The Hon’ble SC in State of Uttar Pradesh v. Kay Pan Fragrance (P.) Ltd. [Civil Appeal No. 8941/2019 (@ Petition for Special Leave to Appeal (C) No. 25291/2019) dated November 22, 2019] held that in cases where Writ Petitions are filed before HC against seizure order, the HC should ask the assessee to approach before the Appropriate Authority for complying with the procedure prescribed under the GST law. The Central Goods and Services Act, 2017 (“CGST Act”) read with Central Goods and Service Tax Rules, 2017 (“CGST Rules”) contains a complete code for release (including provisional release) of seized goods. Further, the orders passed by the HC that are contrary to the provisions prescribed would not be given effect and shall be processed afresh in accordance with law.
The State of U.P. (“the Petitioner”) filed an appeal questioning the interim order passed by the HC directing 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 the Assessing Authority.
The HC after passing the said interim order, then, dispose of the main Writ Petition as having become infructuous, consequent to release of goods by the appropriate authority in terms of the interim order of the HC. In the context of that grievance, the Hon’ble SC had to pass an order on September 16, 2019 which reads thus:
“Applications for exemption from filing certified copy of the impugned order and official translation are allowed.
Issue notice on the special leave petition as also on the prayer for interim relief.
Tag with Special Leave Petition (C) Diary No.24795 of 2019.
Considering the fact that in the present case goods have already been released pursuant to the impugned order, no interim relief can be granted.
However, our attention was invited to an order dated 31.01.2019 passed by the High Court in a similar matter i.e. Writ Tax No.141 of 2019 and couple of other case(s), wherein the High Court allowed the writ petitioner(s) to withdraw writ petition(s) after release of goods pursuant to the interim order, despite the fact that the interim order passed by it directing release of goods was subject matter of challenge pending before this Court. That cannot be countenanced. For, the claim of the State cannot be made faitaccompli in this manner.
In future, if such occasion arises including in the case of writ petitioners in this case, it will be open to the petitioner(s) (Department) to invite the attention of High Court regarding the pending special leave petition before this Court. We are certain that the High Court will consider the request for withdrawal of writ petition appropriately.”
After the afore-mentioned order of the SC, the HC is disposing of Writ Petitions by referring to Section 67 (8) of the CGST Act and Rule 141 of the CGST Rules.
The Hon’ble SC in Civil Appeal No. 8941/2019 (@ Petition for Special Leave to Appeal (C) No. 25291/2019) dated November 22, 2019 held as under:
- Observed that HC 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 CGST Act read with Rules as applicable for release (including provisional release) of seized goods.
- 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 CGST Act read with Rules as applicable 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 CGST Act.
- The orders passed by the HC 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 CGST Act read with Rule 141 and 142 of the CGST Rules. 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 HC in his case, if the same deviates from the statutory compliances. That be done within four weeks without any exception.
- Reiterate that any order passed by the HC 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 the SC and fresh cases which may have been filed or likely to be filed before the HC in connection with the subject matter of the appeals.
- Accordingly disposed off all the Writ Petitions pending before the HC, list whereof has been furnished in the affidavit.
Section 67 of the CGST Act:
“Section 67 Power of inspection, search and seizure
- (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that––
(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or
(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorize in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.
(2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under subsection
(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 authorize 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 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:
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.
(3) The documents, books or things referred to in sub-section (2) or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.
(4) The officer authorized under subsection (2) shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied.
(5) The person from whose custody any documents are seized under subsection (2) shall be entitled to make copies thereof or take extracts therefrom in the presence of an authorized officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.
(6) The goods so seized under subsection (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.
(7) Where any goods are seized under subsection (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months.
(8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under subsection (2), be disposed of by the proper officer in such manner as may be prescribed.
(9) Where any goods, being goods specified under subsection (8), have been seized by a proper officer, or any officer authorized by him under subsection (2), he shall prepare an inventory of such goods in such manner as may be prescribed.
(10) The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that subsection (5) of section 165 of the said Code shall have effect as if for the word “Magistrate”, wherever it occurs, the word “Commissioner” were substituted.
(11) Where the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder for prosecution.
(12) The Commissioner or an officer authorized by him may cause purchase of any goods or services or both by any person authorized by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier.”
Rule 140 of CGST Rules:
“Rule 140 – Bond and security for release of seized goods
(1) The seized goods may be released on a provisional basis upon execution of a bond for the value of the goods in FORM GST INR-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable.
Explanation. For the purposes of the rules under the provisions of this Chapter, the “applicable tax” shall include Central Tax and State Tax or Central Tax and the Union Territory Tax, as the case may be and the cess, if any, payable under the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017)
(2) in case the person to whom the goods were released provisionally fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the tax, interest and penalty and fine, if any, payable in respect of such goods.”
Rule 141 of CGST Rules:
“Rule 141 – Procedure in respect of seized goods
(1) Where the goods or things seized are of perishable or hazardous nature, and if the taxable person pays an amount equivalent to the market price of such goods or things or the amount of tax, interest and penalty that is or may become payable by the taxable person, whichever is lower, such goods or, as the case may be, things shall be released forthwith, by an order in FORM GST INS-05, on proof of payment.
(2) Where the taxable person fails to pay the amount referred to in sub-rule (1) in respect of the said goods or things, the Commissioner may dispose of such goods or things and the amount realized thereby shall be adjusted against the tax, interest, penalty, or any other amount payable in respect of such goods or things.”