2024 (6) TMI 1239 - HC - GST

Challenge to search and seizure order - non-compliance with mandatory provision of Section 67 of UPGST Act - reasons to believe - Joint Commissioner, while granting the authorization for search and seizure, never put forth the reasons to believe that the search was necessary - HELD THAT - The attempt of the State authorities in explaining the issue of two INS-01 forms has resulted in a kerfuffle and nothing more. The confusion is writ large in the counter affidavit and no sensible explanation has been provided to put forward the actual reasons to believe as required under Section 67 of the Act. In the present case, the said procedure had not been followed, and accordingly, the entire authorization is vitiated and liable to be quashed. The entire proceedings that have originated from the illegal search and seizure carried out under Section 67 of the Act have no foot to stand on, and accordingly, are quashed and set aside. The State authorities are directed to release all the goods and documents that they may have detained or confiscated within a period of three weeks from date - Any amount deposited by the petitioner in lieu of the order passed under Section 74 of the Act should be refunded to the petitioner within a period of eight weeks from date.

Summary

Issues:
Challenge to search and seizure order under Article 226 of the Constitution of India, compliance with Section 67 of the Uttar Pradesh Goods and Services Tax Act, 2017, validity of INS-01 documents, lack of reasons to believe, legality of proceedings under Section 67, explanation by State authorities, release of detained goods and documents, refund of deposited amount under Section 74.

Comprehensive Analysis:

1. The writ petition challenges the search and seizure order, subsequent proceedings, and orders under the Uttar Pradesh Goods and Services Tax Act, 2017. The petitioner contends that the authorities did not comply with Section 67 of the Act, specifically noting that the Joint Commissioner failed to provide reasons to believe that the search was necessary.

2. Upon review, it was found that two INS-01 forms were issued on different dates, with one being post-search, rendering it invalid. The other INS-01, issued on the date of the search, lacked the necessary reasons to believe. The petitioner argued that this document seemed fabricated and an afterthought, raising doubts about the authorization's genuineness.

3. The petitioner explicitly raised concerns in the writ petition regarding the authenticity of the authorization due to the discrepancies in the INS-01 forms and the absence of recorded reasons to believe. The State authorities, in their response, did not provide a satisfactory explanation, leading to confusion and failing to establish compliance with the statutory requirements of Section 67.

4. Consequently, the Court found that the authorization for search and seizure was flawed, as it did not adhere to the mandatory provisions of Section 67. As a result, the entire proceedings initiated under Section 67 were deemed illegal and set aside. The Court directed the release of any detained goods and documents within three weeks and ordered the refund of any deposited amount under Section 74 within eight weeks.

5. In conclusion, the judgment highlights the importance of procedural compliance and the necessity of valid reasons to believe in authorizing search and seizure actions under the relevant tax legislation. The Court's decision to quash the proceedings underscores the significance of upholding legal standards in such matters to safeguard the rights of the parties involved.