Case Law Details
Maruti Castings, Proprietor Nand Kumar Sharma Vs Union of India (Rajasthan High Court)
Prima facie it cannot be said that in case of a registered person action only under Section 35(6) read with Section 73 or 74 of the Act can be taken and that Section 67 of the Act cannot be invoked, if the circumstances as indicated therein exist.
The word ‘secreted’ is not defined under the Act, however, the same can be understood to mean anything which is concealed and in those circumstances even if the documents are not kept at the designated places where the same ought to be kept in terms of the Act and the Rules, and in case circumstances exist where the absence of the documents is with an intention to conceal them from the officers, the same can be termed as secreted, therefore, as observed hereinbefore, the plea raised in this regard, based on the circumstances which have come on record, is essentially premature.
Consequently, at this stage, prima facie it cannot be said that the seizure is illegal for the purpose of coming to the conclusion that provisions of Section 67(6) of the Act would have no application.
The plea raised regarding lack of jurisdiction also apparently cannot be countenanced while dealing with the application seeking vacation/modification of the interim order.
Admittedly, the petitioner himself applied under Section 67(6) of the Act seeking release of the seized goods vide Annex.10, based on which the order dated 11/5/2021 (Annex.15) was issued and as such passing of the order 11/5/2021 by the respondents also cannot be faulted.
In view of the above discussion, the application filed by the respondents under Article 226(3) of the Constitution is allowed. The order dated 21/5/2021 is modified to the extent that besides the surety bond of the equivalent amount of value of goods by the petitioner, it would be required of the petitioner to furnish security in the form of bank guarantee in terms of Section 67 (6) of the Act and Rule 140 of the Rules for release of the seized goods.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
The matter comes up on an application filed by the respondents No.1, 3, 4 & 5 under Article 226(3) of the Constitution of India seeking vacation of the interim order dated 21/5/2021.
By order dated 21/5/2021, a coordinate bench of this Court passed the following order:
“Learned counsel for the petitioner submits that a sum of Rs.50 lac has been recovered under duress from the petitioner without even issuing show cause notice treating it as under Section 74 of the CGST Act, 2017. Learned counsel submits that the goods which have been seized are all duly accounted for and the same could not have been seized. The entire seizure is illegal.
Learned counsel submits that he is ready to submit surety bond instead of asking for a Bank guarantee.
Issue notice of the writ petition as well as stay application, returnable within eight weeks.
In the meanwhile, the goods lying with the respondent/s shall be released subject to submitting a surety bond of the equivalent amount of the value of the goods by the petitioner. The petitioner shall not be insisted for submitting the Bank guarantee.”
It is submitted by learned counsel for the respondents that the directions of the Court that the petitioner shall not be insisted for submitting the Bank guarantee is contrary to the provisions of Section 67(6) of the Central Goods & Services Tax Act, 2017 (‘the Act’) read with Rule 140 of the Central Goods & Services Tax Rules, 2017 (‘the Rules’).
It is submitted that provisions of Section 67 (6) envisage release of goods on provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, as may be prescribed, and as per Rule 140 of the Rules, the seized goods may be released on a provisional basis upon execution of a bond for the value of the goods and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest & penalty payable.
It is submitted that the petitioner filed an application (Annex.10) seeking release of goods as per the provisions of Section 67(6) of the Act and indicated that it was ready to comply with the procedure. Based on the said application (Annex.10), a communication dated 11/5/2021 (Annex.15) was issued indicating the requirement to furnish a bond of Rs.2,71,07,354/- and a security in the form of a bank guarantee of Rs.1,51,80,118/- as per Section 67(6) of the Act and Rule 140 of the Rules for provisional release of seized goods. It is submitted that the respondents have passed the order in terms of the relevant provisions, which cannot be faulted and, therefore, the direction to release the goods without insisting for submitting the bank guarantee deserves to be vacated.
Reliance was placed on State of U.P. & Ors. vs. Kay Pan Fragrance Pvt. Ltd. : (2020) 5 SCC 811, M/s. Maa Karni Traders & Anr. vs. Union of India & Ors. : I.A.(Civil)/977/2021 in WP (C) 1003/2021 passed by Gauhati High Court on 10/6/2021 and JVG Super Cargo Service Ltd. vs. State Tax Officer : S.B.Civil Writ Petition No.2540/2020, decided on 29/6/2020.
