GST Dept. Can Only Seize Goods In Transit And Not From Godown : Allahabad High Court

The single bench of Justice Saumitra Dayal Singh has observed that it is unbelievable that two (not one) authorities of the Mobile Squad of the Commercial Tax Department chose to act with negligence. The provision of Section 129(3) of the CGST Act could not be invoked to subject a godown premises to a search and seizure operation. The department was unmindful of the Act as no action was taken under Section 67. Section 67 of the CGST relates to the existence of "reasons to believe" that premise is subject to search and seizure of goods or documents found therein.

The petitioner/assessee is in the business of manufacturing PVC pipes. The assessee was not found involved in any transaction involving the transportation of any goods, whether raw materials or finished goods.

However, on 07.08.2018, the business premises of the petitioner were subjected to a search and seizure operation by the Special Investigation Branch of the Commercial Tax Department, Agra. A Panchnama was drawn, alleging the shortage of physical stock as compared to that recorded in the stock registers. On the next date, the assessee moved an application to the S.I.B. authorities disputing the allegation of a shortage of stock. According to the assessee, stock reconciliation could be made by taking into account the stock of raw materials and finished goods stored at its other godown that was not subjected to search and seizure proceedings.

The department proceeded to issue separate show cause notices to the assessee under Section 129(3) with respect to the search and seizure operation conducted by the Special Investigation Branch at the business premises of the petitioner. The seizure order was passed. The tax and penalty were demanded. The appellate authority dismissed the appeals filed by the petitioner.

The court noted that the department not only closed its eyes to the power and jurisdiction that never existed, but they deliberately described the vehicle being checked as "UPGODOWN02" and "GODOWON."

"The Court does not wish to go deeper into the intention of the officers concerned in issuing such notices and drawing up such proceedings for which they had no jurisdiction, as that would entail the calling of personal affidavits of the officers at the cost of precious time of the Court. However, the officers are accountable for their acts. Therefore, let this order be communicated to the Commissioner Commercial Tax UP to look into the matter, call for explanation, and take appropriate action commensurate to the misconduct, if any, that may be found committed by the erring officer and to take consequential and corrective action to avoid such occurrences in future," the court said.

Case Title: Mahavir Polyplast Pvt. Ltd. Versus State Of U.P. And 2 Others

Citation: WRIT TAX No. - 57 of 2020

Case Citation: 2022 LiveLaw (AB) 418

Counsel For Petitioner: Advocate Nishant Mishra

Counsel For Respondent: C.S.C.

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