2019 (8) TMI 1135 - HC - GST

Jurisdiction - power to seize goods - Section 67(2) of the UP GST Act, 2017 - goods seized from the disclosed place of business - goods secreted in any place or not - HELD THAT - The power to seize the goods has been given under sub-section (2). The Joint Commissioner or an officer higher in rank, may, either in pursuance of an inspection that may have been carried out or otherwise forms reason to believe that any goods liable to confiscation or any documents or books or things that may be useful for or relevant to any proceeding under the Act, may be seized though they may be secreted in any place - Under sub-section (6) of Section 67 of the Act, the goods seized under sub-section (2) may be released provisionally against execution of bonds and furnishing of security. In the present case, there is no ground of challenge raised by the learned counsel for the assessee that an authorization to inspect search and seize did not exist - Once it was admitted to the assessee during the course of the survey that it had not recorded the goods found stored at his disclosed place of business in the regular books of account, a presumption of the goods having been secreted did arise, constructively. It may be added here itself that the presumption, as has been considered here, would remain rebuttable. However, at this stage its existence may not be denied. The object of the provision being clearly to ensure that dealers would disclose their stocks in their books of account and not indulge in any undisclosed trading, the interpretation as suggested by learned counsel for the assessee would, if accepted, defeat that object and encourage conduct of undisclosed business from disclosed place/s of business. Demand of security - HELD THAT - In view of the fact that the seizure was made from the disclosed place of business as also semi finished goods were found; the assessee claims to be a manufacturer and further, in view of the fact that the proceedings are yet to be finalized, it is desirable that the goods may be released in favour of the assessee, subject to his furnishing security in the shape of cash for the amount of tax and penalty contemplated to the extent of 50% and for the balance amount, the security may be furnished in the shape of indemnity bond, subject to the satisfaction of the concerned authority. Petition disposed off.

Summary

Issues Involved:

1. Jurisdiction under Section 67(2) of the UP GST Act, 2017 to seize goods from the disclosed place of business.
2. Validity of the demand for cash security equivalent to tax, penalty, and interest.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 67(2) of the UP GST Act, 2017 to seize goods from the disclosed place of business:

The petitioner-assessee challenged the seizure of goods from their disclosed place of business under Section 67(2) of the UP GST Act, 2017. The assessee argued that goods kept at a disclosed place of business could not be considered 'secreted,' thus no jurisdiction existed under Section 67(2) to seize such goods. The assessee contended that the term 'secreted' implies goods hidden or kept at an undisclosed location.

The court examined the provisions of Chapter XIV of the Act, particularly Section 67, which deals with inspection, search, and seizure. It noted that while sub-section (1) provides the power to inspect, sub-section (2) grants the power to seize goods if there is a reason to believe they are liable to confiscation and are 'secreted in any place.' The court referred to the interpretation of 'secreted' from the case of Durga Prasad Vs H. R. Gomes, where it was defined as documents or things kept out of the usual place to conceal them.

Applying this interpretation, the court concluded that in the context of the GST Act, 'secreted' implies goods not disclosed to revenue authorities for fair self-assessment. If goods are not recorded in the regular books of account, it raises a presumption of them being 'secreted,' regardless of whether they are at a disclosed place of business. Thus, the court held that the goods were validly seized, as they were not recorded in the assessee's books, leading to a constructive presumption of being 'secreted.'

2. Validity of the demand for cash security equivalent to tax, penalty, and interest:

The petitioner also contested the demand for cash security equivalent to tax, penalty, and interest, arguing it was excessive since penalty proceedings were yet to be finalized. The court acknowledged this concern and considered the facts that the seizure was from a disclosed place of business, included semi-finished goods, and the assessee was a manufacturer with ongoing proceedings.

The court decided that the goods should be released provisionally, subject to the assessee furnishing security. Specifically, the court directed that 50% of the demanded amount should be provided as cash security, and the remaining 50% as an indemnity bond, subject to the satisfaction of the concerned authority. This balanced approach aimed to protect the revenue's interest while allowing the assessee to continue their business operations.

Conclusion:

The court disposed of the petition by upholding the seizure under Section 67(2) of the Act, interpreting 'secreted' to include goods not recorded in the books of account, even if stored at a disclosed place of business. The demand for security was moderated, requiring the petitioner to furnish 50% in cash and 50% in an indemnity bond for the provisional release of the seized goods.