Learned counsel for the petitioner made vehement submissions with reference to various provisions of the Act that the petitioner is a registered person under Section 25 of the Act and as such in the circumstances of petitioner’s case, issues have to be dealt with under Section 35(6) of the Act read with Section 73 or 74 of the Act. Action of the respondents in resorting to Section 67(2) of the Act in seizing the goods is not valid and consequently provisions of Section 67(6) do not apply and, therefore, as the entire action of the respondents in seizing the goods of the petitioner itself is invalid, the interim order granted by the Court is justified and the same does not call for any vacation/modification.
It was sought to be emphasized by learned counsel that besides the fact that as the petitioner is a registered person, as such provisions of Section 35 (6) read with Sections 73 & 74 of the Act only are applicable, even Section 67(2) has no application inasmuch as Section 67(2) of the Act applies only in cases where the goods or documents or books or things are ‘secreted’, which is not the case and on that count also as the seizure is illegal and CGST authorities have no jurisdiction, therefore, passing of the interim order is justified and does not call for vacation/modification.
It was also emphasized that the present action of the respondents is also contrary to Section 6 of the Act as only the Directorate General of GST Intelligence (DGGI) has the jurisdiction in the matter and as such, the action of the respondents in this regard being without jurisdiction, the interim order granted by the Court does not call for any interference.
Further submissions were made that the judgments cited by the learned counsel for the respondents have no relevance to the case in hand as the said judgments/order pertain to transporters and not registered persons.
Learned counsel for the respondents reiterated that the action taken by the respondents is in consonance with the statutory provisions, the seizure is valid and CGST authorities have the jurisdiction in terms of Section 6(2)(b) of the Act and as such, the interim order dated 25/5/2021 deserves to be vacated/modified.
I have considered the submissions made by learned counsel for the parties and have perused the material available on record.
The prayers made in the writ petition read as under:
“It is, therefore, most humbly and respectfully prayed that by suitable writ, order or direction to:
a) Direct the respondents to refund the illegally recovered money during the course of search without any issuance of show cause notice as required under section 73 and 74 of CGST act, 2017 and to declare the same as premature, illegal and arbitrary;
b) Quash and set aside the Seizure of Goods worth Rs.2,71 crores vide order dated 31.03.2021, in terms of INS 02 and INS 03 and the provisional order dated 11.05.2021.
c) Quash and set aside the search warrant and search proceedings carried out without jurisdiction, contrary to the provisions of section 6, by exercising overlapping jurisdiction over DGGI, contrary to the Circular dated 12.06.2017.
d) Quash and set aside the statements recorded by bypassing the provisions of Section 70 and in non compliance with the Hon. Supreme Court directions in the judgment of Paramvir Singh Saini v/s Baljit Singh and others in SLP (Criminal) No. 3543 of 2020.
e) provide such further and other reliefs, costs as this Hon’ble Court may deem fit and proper in the nature and circumstance of the case.”
The action of the authorities, apparently, is two fold (i) on account of allegations of one M/s Krishna Enterprises being a bogus firm and supplying fake invoices without supplying the raw material physically and (ii) on account of inspection carried out by the authorities at the principal place of business and additional places of business of the petitioner firm. It is claimed by the respondents, based on the ‘Panchnama’ dated 31/3/2021 that physical stocks available at the principal place of business/additional places of business did not match with the books of the petitioner during the course of inspection.
Various submissions have been made by learned counsel for the petitioner seeking to explain the circumstances in which there was a mismatch between the two and seeking to emphasize that the provisions of Section 35(6) read with Section 73 or 74 only could have been invoked in the given circumstances.
Having heard the learned counsel for the parties, prima facie it cannot be said that in case of a registered person action only under Section 35(6) read with Section 73 or 74 of the Act can be taken and that Section 67 of the Act cannot be invoked, if the circumstances as indicated therein exist.
The emphasis laid by learned counsel for the petitioner that as the goods liable to be confiscated or documents or books or things were not secreted, the provisions cannot be invoked, is premature at this stage.
