2025 (3) TMI 479 - HC - GST

Challenge to the continued retention of goods by the Respondent seized on the basis of a search conducted by the Respondents - sufficient cause present or not - absence of notice or opportunity to be heard before extending the seizure period - HELD THAT - In the facts of the present case no notice of extension of the seizure was provided prior to the conclusion of the six-month period. Reliance was instead placed on certain extracts which came to be filed as a consequence of Order dated 22.08.2023 to contend that the same would constitute compliance of the mandate of sufficient cause - These extracts are not in the public domain and the Petitioner herein could not have had any opportunity to controvert or reply to the contents of the same. It clearly amounts to a unilateral act on the part of the Respondent by which the Petitioner would stand deprived of its statutory entitlement to the goods and for that reason alone would not satisfy the mandate of Section 67 (7) of the CGST Act. Clearly the shoddy performance by the concerned officers in valuing the goods despite the complete cooperation of the Assessee cannot be sufficient cause - In any event when the relevant documents themselves were not made available completely it is difficult to accept the contention that the same could have formed sufficient cause for the purpose of extending the period of seizure. The confiscation is the result of an investigation that establishes that there has been a contravention of the provisions of the Act. The same cannot be equated to the power of seizure under Section 67 which pertains to the power of the Officer to seize based on a reason to believe . A notice under Section 130 cannot be equated to the mandate under Section 67 (7). It is directed that the seized goods as per the stock summary annexed to the letter dated 17.06.2021 (Annexure P-6) be released upon the Petitioner making a deposit of the amount as per the valuation annexed to the letter dated 17.06.2021 with the Respondents. Conclusion - The sufficient cause must be shown to the affected person and the right to notice and hearing cannot be unilaterally denied. The provisions of the CGST Act regarding seizure are pari materia with the Customs Act. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment include:

Whether the continued retention of goods seized under the Central Goods and Services Tax Act, 2017 (CGST Act) was valid, particularly concerning the timeline and procedural requirements under Section 67(7) of the CGST Act.
Whether the provisions of Section 67 of the CGST Act are pari materia with Section 110 of the Customs Act, 1962, and if so, whether the principles established in the Supreme Court's decisions concerning the Customs Act apply to the CGST Act.
Whether the absence of notice or opportunity to be heard before extending the seizure period invalidates the continued seizure of goods.
Whether the Show Cause Notice (SCN) issued for confiscation was served within the permissible time limits and in accordance with the procedural requirements.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of Continued Retention of Goods under Section 67(7) of the CGST Act:

Relevant Legal Framework and Precedents: Section 67(7) of the CGST Act mandates the return of seized goods if no notice is given within six months, extendable by another six months on sufficient cause. The Court referenced similar provisions under Section 110 of the Customs Act and the Supreme Court's decisions in I.J. Rao and Charan Das Malhotra.
Court's Interpretation and Reasoning: The Court found that the provisions of the CGST Act and the Customs Act are indeed pari materia, meaning they are similarly worded and serve similar purposes. The Court rejected the Respondents' argument that the two statutes operate in different fields.
Key Evidence and Findings: The Court noted that the Respondents failed to provide notice or an opportunity to the Petitioner before extending the seizure period. The note sheets presented by the Respondents did not contain sufficient material to justify the extension.
Application of Law to Facts: The Court applied the principles from the Supreme Court's decisions, emphasizing that the affected party must be given notice and an opportunity to be heard before extending the seizure period.
Treatment of Competing Arguments: The Court dismissed the Respondents' argument that the provisions are not pari materia and that no notice was required under the CGST Act.
Conclusions: The Court concluded that the continued seizure without notice or hearing was invalid, and the goods should be returned to the Petitioner.

Service and Timing of the Show Cause Notice:

Relevant Legal Framework: Section 67(7) of the CGST Act requires that notice be given within six months of seizure, extendable by another six months.
Court's Interpretation and Reasoning: The Court did not delve deeply into the factual aspect of the SCN's service, as the SCN itself was not directly challenged in the petition.
Key Evidence and Findings: The Respondents claimed the SCN was served by affixation due to the unavailability of the Petitioner at the registered premises.
Application of Law to Facts: The Court noted that the SCN related to confiscation, not the extension of seizure, and thus was not directly relevant to the petition's primary issues.
Treatment of Competing Arguments: The Court did not find the Respondents' arguments regarding the SCN's service persuasive for the purposes of the seizure issue.
Conclusions: The SCN's service was not deemed directly relevant to the issue of seizure extension.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: The Court emphasized that "sufficient cause" must be shown to the affected person, and the right to notice and hearing cannot be unilaterally denied.
Core Principles Established: The provisions of the CGST Act regarding seizure are pari materia with the Customs Act, and the principles of notice and hearing established in Supreme Court precedents apply.
Final Determinations on Each Issue: The Court ordered the release of the seized goods upon the Petitioner making a deposit as per the valuation. It also directed the Respondents to conclude any related proceedings within six weeks and to provide copies of all seized documents and electronic data to the Petitioner.

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