Seizure of the goods of the godown without jurisdiction may amount to misconduct

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The Hon’ble Allahabad High Court in Mahavir Polyplast Pvt. Ltd. v. the State of U.P. And 2 others [Writ Tax No. 57 of 2020 and Writ Tax No. 58 of 2020 dated August 6, 2022] quashed the orders of the GST officials for seizing the goods of the assessee inside the godown without jurisdiction. The court also directed the Commissioner Commercial Tax UP to look into the matter, and take appropriate action commensurate to the misconduct, if any.

Facts:

Mahavir Polyplast Pvt. Ltd. (“the Petitioner”) isa manufacturer of PVC pipes and it has established its manufacturing unit at Tehsil-Kirawali, Agra. They store all its raw materials and manufactured goods at a godown located on the same premises.

The business premises of the Petitioner was subjected to a search and seizure operation by the Special Investigation Branch (“SIB”) of the Commercial Tax Department, Agra dated August 7, 2018 and described them as “Vahan Sankhiya UPGODOWN02” and “Vahan Sankhiya GODOWON”. A Panchnama was drawn on the same day mentioning the allegation of shortage of physical stocks as compared to that recorded in the stock registers.

Show cause notices dated August 9, 2018 and August 14, 2018 (“SCNs”) were issued by the Assistant Commissioner (Mobile Squad), Unit-II Agra, and Assistant Commissioner (Mobile Squad) -5 Agra (“the Department”) respectively under Section 129(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) with respect toVahan Sankhiya GODOWON“. Accordingly, seizure orders had been passed demanding tax and penalties.

Therefore, the Petitioner filed two writ petitions for the same.

Issue:

Whether the goods were seized without jurisdiction?

Held:

The Hon’ble High Court of Allahabad in Writ Tax No. 57 of 2020 and Writ Tax No. 58 of 2020 dated August 6, 2022, held as under:

  • Stated that as far as the seizure of goods and demand of tax under Section 129 of the CGST Act is concerned, the Department acted negligently.  Since they deliberately described the vehicles wrongly as “Vahan Sankhiya UPGODOWN02” and “Vahan Sankhiya GODOWON” they cannot deny that they were aware that the subject search was not directed at any vehicle but at an immovable property.
  • Directed that this order of the Court must 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 officers and to make consequential and corrective action to avoid such occurrences, in future.
  • Concluded that the entire proceedings drawn up against it under Section 129(3) of the CGST Act, are found to be without jurisdiction as the Department chose to exercise powers vested in them to search a vehicle carrying goods during transportation to proceed against goods lying in a godown. Any amount that may have been deposited by the Petitioner may be refunded together with interest at the rate of 8%, subject to adjudication proceedings.
  • Therefore, the Court allowed the writ petitions.

Relevant Provisions:

Section 129(3) of the CGST Act:

“Detention, seizure, and release of goods and conveyances in transit

129. (3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”

(Author can be reached at info@a2ztaxcorp.com)

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CA Bimal Jain
A2Z Taxcorp LLP is a boutique Indirect Tax firm having its offices at New Delhi and Guwahati specializing in GST, Central Excise, Custom, Service Tax, VAT, DGFT, Foreign Trade Policy, SEZ, EOU, Export – Import Laws, Free Trade Policy, etc. It is a professionally managed firm having a team of experienced and distinguished Chartered Accountants, Company Secretary, Lawyers, Corporate Financial Advisors and Tax consultants to provide various services like litigation and representation, transaction advisory, diagnostic reviews/ health checks, audit defense & protection, retainership & compliance, configuration of tax efficient business model etc. Its clientele consists mainly of Foreign MNC, large/mid-sized Indian companies which includes exporters, FMCG, consumer durables, automobiles, aerated beverages, ceramic tiles, real-estate, hospitality, etc. Our clients include Varun Beverages Limited, Kajaria Ceramics Limited, L.G. Electronics India Private Limited, Shipra Hotel Limited, Multani Pharmaceuticals Limited, Shangri-La Eros Hotel etc. Flat No. 34B, Ground Floor, Pocket - 1, Mayur Vihar, Phase–I, Delhi – 110091 India Desktel:+91-11-42427056 Mobile:+91 8076563802 info@a2ztaxcorp.com www.a2ztaxcorp.com
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