GST Caselaw

#GSTCase-57-Gist of Cases of Search and Seizure in GST-(Section 67): Complete sealing of premises by DGST per se Illegal; Whether goods secreted in any place and not recorded in books of accounts can only be seized under section 67; Common Investigation at one level for separate investigations ate local level, Suspension of Provisional Attachment

#GSTCase-57-Gist of Cases of Search and Seizure in GST-(Section 67): Complete sealing of premises by DGST per se Illegal; Whether goods secreted in any place and not recorded in books of accounts can only be seized under section 67; Common Investigation at one level for separate investigations ate local level, Suspension of Provisional Attachment  

 

Case-1: Napin Impex (P.) Ltd. v. Commissioner of DGST, Delhi [2018] 98 taxmann.com 462 (Delhi)

Case-2: Khushiya Industries (P.) Ltd. v. State of Gujarat [2018] 100 taxmann.com 37 (Gujarat)

Case-3: Palak Designer Diamond Jewellery v. Union of India [2019] 102 taxmann.com 294 (Gujarat)

Case-4: Golden Cotton Industries v. Union of India [2019] 102 taxmann.com 412 (Gujarat)

Case-5: Lemon Tree Hotels Ltd. v. Union of India [2018] 99 taxmann.com 25 (Delhi)

 

Case-1: Napin Impex (P.) Ltd. v. Commissioner of DGST, Delhi [2018] 98 taxmann.com 462 (Delhi)

Issue: Complete Sealing of Premises by the DGST Officials under GST is per se illegal.

Facts: The petitioner alleges that its premises were visited by the Revenue authorities on 29.08.2018 when the DGST officials directed production of books of account and other documents. Since the petitioner was not in possession of those, it sought 24 hour time for the same. Apparently, a temporary sealing of the premises was ordered. On the next date i.e. 30.08.2018, the premises were completely sealed.

Contention of the Petitioner: It is contended that the DGST lacks statutory power and authorization to indefinitely seal the premises in a manner it has proceeded to do so.

Contention of the Respondent: Learned counsel for the DGST, appearing on advance notice, submitted that till date the petitioner has not cooperated as it has neither produced the books of account nor other materials. It is further submitted that according to the instructions available to them, the premises can be immediately de-sealed provided the petitioner cooperates.

Held: Given the plain text of the statute i.e. especially Section 67(4) which merely authorizes the concerned officials to search the premises and if resistance is offered, break-open the lock or any other almirah, electrical device, box, etc. containing books and documents, the complete sealing of the premises, in the opinion of the court is per se illegal. Even if it were assumed that the respondents temporarily restrained the petitioner from using its premises, for a few hours, till the books of account are made available in order to secure the evidence available in the premises, that could not have assumed the life on “its own”, at least indefinitely. In these given circumstances, this petition has to succeed. Since the premises have been in the possession of the respondents for over a month, a direction is issued to remove the seal forthwith – within the next 12 hours and hand over the premises to the petitioner.

 

Case-2: Khushiya Industries (P.) Ltd. v. State of Gujarat [2018] 100 taxmann.com 37 (Gujarat)

Issue: Suspension of Provisional Attachment of Factory Premises, Stock and Bank Accounts

Facts: Provisional orders of attachment passed by the respondent authorities attaching the petitioner’s factory premises, stock and bank accounts. The premises of the petitioner and other entities in the same business were raided. During the period between 27.06.2018 and 07.07.2018, Revenue authorities collected several documents and recorded statements of responsible persons. On the basis of such materials, the case of the department is that the petitioner is engaged in large scale bogus billing activities. The petitioner is thereby defrauded the Revenue. The respondents roughly assessed the petitioner’s possible tax and penalty liabilities under the Gujarat Goods & Service Tax Act and Central Goods & Service Tax Act at close to Rs. 45 crores.

Held: At the prima facie stage, the department contends strongly that the petitioner has indulged into revenue defalcation. Possible tax and penalty liabilities are substantial. At the same time, it is not disputed that the petitioner is also involved in legitimate business activities. By freezing the petitioner’s bank accounts and attaching the properties, the petitioner is temporarily rendered penalized. The petitioner cannot operate the business, cannot move the stock and cannot make payments. On reasonable terms, we propose to suspend the attachments. Under the circumstances, we would permit the petitioner to carry on the legitimate business by suspending provisional attachments subject to fulfillment of following conditions:

  • The petitioner creates an undertaking to maintain a stock of the goods of a minimum of Rs. 5 crores. Such undertaking shall be filed before the department as well as before this Court by 15.11.2018;
  • The petitioner give unconditional bank guarantee to the department to the tune of Rs. 5 crores. For this limited purpose of enabling the petitioner to create stock and give bank guarantee, it would be open for the petitioner to receive payments from its dealers. The director of the petitioner will file undertaking before this Court latest by 30.10.2018 that such payments will not be utilized for any purpose other than creating the stock as directed above and for raising bank guarantee.

