Case Law Details
Velayudhan Gold LLP Vs State of Kerala (Kerala High Court)
The Hon’ble Kerala High Court in the case of M/s. Velayudhan Gold LLP v. State of Kerala and Others [WP (C) No. 34654 of 2023 dated October 20, 2023] disposed the writ petition and held that authorisation under Section 67(2) of the State Goods and Services Act, 2017 (“the SGST Act”) / the Central Goods and Services Act, 2017 (“the CGST Act”), is not required for every person or article, goods, books and documents discovered during the search operation.
Facts:
The Intelligence Unit of the Revenue Department (“the Respondent”) conducted a search at the business premises of M/s. Sobhana Jewellery. The search took place after the authorisation was given by the Joint Commissioner under Section 67(2) of the SGST Act/ the CGST Act. After conducting the search, Mahazar (“list of goods and documents recovered and seized/detained during a search) was prepared.
However, during the search, employees of M/s. Velayudhan Gold LLP (“the Petitioner”) were present, carrying the bag of gold ornaments along with the delivery challan issued by the Petitioner. The delivery challan endorsed 22kt gold ornaments with a net weight of 1332.590 grams in the name of M/s Sobhana Jewellers. At the time of physical verification conducted by the Respondent officials in the presence of witness at the business premises of M/s. Sobhana Jewellery, it was found that the net weight of the gold ornaments was 1647.97 grams. A discrepancy was found between the documents and the actual stock of gold in the bag. Therefore, the gold ornaments found in the bag were seized by the Respondent and a seizure memo was prepared in Form INS 02.
Further, in violation of Rule 56(17) read with Rule 55 of the State Goods and Service Tax Rules, 2017 (“the SGST Rules”) / the Central Goods and Service Tax Rules, 2017 (“the CGST Rules”), the Respondent issued Show Cause Notice dated July 07, 2023 (“the SCN”) raising demand for penalty payable at Rs. 91,70,954/-. The Petitioner thereafter submitted the reply on August 14, 2023.
The Respondent adjudicated upon the SCN vide order dated September 23, 2023 (“the Impugned Order”). Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble Kerala High Court on the ground that there was no authorisation granted by the Joint Commissioner for conducting the search and seizure of gold ornaments recovered and seized from the bag of the Petitioner Partner and employees who were present at the premises of M/s. Sobhana Jewellery. Therefore, as per Section 67 of the SGST Act/ the CGST Act, the seizure of gold ornaments becomes illegal, null and void.
Issue:
Is authorisation under Section 67(2) of the SGST Act/CGST Act required for every person or article, goods, books and documents discovered during search operation?
Held:
The Hon’ble Kerala High Court in the case of W.P. (C) No. 34654 of 2023 held as under:
- Observed that, when search and seizure operations are conducted, it is not known which items or documents or books might be recovered or kept at a secret place. Authorisation by the Joint Commissioner has to be in general terms and cannot be with respect to any specific books, items, things or documents. The relevant factor while granting authorisation for search and seizure operation is whether, the authority granting the permission, i.e. Joint Commissioner or above has a reason to believe that the goods, documents or things hold relevance, are kept in a secret place and are useful in any legal proceeding conducted under the SGST Act/ the CGST Act.
- Noted that, the search and seizure operation was authorised by the Joint Commissioner and the search was conducted under Section 67(2) of the SGST Act/ the CGST Act, in Form INS 01 issued by the Joint Commissioner. The authorisation was for the search of premises of M/s. Sobhana Jewellers and gold items owned by the Petitioner were found in a bag in the premises of M/s. Sobhana Jewellers.
- Further noted that, the authorisation under Section 67(2) of the SGST Act/ the CGST Act, cannot be granted in respect of every person or article, goods, books and documents which may be discovered during search operation. The Respondent Officer is liable for any items, books or documents if the Respondent authorised officer has a reason to believe that it would be relevant for proceeding under the SGST Act/ the CGST Act. Therefore, the arguments made by the Petitioner that there was no authorisation under Section 67(2) of the SGST Act/ the CGST Act for the seizure of gold ornaments is devoid of merit.
- Held that, there is no substance in the writ petition and Petitioner has the right to avail remedy under the SGST Act/ the CGST Act and the SGST Rules / the CGST Rules. Hence, the writ petition is disposed of.
Relevant Provisions
Section 67 of the CGST Act:
“Power of inspection, search and seizure
(1) …………………………..
(2) Where 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 or things:
Provided that where 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:
Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.”
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The present writ petition under Article 226 of the Constitution of India has been filed by the petitioner impugning the order of seizure dated 26.05.2023 in Ext.P3 passed by the 1st respondent as well as the order of confiscation dated 23.09.2023 in Ext.P8 passed by the 2nd respondent.
2. Intelligence Officer, Intelligence Unit of the State Goods and Services Tax Department Kerala, Kottarakkara, conducted a search at the business premises of M/s Sobhana Jewellery, Main Road Ottappalam, Palakkad. The search took place on 26.05.2023 at 3.00 p.m. after the authorisation was given by the Joint Commissioner under Section 67(2) of the Kerala State Goods and Services Tax Act/Central Goods and Services Tax Act 2017 (for short, ‘SGST/CGST Act 2017’). After conducting the search operation, a Mahazar was prepared. The business premises of M/s Sobhana Jewellery consist of a two-storeyed building. During the search of the first floor, it was seen that some gold ornaments were kept in a bag. Sri Jaleesh A and Sri Raju, who claimed themselves as employees of the petitioner herein, were present during the time of search at the business premises of M/s Sobhana Jewellery. During further examination, the gold ornaments in the bag were found to be accompanied by a delivery challan with the details as mentioned in the notice under Section 130 of the SGST/CGST Act 2017.
