Seizure of the goods of the godown without jurisdiction may amount to misconduct

[CA Bimal Jain]

The Hon’ble Allahabad High Court in MAHAVIR POLYPLAST PVT. LTD. VERSUS STATE OF U.P. AND 2 OTHERS  - 2022 (8) TMI 410 - ALLAHABAD HIGH COURT quashed the orders of the GST officials for seizing the goods of the assessee inside the godown without jurisdiction. The court also directed the Commissioner Commercial Tax UP to look into the matter, and take appropriate action commensurate to the misconduct, if any.

Facts:

Mahavir Polyplast Pvt. Ltd. (“the Petitioner”) is a manufacturer of PVC pipes and it has established its manufacturing unit at Tehsil-Kirawali, Agra. They store all its raw materials and manufactured goods at a godown located on the same premises.

The business premises of the Petitioner was subjected to a search and seizure operation by the Special Investigation Branch (“SIB”) of the Commercial Tax Department, Agra dated August 7, 2018 and described them as "Vahan Sankhiya UPGODOWN02" and "Vahan Sankhiya GODOWON". A Panchnama was drawn on the same day mentioning the allegation of shortage of physical stocks as compared to that recorded in the stock registers.

Show cause notices dated August 9, 2018 and August 14, 2018 (“SCNs”) were issued by the Assistant Commissioner (Mobile Squad), Unit-II Agra, and Assistant Commissioner (Mobile Squad) -5 Agra ("the Department”) respectively under Section 129(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) with respect to "Vahan Sankhiya GODOWON". Accordingly, seizure orders had been passed demanding tax and penalties.

Therefore, the Petitioner filed two writ petitions for the same.

Issue:

Whether the goods were seized without jurisdiction?

Held:

The Hon’ble High Court of Allahabad in MAHAVIR POLYPLAST PVT. LTD. VERSUS STATE OF U.P. AND 2 OTHERS  - 2022 (8) TMI 410 - ALLAHABAD HIGH COURT, held as under:

• Stated that as far as the seizure of goods and demand of tax under Section 129 of the CGST Act is concerned, the Department acted negligently.  Since they deliberately described the vehicles wrongly as "Vahan Sankhiya UPGODOWN02" and "Vahan Sankhiya GODOWON" they cannot deny that they were aware that the subject search was not directed at any vehicle but at an immovable property.
• Directed that this order of the Court must be communicated to the Commissioner Commercial Tax UP to look into the matter, call for explanation and take appropriate action commensurate to the misconduct, if any, that may be found committed by the erring officers and to make consequential and corrective action to avoid such occurrences, in future.
• Concluded that the entire proceedings drawn up against it under Section 129(3) of the CGST Act, are found to be without jurisdiction as the Department chose to exercise powers vested in them to search a vehicle carrying goods during transportation to proceed against goods lying in a godown. Any amount that may have been deposited by the Petitioner may be refunded together with interest at the rate of 8%, subject to adjudication proceedings.
• Therefore, the Court allowed the writ petitions.

Relevant Provisions:

Section 129(3) of the CGST Act:

“Detention, seizure, and release of goods and conveyances in transit

129. (3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”

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