 

Case-3: Palak Designer Diamond Jewellery v. Union of India [2019] 102 taxmann.com 294 (Gujarat)

Issue: Provisional Release of Goods in terms of Section 67(6) of CGST Act, 2017

Facts: The petitioner is engaged in the manufacture of jewellery from gold, diamond and precious metals on its own account as well as on job work basis and claims to be having substantial income from job work. Search came to be carried out at the factory premises of the petitioner on 11.1.2018 under section 67 (2) of CGST Act to ascertain whether the petitioner had paid GST in terms of the provisions of that Act.

During the course of search, the officers seized the excess stock of finished goods under seizure memo dated 11.1.2018.  The officers of the third respondent, once again visited the office of the petitioner on 23.1.2018 to ascertain value of the seized goods along with an approved valuer, who valued the seized goods at Rs.4,10,68,644/- and, thereafter, sealed such goods. On 14/15.3.2018, the respondents once again searched the premises of the petitioner and seized all the raw materials and finished goods lying on the first, second and third floors under the seizure memo dated 14/15.3.2018. Vide letter dated 13.3.2018, the petitioner requested the respondents to release the goods as they had paid GST at the appropriate rate under the Act along with penalty.

Thereafter, the petitioner furnished various documents from time to time and vide letter dated 29.5.2018 provided the reasons as to why the goods were not required to be seized, inter alia, stating that the petitioner being a job worker was not responsible for payment of GST on the value of supply of goods and that it was liable to pay GST only on job work charges.

Vide letter dated 19.6.2018, the competent authority extended the period of seizure in terms of section 67 (7) of the CGST Act for a further period of six months.

Held: The respondents are duly empowered to provisionally release the seized goods, if the requirements of section 67 (6) of the CGST Act read with rule 140 of the CGST Rules are satisfied. The total amount of tax payable on the seized goods, totally valued at Rs.15,58,59,711/- is Rs.46,75,791/-. Adding 50% towards penalty, the total amount would come to approximately Rs.70 lakhs. The petitioner has already deposited Rs.14,16,868/- by way of challan and has reversed credit of SGST to the tune of Rs.7,90,793/-, which comes to approximately Rs.22 lakhs. Under the circumstances, if the petitioner furnishes bank guarantee of Rs.50 lakhs and a bond for the value of the goods in FORM GST INS-04, the interest of justice would be served.

 

Case-4: Golden Cotton Industries v. Union of India [2019] 102 taxmann.com 412 (Gujarat)

Issue:  Whether only those goods, documents, books or things could be seized under Section 67(2) which have been secreted in any place and not goods accounted for in the books of accounts

Contention of the petitioner: Section 67(2)of  CGST Act, 2017 provides that concerned officer, 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 books or things, which in his opinion shall be useful for or relevant to any proceedings under the Act, are secreted in any place, a search or seizure can be carried out, and such goods, documents or books or things can be seized. Therefore, the basic requirement is that the goods, documents, books or things should have been secreted in any place.

It was submitted that in the facts of the present case, the goods in respect of which the impugned order of prohibition under rule 139(4) of the rules has been issued, are the goods which are accounted for in the books of account and are not secreted anywhere, and hence, the order of prohibition is contrary to the provisions of sub-section (2) of section 67 of the Act.

Held: Having regard to the submissions advanced by the learned advocate for the petitioner, Issue Notice returnable on 21st February, 2019.

 

 

Case-5: Lemon Tree Hotels Ltd. v. Union of India [2018] 99 taxmann.com 25 (Delhi)

Issue: Common Investigations at one level for separate investigations being carried out at local level

Facts: Separate investigation at the local levels have been carried out by the authorities against the units at Ahmedabad, Chandigarh, Chennai and Pune. The petitioner had approached this Court claiming directions that common investigations be carried out having regard to the nature of its business functioning and having regard to the fact that M/s. Lemon Tree Hotels Ltd. maintains common accounts and, therefore, prepares balance sheets on the basis of common centralized inputs.

Held: It is evident from the above extracts that the nature of investigations carried out in the M/s. Lemon Tree Hotels Ltd. resulted in material and information gathering which are of a different kind. Although the petitioner seeks general directions that common investigations be carried out, the Court is of the opinion that grant of such relief at this stage would not be expedient.

Instead, the respondents shall, at a later stage of the investigation, nominate a senior officer or Commissioner to review the evidence gathered in order to purely discern if common approach is essential, after which the investigations may be concluded and the Show Cause Notices (SCNs) issued by appropriate competent authorities. Upon the issuance of such SCNs, the Chief Commissioners of Central Goods and Services Tax of the concerned Zones shall pass an order centralizing the adjudication of such SCNs, which shall be by one competent officer in Delhi. In other words all SCNs of all zones shall be dealt with by one adjudicating Officer, in Delhi, empowered to do so, by the competent authority.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top