GST: Unauthorised search and seizure by BIEO, HC grants interim relief

M/s. Kumar Traders And Company & Anr. Vs. State Of Assam (Gauhati High Court)

This case was adjourned on 9.8.2017, to enable the learned Govt. Advocate to receive instruction on the circumstances under, which the team from the Bureau of Investigation for Economic Offences (BIEO) had raided the Amingaon godown of the petitioners, where areca nuts are stored. The facts leading to the search and seizure were noted by the Court as under:-

“The interest of the petitioners in all 3 cases are common and similar arguments are advanced by the learned counsel Ms. M.L. Gope. The petitioners are registered under the Goods and Service Tax Act, 2017 (hereinafter referred to as the “GST Act”) and earlier they were registered under the Assam Value Added Tax Act. The authorities under the VAT Act have certified that the petitioners have cleared their outstanding tax liabilities up till 30.06.2017. Therefore w.e.f. 01.07.2017 when the GST is brought into force, the obligation of the dealers will arise out of the GST Act.

2. The power of inspection, search, seizure etc. is provided under Section 67 of the GST Act and such power is to be exercised by an officer, not below the rank of the Joint Commissioner. For the business of Dried Areca Nuts, the dealers are required to comply with the e-way bill system and the Assam Goods and Service Tax Act, 2017 read with the Assam Goods and Service Tax Rules, 2017 provides for the document to be furnished by the dealer, to comply with the requirement of e-way bill system. However the new system is still to be made functional and therefore under the notification of 12.07.2017 issued by the Finance (Taxation) Department, the dealers are required to obtain the GST outward permit for continuing with their, business under the GST regime.

3. The grievance of the dealers is the unauthorised inspection, search and seizure of their godown at Amingaon, by the authorities of the Bureau of Investigation for Economic Offences (BIEO) Officers on 27.07.2017, who have seized around 7290 bags of Dried Areca Nuts, under the 2 seizure lists dated 27.07.2017. The seizure party led by the Deputy S.P. of the BIEO have also asked the dealers to submit around 15 documents, which may have no relevance for the business, under the GST regime.

4. The petitioners contend that this is an unnecessary intervention by an incompetent authority. In fact, the bonafide of the seizure is also questioned on account of the threat meted out to the petitioners, for their inadequate donation to certain organization in Assam.

5. The learned counsel Ms. M.L. Gope for the petitioners submits that when the GST regime is at a nascent stage and requisite infrastructure is not yet ready for e-way bill system, the harassment of the bonafide business group is totally unwarranted. The counsel refers to the press note of the Union Finance Minister to project that such harassment cannot be resorted to by visiting the business premises of the dealers, even by the officers, authorised under the GST Act.

6. Considering the above projection made from the petitioners’ side, Mr. B. Gogoi, the learned standing counsel for the Finance and Taxation Department prays for short time to receive instruction from the competent authorities. The departmental lawyer will secure specific instruction on which provision of law the search, seizure has been made and whether the officers in the BIEO, is competent to make the search and seizure. The fate of the complaint registered by the petitioners in the departmental helpline, should also be made known.

7. To enable the departmental lawyer to receive instructions, these cases be re-listed on 16.08.2017. Until the next date, the respondents will ensure that the petitioners should not be put to further harassment on account of the search and seizure made on 27.07.2017.

A copy of this order be furnished to Mr. B. Gogoi, the learned standing counsel and Ms. K. Phukan, the learned Govt. advocate”.

2. Ms. K. Phukan, the learned Govt. Advocate has received instruction from the BI(EO) authorities and she submits that the police team raided the godown in purported exercise of power, under Section 102 of the CrPC. She further submits that the BI(EO) team suspected that the areca nuts stored in the godown, were of Burmese origin and were smuggled through Mizoram border and was stored in the Guwahati godown, for onward transportation to other parts of the country.

3. Mr. D. Saikia, the learned Addl. Advocate General, Assam submits that collection of tax and prosecution of defaulters, is the responsibility of the Finance & Taxation Department and the areca nuts are liable to be taxed under the Assam Goods & Service Tax Act, 2017. The learned Asstt. Solicitor General of India, Mr. S.C. Keyal on the other hand submits that if it is a case of evasion of customs duty, the concerned police team should have informed the Customs Authorities, instead of acting on their own.

4. The stored areca nuts were neither stolen nor were kept in suspicious circumstances. At best, tax is payable for dealing in areca nuts but that would be in the domain of the Finance & Taxation Department. The submissions made by the Addl. Advocate General and the Asstt. Solicitor General reflect that the BI(EO) team may have acted beyond their jurisdiction. Therefore, the learned Govt. Advocate has prayed for and is granted three weeks time to file counter affidavit.

5. Let notice returnable in three weeks be issued. The learned standing counsel for the Finance & Taxation Department, Mr. B. Gogoi, accepts notice for respondent Nos.1 & 2. The Union of India (respondent No.6) is represented by the learned Asstt. Solicitor General of India, Mr. S.C. Keyal. The learned Govt. Advocate Ms. K. Phukan, accepts notice for respondent Nos.3, 4 & 5. Necessary extra copies be furnished to all the three lawyers.

6. In the interim, to facilitate the petitioners to carry on their legitimate business and taking note of the fact that rate of tax is @2.5% for areca nuts, under the Assam Goods & Service Tax Act, 2017 and they are to pay further 2.5% tax to the Central Govt. coffer, subject to the petitioners’ furnishing Bank guarantee for Rs.30 lakh towards the estimated tax, to the Commissioner of State Tax (respondent No.2), the seized goods should be released to the custody of the petitioners. The 7290 bags of areca nuts, after due verification should be released, in presence of the Tax Department Officials. However the transportation and business of areca nuts will be subject to realization of due tax by the authorities and the Bank guarantee, ordered to be deposited, is only on estimation and is not on quantification of the payable tax. The Finance & Taxation Department is at liberty to estimate the precise payable tax and make the assessment. It is ordered accordingly.