Goods seized cannot be released by invoking writ jurisdiction if no application filed for release of goods under GST

Kanak Timber House & Anr. Vs Assistant Commissioner of Sales Tax & Ors. (Calcutta High Court)

Goods seized cannot be released by invoking writ jurisdiction if no application filed for release of goods under GST

The Hon’ble Calcutta High Court in the case of Kanak Timber House v. Assistant Commissioner of Sales Tax [W.P.A. NO. 4729 of 2024 dated March 11, 2024] disposed of the writ petition, thereby holding that, a person cannot seek the release of the goods by way of filing writ petition and is required to file application under sub-section (6) of Section 67 of the Central Goods and Services Tax Act, 2017(“the CGST Act”).

Facts:

Search and Seizure proceedings were conducted by the Revenue Department (“the Respondent”) at Kanak Timber House (“the Petitioner”) registered place of business. Thereafter, prohibitory order dated March 25, 2023 (“the Impugned Order”) was issued under sub-section (2) of Section 67 of the CGST Act. Further, a show cause notice under Section 122 of the CGST Act was issued for which reply was filed by the Petitioner. Also, the Petitioner requested the Respondent to release the stock of timber which was seized and covered under the Impugned Order.

Aggrieved by the Impugned Order passed, the Petitioner filed a writ petition before the Hon’ble High Court.

Issue:

Whether the Petitioner is required to file application under sub-section (6) of Section 67 of CGST Act for release of goods seized?

Held:

The Hon’ble Calcutta High Court in W.P.A. NO. 4729 of 2024 held as under:

• Relying upon the judgment of the Hon’ble Supreme Court in the case of State of Uttar Pradesh v. Kay Pan Fragrance Pvt. Ltd. [Civil Appeal No. 8941 of 2019 dated November 22, 2019] observed that, the Assessee in order to seek release of the goods seized is required to invoke the provisions of GST Act.
• Relying upon the judgement of the Hon’ble Delhi High Court in the case of Best Crop Science Pvt. Ltd. v. Superintendent, CGST, Delhi West and Ors. [WP (C) No. 238 of 2023 dated September 5, 2023] noted that, the prohibitory order cannot be valid for infinite period of time.
• Opined that, the goods seized cannot be released till the time the Petitioner has not filed the application under sub-section (6) of Section 67 of the CGST Act.
• Held that, the Court is not inclined to interfere as no application has been filed by the Petitioner with the Respondents for release of goods.

Relevant Provision:

Sub-section (6) of Section 67 of the CGST Act:

Section 67: Power of Inspection, search and seizure

(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.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

1. Considering the nature of urgency involved, the present writ petition is taken up for consideration.

2. The present writ petition has been filed, inter alia, praying for quashing of the order of prohibition dated 25^th March, 2023 issued under Section 67(2) of the CGST/WBGST Act, 2017 (hereinafter referred to as the “GST Act”).

3. It is the petitioners’ case that on/or about 24t^h March, 2023, a search and seizure procedure was initiated under Section 67 of the GST Act at the petitioners’ registered place of business. On the following date, in terms of first proviso to Section 67(2) of the GST Act, a prohibitory order was issued. Since then, on 26^th December, 2023, a notice under Section 122 of the GST Act was issued. According to the petitioners, the petitioners had duly responded to the said notice and are participating in the proceedings. Subsequently, on 17^th January, 2024, the petitioners had requested the respondents to release the stock of timber which had remained seized and covered under the prohibitory order dated 25^th March, 2023.

4. In response to such application, the office of the respondent no.1 by an e-mail communication dated 25t^h January, 2024 without appropriately replying to the petitioners’ communication had only informed that a show-cause notice under Section 122 of the GST Act has already been issued.

5. Kanodia, learned advocate representing the petitioners, by drawing attention of this Court to Section 67(2) of the said Act submits that power has been vested on 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 book 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 authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or things.