2.1 Delivery challan was issued by the petitioner. The delivery challan endorses 22kt gold ornaments with net weight of 1332.590 gms in the name of M/s Sobhana Jewellery. The delivery challan was issued for the transportation of the aforesaid ornaments from the petitioner to M/s Sobhana Jewellery. The stock of gold ornaments was physically verified ntelligence Officer in the presence of witnesses at the business premises of M/s Sobhana Jewellery, and the net weight of the gold ornaments was found to be 1647.97 grams. Discrepancies were found between the documents and the actual stock of gold in the bag. As a result, the gold ornaments found in the bag were seized by the Intelligence Officer, and a seizure memo was prepared in Form INS 02.
2.2 Summons under Section 70(1) of SGST/CGST Act 2017 was issued to the petitioner. In response to the summons, the Managing Partner of the petitioner, Sri Rishikesh K K, appeared before the Intelligence Officer. A detailed statement was recorded. The Managing Partner of the petitioner, in his statement, said that he holds ownership of the seized gold ornaments and Sri Jaleesh A, the person present at the premises of the M/s Sobhana Jewellery, was one of the Partners of the petitioner and Sri Raju was an employee of the Firm.
2.3 Finding discrepancies and violations of Rule 56(17) of the SGST/CGST Rules 2017, as well as Rule 55 of the SGST/CGST Rules 2017, the show cause notice was issued to the petitioner demanding penalty in lieu of confiscation of goods payable at Rs.91,70,954/-. The petitioner was given 15 days’ time to file a reply and to remain present for a personal hearing on 27.07.2023 at 11.00 a.m. at the Office of the Intelligence Officer, Unit 3, SGST Department, Edappally. The petitioner submitted its reply on 14.08.2023 in Ext.P7.
2.4 The said show cause notice was adjudicated by the Intelligence Officer vide impugned order in Ext.P8. The petitioner’s contention that there was no authorisation granted by the Joint Commissioner for the purpose of conducting the search and seizure of the gold ornaments recovered and seized from the bag of the Partner and employee of the petitioner, who were present at the premises of M/s Sobhana Jewellery and therefore, in the absence of such authorisation under Section 67 of the SGST/CGST Act 2017, the seizure of the gold ornaments of the petitioner is null and void and consequent actions also become void ab initio.
3. Sub-section (2) of Section 67 of the SGST/CGST Act 2017 has been taken note of by the Intelligence Officer, which reads as under:
“67. Power of inspection, search and seizure
(1) ….
(2) Where 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 or central tax to search and seize or may himself search and seize such goods, documents or books or things:
PROVIDED that where 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:
PROVIDED FURTHER that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.”
4. Learned counsel for the petitioner submits that there was no authorisation in respect of the jewellery items of the petitioner, which were seized from the premises of M/s Sobhana Jewellery. Sub-section (2) of Section 67 contemplates three aspects for seizing the articles, that too with the prior permission of the Officer not below the rank of Joint Commissioner which are: (i) there has to be reasons to believe that any goods, documents, books or things which are likely to be confiscated would be useful or relevant for the proceedings under the SGST/CGST Act 2017; (ii) these goods, books or documents are placed in a secreted place; and (iii) these goods would be relevant for any proceedings under the Act.
4.1 Learned Counsel for the petitioner submits that in the absence of such satisfaction or authorisation, the seizure becomes illegal, null and void. Therefore, the consequent proceedings, including the penalty for the release of the goods, are liable to be quashed.
5. From the perusal of sub-section (2) of Section 67 of SGST/CGST Act 2017, it is evident that when search and seizure operations are authorised, at that time, it would not be known which are the items or documents or books which might be recovered or which would have been kept at a secreted place. Authorisation has to be in general terms and cannot be with respect to any specific books, items, things or documents. What is relevant is that while granting authorisation for search and seizure operations, the authority granting such permission, i.e., Joint Commissioner or Officer above the rank of Joint Commissioner, should have reasons to believe that the goods, documents or things hold relevance and are useful in any legal proceedings under the SGST/CGST Act 2017 and the same are secreted at a particular place.
5.1 In the present case, it is not in dispute that the search and seizure operation was authorised by the Joint Commissioner. It has been a finding of fact and of record that the search operation was authorised under Section 67(2) of the SGST/CGST Act 2017 in Form INS 01 issued by the Joint Commissioner of State Tax, INA Thiruvananthapuram. The petitioner’s gold jewellery items were also found stored in a bag at the premises of M/s Sobhana Jewellery. The contention of the petitioner that there was no authorisation for the seizure of 1647.970 grams of gold, the property of the petitioner, does not merit consideration as there was authorisation for the search of the premises of M/s Sobhana Jewellery and these gold items, which the petitioner had later on claimed ownership, was found in a bag in the premises of M/s Sobhana Jewellery.
5.2 There cannot be authorisation in respect of each band every person and each and every article, goods, books, and documents which may be discovered during the search operation. The authorisation has to be done in respect of the business premises of an assessee, and if things, items, books or documents are found that the authorised officer has reasons to believe that they would be relevant for the purpose of proceeding under the SGST/CGST Act 2017, they are liable to be seized. Therefore, I do not find any substance in the submission of the learned Counsel for the petitioner that there was no authorisation under Section 67(2) of the SGST/CGST Act 2017 for the seizure of the gold ornaments weighing 1647.970 grams.
In view thereof, I find no substance in this writ petition. However, if the petitioner is aggrieved by the impugned order, he may take recourse to the remedy as may be available to him under the provisions of the SGST/CGST Act and Rules 2017.
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