2020 (10) TMI 464 - HC - GST

Evasion of GST - Prohibition order - direction that the dealer not to remove or part with or otherwise deal with the seized goods - primary contention of the petitioner is that there was absolutely no reason to believe that the petitioner had indulged in suppression or otherwise contravened any of the provisions of the Act - HELD THAT - In the case on hand, bare assertion has been made that the impugned proceedings were initiated based on the intelligence developed by CGST (HPU), Madurai that the petitioner is evading GST by misdeclaring the goods while importing. But not a scrap of material was produced before the court. The recitals set out in the order of seizure and the order of prohibition indicate that the formation of the requisite belief is predicated on the scrutiny of the books of account, registers and documents found during the search. This is sufficient to invalidate the entire proceedings. But I refrain from doing so. Now that the search has been conducted and it has been shown that the stock register was not maintained at the petitioner's place of business, I do not want to quash the order of seizure. However, the order of prohibition has to be necessarily interfered with. The search and seizure had taken place on 21.08.2020. By now, more than 40 days have elapsed. Even, a show cause notice has not been issued till date. The respondents have made a cool statement in their para wise comments that no allegation has been made against the petitioner on the matter under investigation merely by issuing orders of seizure and prohibition and that the matter would be decided by proper officer under CGST Act only after completion of the investigation of the case. The respondents ought to release the goods on provisional basis. The respondents are directed to take personal bond from the petitioner. I wanted to know if the petitioner can offer any security. It appears that the two immovable properties of the petitioner are already under mortgage. The petitioner states that at best he can deposit a sum of ₹ 2.00 lakhs. It is not as if the petitioner is going to run away. He has roots in Madurai. Unless the petitioner is permitted to deal with the goods in question, even if some levy is imposed on the petitioner in future, he will not be able to pay the same. Common sense dictates that the petitioner is allowed to do business. The respondents are directed to release the goods on taking personal bond from him and on payment of a sum of ₹ 2.00 lakhs. Even while the order of seizure is sustained, the order of prohibition is modified in the above terms - Petition allowed in part.

Summary

Issues:
Challenge to orders of seizure and prohibition issued under GST Act based on search operation conducted at petitioner's business premises.

Analysis:
1. The petitioner contended that the search conducted without reasonable basis led to seizure of goods, impacting business post Covid-19 lockdown. Cited Supreme Court precedent on belief for seizure.
2. Respondents alleged tax evasion by misdeclaration, supported by intelligence inputs. Claimed petitioner failed to produce accurate stock details during search.
3. Court considered arguments from both sides, emphasizing the importance of economic revival post-pandemic for businesses like the petitioner's.
4. Examined Section 67 of GST Act regarding inspection, search, and seizure powers, highlighting the need for a valid reason to believe for such actions.
5. Noted the absence of concrete evidence supporting the initiation of proceedings based on intelligence inputs, but refrained from quashing the seizure order due to lack of stock register maintenance.
6. Directed provisional release of seized goods upon execution of a bond and payment of a sum by the petitioner, considering his rootedness in the locality and necessity to continue business operations.
7. Emphasized the importance of promoting indigenous products over Chinese imports, urging entrepreneurs to provide quality alternatives at competitive prices.
8. Partially allowed the writ petition, modifying the prohibition order while allowing for future adjudication proceedings by the authorities. No costs awarded, and the case was closed.