TMI Blog2019 (7) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Even at this stage, the authority concerned is empowered to release the seized goods on a provisional basis upon asking the writ applicant to execute a bond and also furnishing security of a particular quantum. Thus, 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leased to issue a writ mandamus or in the nature of mandamus quashing and setting aside the instruction issued wide letter dtd. 23-05-2019 by Respondent No. 4 bearing No.SARAVEKMI (1) ANVESHAN/V-3/ GANDHINAGAR /2019-20/Ja: dated 23-05-2019. 2.00. The case of the writ applicant in his own words, as pleaded in the writ application, is as under :- 1. The Petitioner says and submits that the petitioner is engaged in processing of raw cotton classifiable under chapter 52 of the Schedule to the Goods and Service Tax Act, 2017 and is holder of Registration Certificate bearing No.24AAKFG9023B1ZR and are under the control of State Tax Officer, Ghatakt 93, Range-l, Rajkot. The Petitioner says and submits that they were holding registration under the provisions of Gujarat Value Added Tax Act and on introduction of Goods and Service Tax Act, has migrated as per the procedure prescribed under the law. 2. The Petitioner says and submits that they are following all the procedure prescribed under the provisions of the respective Acts and are also availing credit of eligible taxes paid on the input used in relation to the business activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 05-12-2018. 10. The petitioner says and submits that the respondents are served with the notice and are in the knowledge of the fat 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. 2.01. Thus, it appears from the materials on record that 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. The Seizure Order reads thus :- FORM GST INS-O2 ORDER OF SEIZURE [ See rule 139 (2)] Whereas an inspection under sub-section (1)/search under sub-section (2) of Section 67 was conducted by me on 04/12/2018 at __ AM/ PM in the following premise(s): ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D IN BILLING ACTIVITY YEAR 2018-19 PAGE NO.1 TO 311 And these goods; and or things are being handed over for safe upkeep to: With a direction that he shall not remove, part with, or otherwise deal with the goods or things except with the previous permission of the undersigned. Place : Dhokliya Date : 05-12-2018 Sd/- Illegible. Assistant Commissioner of State Tax Enforcement) Div.3, Gandhinagar. 2.02. The Prohibition Order reads thus : FORM GST INS-03 ORDER OF PROHIBITION [ See Rule 139(4))] Whereas an inspection under sub-section (1) / search under sub-section (2) of Section 67 was conducted by me on 04/12/2018 at ___ AM/PM in the following premise(s); SURVEY No-50, DHOKLIYA, JAMNAGAR ROAD, AMRELI GAM ROAD DlST-RAJKOT which is/are a place/places of business/premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AL CHANGANLAL RAMKABIR, POST DHOKALIYA, TA-PADDHARI, DlST-RAJKOT. Ramkabir A.C. Place : Dhokliya. Date : 05-12-2018 Sd/- Illegible. Assistant Commissioner of State Tax (Enforcement) Div.3, Gandhinagar. 2.03. Being aggrieved and dissatisfied with the orders of seizure as well as prohibition, the writ applicant has come up with this writ petition. 3.00. Mr.Sheth, the learned counsel appearing for the writ applicant vehemently submitted that the impugned order of prohibition is in clear violation of the principles of natural justice and contrary to the powers conferred under the provisions of Section 67(2) of the Goods and Service Tax Act, 2017 (for short GST Act ). 3.01. Mr.Sheth further submitted that the impugned order passed by the authority concerned is premature, as the department has neither determined any liability in any adjudication proceedings nor any assessment order has been passed determining any liability contemplated in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration 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. 3.05. In such circumstances referred to above, Mr.Sheth, submitted that there being merit in this writ application, the same be allowed and the impugned order of prohibition be quashed. 4.00. On the other hand, this writ application has been vehemently opposed by Mr.Devang Vyas, the learned Assistant Solicitor General of India appearing for the respondent No.1, Mr.Jaimin Gandhi, the learned counsel appearing for the respondent No.2 and Ms.Maithili Mehta, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Metropolitan Magistrate, Ahmedabad bearing Criminal Case no. 111714 of 2018, wherein as accused no.22 one Mr. Nitin Chaganbhai Sirza, accused No.23 namely Bharatbhai Chaganbhai Sirza who are the partners of M/s Golden Cotton Industries and accused no. 24 M/s. Golden Cotton Industries. 9. It is respectfully submitted that, in paragraph no.2 of the compliant it is stated that, the Assistant Commissioner of State Tax has accorded sanctioned as warrant under section 132 (6) and section 134 of the Gujarat Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 for the purpose of launching prosecution against the cited accused Vide sanctioned order bearing no.1925 dated 18.12.2018, it is also stated in paragraph no.3 of the said complaint that the department is investigating case of fraudulent transaction of input tax credit and evasion of huge amount of Gujarat Goods and Service Tax by various entities in Gujarat, particularly in the commodities of edible or non-edible oils and cakes. For carrying out search proceedings at some places, search warrant has been issued under section 67 of the Gujarat Goods and Services Act, 2017 to the officers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the business of edible and non-edible oils and cakes. 