The word ‘secreted’ is not defined under the Act, however, the same can be understood to mean anything which is concealed and in those circumstances even if the documents are not kept at the designated places where the same ought to be kept in terms of the Act and the Rules, and in case circumstances exist where the absence of the documents is with an intention to conceal them from the officers, the same can be termed as secreted, therefore, as observed hereinbefore, the plea raised in this regard, based on the circumstances which have come on record, is essentially premature.
Consequently, at this stage, prima facie it cannot be said that the seizure is illegal for the purpose of coming to the conclusion that provisions of Section 67 (6) of the Act would have no application.
The plea raised regarding lack of jurisdiction also apparently cannot be countenanced while dealing with the application seeking vacation/modification of the interim order.
The Hon’ble Supreme Court in the case of Kay Pan Fragrance (supra), wherein the High Court had directed the State to release the seized goods subject to deposit of security other than cash or bank guarantee or in the alternative indemnity bond equal to the value of tax and penalty to the satisfaction of assessing authority, inter alia quoting the provisions of Section 67 and Rule 140 and 141 observed as under:
“9. For the sake of consistency, we have no hesitation in observing that the High Court in all such cases ought to have relegated the assessees before the appropriate Authority for complying with the procedure prescribed in Section 67 of the Act read with Rules as applicable for release (including provisional release) of seized goods.”
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“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 upto 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 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.
13. In our opinion, therefore, the orders passed by the High Court which are contrary to the stated provisions shall not be given effect to by the authorities. Instead, the authorities shall process the claims of the concerned assessee afresh as per the express stipulations in Section 67 of the Act read with the relevant rules in that regard. In terms of this order, the competent authority shall call upon every assessee to complete the formality strictly as per the requirements of the stated provisions disregarding the order passed by the High Court in his case, if the same deviates from the statutory compliances. That be done within four weeks without any exception.
14. We reiterate that any order passed by the High Court which is contrary to the stated provisions need not be given effect to in respect of all the cases referred in the affidavit by the State Government before this Court and fresh cases which may have been filed or likely to be filed before the High Court in connection with the subject matter of these appeals, by all concerned and are deemed to have been set aside/modified in terms of this order. In view of this order, all the Writ Petitions pending before the High Court, list whereof has been furnished in the affidavit are deemed to have been disposed of accordingly. We have passed this common order to cover all cases of seizure during the relevant period, to obviate inconsistency in application of Law and also to do away with multiple appeals required to be filed by the State/ assessee to assail the unstatable orders/directions passed by the High Court in subject writ petition(s) referred to in the affidavit filed by the State before this Court.”
A perusal of the above observations indicate that qua the nature of interim order passed by the High Court therein, the Court required that the assessee must take recourse to the mechanism provided under the Act and the Rules for release on provisional basis upon execution of bond and furnishing of a security in such manner and of such quantum as has been prescribed and it was ordered that the orders passed by the High Court which are contrary to the statutory provisions shall not be given effect to by the authorities.
The order in the case of Kay Pan (supra) has been followed in the case of JVG Super Cargo Service (supra) and Maa Karni Traders (supra).
The attempt made by learned counsel for the petitioner to distinguish the judgment in the case of Kay Pan Fragrance (supra) by indicating that the same pertains to transporters essentially has no substance, as there is apparently no distinction between the case of a transporter and that of a registered person insofar as the applicability of provisions of Section 67 are concerned.
Admittedly, the petitioner himself applied under Section 67(6) of the Act seeking release of the seized goods vide Annex.10, based on which the order dated 11/5/2021 (Annex.15) was issued and as such passing of the order 11/5/2021 by the respondents also cannot be faulted.
In view of the above discussion, the application filed by the respondents under Article 226(3) of the Constitution is allowed. The order dated 21/5/2021 is modified to the extent that besides the surety bond of the equivalent amount of value of goods by the petitioner, it would be required of the petitioner to furnish security in the form of bank guarantee in terms of Section 67 (6) of the Act and Rule 140 of the Rules for release of the seized goods.
It is made clear that the observations made hereinbefore are confined to disposal of the present application and shall not affect the final outcome of the present writ petition.
Stay application stands disposed of.
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