6. By referring to the first proviso to Section 67(2) of the GST Act, it is submitted that when it is not practicable to seize any such goods, the proper officer or any other officer authorized 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. Mr. Kanodia submits that the respondent no.1 by invoking the first proviso to Section 67(2) had issued the order dated 25^th March, 2023.

7. By referring to Section 67(7) of the GST Act, he submits that when any goods are seized under sub-section (2) and no notice in respect thereof has been given within six months from the date of seizure of the goods, the goods shall be returned to the person from whose possession those were seized.

8. By placing reliance on the aforesaid provision, it is submitted that since the respondent no.1 had issued a show-cause under Section 122 of the GST Act, beyond the prescribed period of six months, the respondent no.1 was obliged to return the goods to the petitioner.

9. In support of his aforesaid contention, he has placed reliance on a judgment delivered by the Hon’ble Supreme Court in the case of State of Uttar Pradesh v. Kay Pan Fragrance Pvt. Ltd., reported in (2020) 5 SCC 811, and the judgment delivered by the Hon’ble High Court of Delhi in the case of Best Crop Science Pvt. Ltd. v. Superintendent of Central Goods and Services Tax Delhi West, reported in (2023) 10 Centax 295 (Del.).

10. Per contra, Mr. Chakraborty, learned advocate representing the respondents has taken me through the provisions of Section 67(7) of the GST Act. According to Mr. Chakraborty, the said section comes into play when no notice of the seizure is issued within a period of six months. Mr. Chakraborty further by referring to the provisions of Section 67(6) of the said Act submits that an assessee has a right to get such goods released on provisional basis even upon execution of a bond and furnishing a security in such manner and of such quantum, respectively, as may be prescribed. According to him, the petitioners have not approached the respondents for release of the goods even on provisional basis. The letter dated 17^th January, 2024 do not call provisional release of goods. Having regard to the aforesaid, it is submitted that no case for interference has been made out as the assessee has not approached the respondents for release of the seized goods in terms of Section 67(6) of the GST Act.

11. Heard the learned advocates appearing for the respective parties and considered the materials on record. Admittedly in this case it is noticed that a prohibitory order has been passed by invoking the first proviso to Section 67(2) of the GST Act. Admittedly, the assessee has not approached the respondent no.1 for release of goods under Section 67(6) of the GST Act and I find that the Hon’ble Supreme Court in the case of State of Uttar Pradesh (supra) has clearly highlighted that the assessee in order to seek release of the goods must invoke the provisions of the GST Act to seek release of the goods. The Hon’ble Supreme Court in paragraph 12 has, inter alia, observed as follows:-

“12. There is no reason why any other indulgence need be shown to the assessees, who happen to be the owners of the seized goods. They must take recourse to the mechanism already provided for in the Act and the Rules for release, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum (even up to the total value of goods involved), respectively, as may be prescribed or on payment of applicable taxes, interest and penalty payable, as the case may be, as predicated in Section 67(6) of the Act. In the interim orders [Kay Pan Fragrance (P) Ltd. v. State of U.P., 2019 SCC OnLine All 6201] , [Mahaveer Trading Company v. State of U.P., 2019 SCC OnLine All 6203] passed by the High Court which are subject-matter of assail before this Court, the High Court has erroneously extricated the assessees concerned from paying the applicable tax amount in cash, which is contrary to the said provision.”

12. Insofar as the judgment delivered in the case of Best Crop Science Pvt. Ltd. (supra), I find that the Hon’ble Delhi High Court taking note of the provisions of Section 67(7) of the GST Act has observed that the prohibitory order cannot be permitted to continue indefinitely. In this case it may be relevant to consider that the assessee has not approached the respondents under Section 67(6) of the GST Act and as such, there is no reason for this Court to interfere at this stage save and except, if any application is made by the assessee with the respondent no.1 in terms of Section 67(6) of the GST Act, the same shall be considered in accordance with law.

13. With the above observations and/or directions the writ petition stands disposed of. There shall be no order as to costs.

Urgent photostat certified copy of this order, if applied for, be made available to the parties upon compliance of necessary form

******

(Author can be reached at [email protected])