small box contains 20 box[sic: boxes]. Question: Whether....
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....i. 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.L. 7 (Del.) i) Pioneer Corporation Vs. Union of India, 2016 (340) E.L.T. 63 (Del.) j) Anluir Carrier Express Cargo Service Vs. Union of India, 2018 (16) G.S.T.L. 354 (All.) Submissions advanced on behalf of the revenue: 7. On the other hand, Mr. Singh made the following submissions: i. The trigger for exercising power under Section 67(2) of the CGST Act was circular no. 1/2021 dated 31.01.2021 issued by CGST Agra and circulated by Chief Commissioner Office, Meerut. This circular wa....
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....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 application of RJT, a provisional release order was passed in its favour on 12.05.2021. viii. The 12.05.2021 order for provisional release is passed in line with the provisions of Section 67 of the CGST Act read with Rule 140 of the Rules. These provisions vest no discretion on the competent authority insofar as terms and conditions for provisional release of goods are concerned. In any event, the order passed is appealable under Section 107 of the CGST Act, and hence, cannot be challenged in the present writ petition. ix. In support of his submissions, Mr. S....
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....ven 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 broadly recorded as to how the search was carried out and what transpired during search recorded, inter alia, the following. a) 190 corrugated boxes containing cigarettes were found. b) Some documents were found in a wooden almirah, which were resumed. c) One of the employees of RJT, i.e., Shri Jaskirat Singh was asked to produce the stock register maintained at the premises [which he could not provide], which led to the formation of "reasonable belief", that the said goods were meant for "illicit trade/supply". This led to the detention of the said goods and the generation of "GST INS - 02" dated 05.03.2021. Th....
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....l 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, an order that he shall not remove, part with, or otherwise deal with the goods except with the prior permission of such officer. 9.3. What is crystal clear upon a perusal of the provisions of subsection (1) and (2) of Section 67 is that the expression "reasons to believe" controls the exercise of powers under the said provisions. Therefore, unless the basic jurisdictional facts exist, in a case, the power conferred under subsections (1) and (2) of Section 67 cannot be exercised. The expression "reasons to believe" is found in various statutes concerned with revenue laws, and therefore, has undergone a forensic analysis, metaphorically speaking, by Courts, in several cases. The width and amplitude....
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.... 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, the communication dated 05.03.2021 gives no clue that "any" goods of RJT were liable for confiscation or "any" documents, or books or things which would be useful for or relevant for proceedings under the CGST Act had been secreted to any place; a prerequisite for the formation of belief, and therefore, for the exercise of powers concerning search and seizure. 9.6. As noticed above, both the order of seizure of documents and the order of prohibition, simply replicate the language of subsection (2) of Section 67 and the corresponding Rule i.e. Rule 139(2). Thus, according to us, the very trigger for conducting the search [i.e. the authorization issued by the Additional Commissioner, CGST Delhi North Commi....
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....ficance 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 more disconcerting is that RJT's specific assertion in paragraph 131 of the writ petition, that a consignment of cigarettes [packed in 92 cartons comprising 10,94,000 sticks] was received while the search was being conducted on RJT's premises, has received no clear response from the respondents. This consignment forms a substantial part of the goods qua which the impugned prohibition order has been passed. For the moment, as indicated above, we are not even delving into the assertions made by the respondents that one of the transporters i.e. Sunny Tempo Transport was not in existence, although, as noted above, RJT has provided an explanation, vis-a-vis this transporter as well as concerning the other trans....