12. It is respectfully submitted that, as far as subrule 4 and Rule-139 is concerned. It is further respectfully submitted that, sub-rule-4 of the Rule 139 reads as under; Sub-Rule 4 and Rule 139 : Where it is not practicable to seize any such goods, the proper officer or the authorized officer may serve on the owner or the custodian of the goods, an order of prohibition in FORM GST INS-03 that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. In the light of the above, it is submitted that, the rule begins with words where it is not practicable to seize any such goods and therefore, in the present case the order of prohibition was in form GST INS 03, which is annexed at Annexure-D to the memorandum of the application. It is respectfully submitted that, the goods seized are in the nature of cotton, cotton seeds and bales worth of Rs. Two crore and Fifty lakhs. It is respectfully submitted that, the petitioner has replied to the show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estive of the fact that pending the confiscation proceedings, action has been taken under section 67 of the Act with regard to the search, seizure and prohibition. 5.02. Section 67 of the GST Act reads thus : Section 67 : ( 1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that- ( a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or ( b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( 6) The goods so seized under sub-section (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be. ( 7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months. ( 8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (2), be disposed of by the proper officer in such manner as may be prescribed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who effected the seizure was reasonable or not, we are not sitting in appeal over the decision of the said officer. All that we can consider is, whether there is ground which prima facie justifies the said reasonable belief. 5.05. If the information is such as leads the Proper Officer to believe that the articles of search are secreted in a place, he may thereby have 'reasons to believe' as contemplated under Section 67 of the Act and authorise in writing any other officer to search and seize such goods. All that the court can consider is, whether there is ground which prima facie justifies the reasonable belief. 5.06. In Durga Prasad's case, AIR 1966 SC 1209 it has been held by the Supreme Court that the power of search granted under Section 105 of the Customs Act (para-materia to section 67 of the Act, 2017) is a power of general search 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 reasons to believe that the documents and things which in his opinion are relevant for any proceedings under the Act, are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion will be useful for or relevant to any proceeding under this Act, are secreted in any place, he may authorise any officer of customs to search or may himself search for such goods, documents or things. ( 2) The provisions of the Code of Criminal Procedure, 1898, relating to searches shall, so far as may be, apply to searches under this section Subject to the modification that subsection (5) of section 165 of the said Code shall have effect as if for the word Magistrate , wherever it occurs, the words Collector of Customs were substituted. The Supreme Court, thereafter proceeded to observe as under :- According to the appellant the power of seizure under s.105 of the Customs Act cannot be exercised unless the Assistant Collector had reason to believe that the documents were secreted. It was argued that the word secreted is used in s. 105 in the sense of being hidden or concealed and unless the officer had reason to believe that any document was so concealed or hidden, a search could not be made for such a document. We are unable to accept the submission of the appellant as correct. In our opinion, the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. We have already mentioned the reasons for holding that this condition has been satisfied in the present case. 5.10. We may also refer to a decision of the Supreme Court in the case of R. S. Seth Gopikisan Agarwal's case reported in AIR 1967 SC 1298 . The Supreme Court in the said decision observed as follows :- Section 105 of the Act confers an unguided and arbitrary power on the Assistant Collector of Customs to make a search, the only condition being of the facts mentioned therein. It is said that the said belief is practically a subjective satisfaction and the section neither lays down any policy nor imposes any effective control on his absolute discretion. So stated the argument is attractive, but a deeper scrutiny of the provisions indicates not only a policy but also effective checks on the exercise of the power to search by the Assistant Collector of Customs. The object of the section is to make a search for the goods liable to be confiscated or the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 5.13. Thus, even at this stage, the authority concerned is empowered to release the seized goods on a provisional basis upon asking the writ applicant to execute a bond and also furnishing security of a particular quantum. 5.14. We are not impressed by the submission of Mr.Sheth, the learned counsel appearing for the petitioner that the order of prohibition is not in accordance with section 67 of the Act, as there is nothing to indicate even prima facie that the goods were secreted. The word secreted in clause (2) needs to be understood. 5.15. The Supreme Court in the case of G ian Chand Versus State of Punjab, reported in [1962] Supp. 1 S.C.R. 364 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 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. 5.18. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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