2023 (10) TMI 1339 - HC - GST

Seizure of silver bars - seized silver was procured using the cash generated from the clandestine removal of the packaging material supplied by the petitioner firm - scope of Section 67 of the CGST Act - Reasons to believe - HELD THAT - The officer while conducting the search may find various types of moveable assets. However, only those goods can be seized which are liable for confiscation while exercising the powers under Section 67 of the CGST Act - It is significant to note that the exercise of power under Section 67 pre-supposes the reason to believe that a taxpayer has suppressed any transaction relating to supply of goods or services. The search in the present case was carried out after recording the reasons to believe that the petitioner is engaged in clandestine manufacturing and supply of their product, that is, various types of laminations. Therefore, silver, though being a movable asset, is not goods liable for confiscation while exercising the power under Section 67 of the CGST Act in relation to the products being traded by the petitioner. The argument that the petitioner has not been able to produce lawful evidence of purchase of silver is of no consequence insofar as the action under Section 67(2) of the CGST Act, as initiated in the present case, is concerned. As far as the argument that in the subsequent investigation the petitioner is found to be trading in silver is concerned, it is clarified that the respondents are not precluded from proceeding further with the investigation and taking appropriate action under the Act. There is no dispute that in case the respondents have reason to believe that the petitioner has suppressed any transaction, in relation to the supply of goods and services, that may involve silver, in contravention of any provisions of the CGST Act or the rules made thereunder, an appropriate action under Section 67 of the Act can be initiated - the respondents are directed to forthwith release the silver bars and coins seized from the petitioner during the search conducted on 07.02.2023. Let a fresh copy of the affidavit filed on behalf of the petitioner be supplied to Mr. Tripathi - List on 30.11.2023.

Summary

Issues involved:
The judgment involves the issue of the seizure of silver bars under Section 67 of the Central Goods and Services Tax Act, 2017 and the legality of the seizure based on the power of the Proper Officer to seize goods, documents, or books.

Analysis of the Judgment:

Issue 1: Seizure of Silver Bars
The Court noted that the seized silver was allegedly procured using cash generated from clandestine activities. The respondents argued that the proprietor of the petitioner firm was engaged in clandestine trading of silver to evade GST. The Court referred to a previous case to analyze the scope of Section 67 of the CGST Act and the power of the Proper Officer to seize goods.

Issue 2: Scope of Section 67 of the CGST Act
Section 67(2) of the CGST Act allows the Proper Officer to seize goods, documents, or books if there is a reason to believe they are liable for confiscation or useful for proceedings under the Act. The term 'goods' under this section covers movable property subject to taxable supplies. The Court emphasized that only items liable for confiscation can be seized.

Issue 3: Definition of 'Things' in Section 67
The term 'things' in Section 67 includes all material informative or relevant to proceedings under the CGST Act. The Court held that 'things' must be interpreted broadly to encompass items containing information useful for the proceedings. The power to seize does not extend to valuable assets merely because they are unaccounted for.

Issue 4: Reason to Believe and Suppression of Transactions
The power under Section 67 requires a 'reason to believe' that a taxpayer has suppressed transactions. In the present case, the search was based on suspicions of clandestine activities related to laminations, not silver trading. The Court ruled that silver, though movable, was not liable for confiscation under Section 67 in this context.

Conclusion:
The Court directed the release of the seized silver bars and coins, emphasizing that the respondents could continue further investigations if they suspect suppression of transactions. The judgment clarified the limitations of the power to seize under Section 67 and the importance of a valid reason to believe in such actions.