Traco Enterprises & Anr. Vs Deputy Commissioner of Revenue (Calcutta High Court)
The Calcutta High Court, in Traco Enterprises & Anr. vs Deputy Commissioner of Revenue, examined the legality of a show cause notice (SCN) issued under Section 122(1)(xviii) read with Section 35(6) of the West Bengal GST/CGST Act, 2017, and addressed issues concerning the seizure of goods and documents from the petitioner’s premises under Section 67 of the Act. The petitioners challenged the SCN dated 27 May 2025 and sought release of their detained goods.
The petitioners argued through their counsel, Mr. Kanodia, that the Deputy Commissioner of Revenue, while conducting inspection of petitioner no.1’s factory and office premises, purportedly seized goods and documents without recording satisfaction or “reasons to believe” as mandated under Section 67 of the Act. It was contended that the proper officer had not justified why the goods were liable for confiscation or why the seized documents were necessary for any proceedings under the Act. Further, Mr. Kanodia submitted that issuance of a SCN under Section 122 following search and seizure proceedings was beyond the scope of the Act, particularly in view of Section 35(6), which prescribes maintenance of proper records. He argued that any proceedings regarding liability should be initiated under Sections 73 or 74, and not under Section 122.
Appearing for the Revenue, Mr. Chakraborty defended the action of the tax authorities, asserting that the officer had seized books of accounts and goods found secreted during inspection. He maintained that the SCN under Section 122 was valid as the seized goods were liable to confiscation under Section 130 of the Act, and the authorities acted within their jurisdiction. Mr. Chakraborty sought time to file a detailed affidavit-in-opposition and argued that no interim relief was warranted at this stage.
The Court, upon hearing both parties, noted that petitioner no.1 is exclusively engaged in supplying goods to the Ministry of Defence for use by the Indian Army, and there exist ongoing work orders from the Ministry for the supply of various items. Acknowledging the urgency of the situation and the suggestion offered by the petitioners, the Court allowed conditional release of the seized goods. It directed that petitioner no.1 may secure release of the goods by furnishing a bank guarantee for 20% of the penalty amount proposed in the SCN dated 27 May 2025. Upon submission of a written application along with the bank guarantee, the proper officer was instructed to release the goods within three working days.
The Court further observed that, prima facie, the issuance of the SCN under Section 122 read with Section 35(6) appeared to be procedurally flawed as the authorities should have proceeded under Sections 73 or 74 of the Act. While permitting the continuation of hearing on the SCN, the Court restrained the tax authorities from communicating any final decision to the petitioners without leave of the Court.
Separately, the Court clarified that the issue concerning the blocking of the petitioner’s electronic credit ledger would be addressed on the next returnable date. The matter was adjourned for further consideration in July 2025.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
