2019 (7) TMI 471 - GUJARAT HIGH COURT

In the present case

An order of seizure dated 5/12/2018 came to be passed by the Assistant Commissioner of State Tax (Enforcement Division-3), Gandhinagar. In the order it has been indicated that the goods as well as the Books and other documents have been seized. It also appears that thereafter an order of prohibition came to be passed under Rule 139(4) with respect to the goods in the nature of cotton seeds and bales.

Therefore, with regard of inspection, survey and search operations conducted by the GST department, the some of the facts narrated by the assessee (petitioner) were as follows:

The Petitioner says and submits that on 04-12-2018 some of the officers from the office of Assistant Commissioner (Enforcement) visited our premises and started investigation and during such investigation impounded some documents like Purchase invoices described by them as the dealer who are involved in billing activity.

The Petitioner says and submits that the said investigation continued up to 5-12-2018 for the reason that evening i.e. upto 7.30 p.m. the investigation could not be completed.

The petitioner says and submits that the respondents are served with the notice and are in the knowledge of the fact that the petitioner has challenged the order of prohibition issued under Section 67(2) of the CGST Act, 2017 has issued instructions that the time limit of the said order is further extended by six months.

Accordingly the grivences of the assessee in the present case were as follows:

 (A). The petitioner says and submits the order passed by the proper officer is improper and unjustified inasmuch as the order passed is in clear violation of principles of natural justice and is in excess of the powers conferred under the provisions of Section 67(2) of Goods and Service Tax Act, 2017?

(B). The petitioner says and submits that the order passed by the proper officer is premature and is in contravention to the provisions of Central goods and Service Act, inasmuch as the department has neither determined any liability by following the adjudication proceeding nor has issued any assessment order determining any liability as contemplated under the law.

(C). The petitioner says and submits that the order of prohibition passed by the roper officer without considering the fact that the goods under consideration are duly accounted for and are utilized in manufacturing of final product which are cleared with payment of tax and the liability thereon also stands discharged.

(D). The petitioner says and submits that the stock lying in the premises has no connection with the so called allegation of the department and is out of the purchases either from the traders who has discharged their liability or from farmers for which the petitioner has discharged liability under the provisions of the Reverse Charge Mechanism. In other words, the stock lying within the premises is duty paid stock and hence the order of prohibition is bad in law and is liable to be set aside.

Prayer

“that there being merit in this writ application, the same be allowed and the impugned order of prohibition be quashed.”

ANALYSIS :-

Clause (2) of section 67 of the Act, 2017 makes it clear that if the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons 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 this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books. The first proviso to clause (2) further clarifies that if it is not practicable to seize any such goods, the proper officer, or any officer authorised 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 previous permission of such officer. Clause (6) provides that the goods so seized under sub-section (2) can be released on a provisional basis upon execution of a bond and furnishing a security in such manner and on such quantum as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.

Scope of the term “secreted”

The Supreme Court in the case of  Gian Chand Versus State of Punjab [1961 (11) TMI 1 - SUPREME COURT] had an occasion to consider the meaning of the word “secreted” within the meaning of section 105 of the Customs Act. The Supreme Court in the said decision has observed and held as under :-

“....It cannot be said that the documents have not been 'secreted within the meaning of S.105 of the Customs Act unless they are hidden or concealed. In the context of the section the word means 'documents which are not kept in the normal or usual place' or it may even mean 'documents or things which are likely to be secreted'; in other words documents or things which a person is likely to keep out of the way or to put in a place where the officer of the law cannot find it. [1005 F-G].

The power to search granted under S.105 of the Customs Act is a power of general search and it is not necessary for its exercise that the authorisation should specify the documents for which search is to be made. But it is essential that before this power is exercised the preliminary conditions required by the section must be strictly satisfied that is, the officer concerned must have reason to believe that any documents or things which-in his opinion are relevant for any proceeding under the Act are secreted in the place searched. [1006 C-F]993.”

In view of the above, even if the authority has reason to believe that the goods liable to be confiscated are likely to be secreted, the authority will have the power to pass an order of prohibition pursuant to the order of seizure.

Observation with regard to unusual discrepancies on behalf of the Department

However, we find something very unusual in the Form GST-INS-02 issued under Rule 139(2) of the Rules with regard to the order of seizure which is at page 7 Annexure-A to this petition and Form GST-INS-03 issued under Rule 139(4) of the Rules with regard to the order of prohibition which is at page 41 Annexure-D to this petition. We are saying so because the order of seizure and prohibition is issued and duly signed by the Assistant Commissioner of State Tax (Enforcement) Division-3, Gandhinagar. The Assistant Commissioner is the person who has been authorised by the Proper Officer under section 67 of the Act to carry out the search and seizure. We fail to understand why it has been stated in the Form that he had reason to believe that certain goods were liable to confiscation and are secreted in the place mentioned in the order. The reasonable belief was entertained by the the Proper Officer.

The Assistant Commissioner appears to have merely carried out the orders of the superior officer namely the Appropriate Officer not below the rank of the Joint Commissioner. This aspect needs to be looked into by the State Government. It is possible that the Proper Officer not below the rank of Joint Commissioner under the Act may himself pass an order of seizure as well as order of prohibition. In such circumstances, the scenario would be altogether different. However, in the case on hand, it appears from the stance of the respondent No.4, as indicated in the Affidavit-inreply that the Assistant Commissioner of State Tax was authorised by the office of the Commissioner of State Tax (Enforcement) to inspect and carry out the search and seizure. To this extent, the orders of prohibition and seizure / Form - GST-INS-02 as well as the Form GST-INS-03 appears to be defective.

Final Decision

We are not impressed by the submission, that pending the confiscation proceedings, there could not have been any seizure or prohibition of the goods or documents or books of accounts or other things. The argument runs contrary to the Scheme of the Act.

The whole object is to preserve and protect the goods or books or documents pending the determination of the tax liability.

We would not like to go any further into the factual aspects of the matter. We have confined our adjudication only with regard to the legality and validity of the order of prohibition and in our opinion, the same is in accordance with law.

We permit the writ applicant to invoke clause (6) of section 67 of the GST Act and prefer an appropriate application before the appropriate authority for release of the seized goods on provisional basis upon execution of a bond and furnishing a security to the satisfaction of the concerned authority. If such an application is filed, the same shall be considered expeditiously, on its own merits and in accordance with law.

Full Text:

2019 (7) TMI 471 - GUJARAT HIGH COURT