2022 (8) TMI 410 - HC - GST

Levy of penalty - Search and seizure operation at the petitioner's godown. - Issuance of separate SCN with respect to same search and seizure operation - deliberate negligence on the part of GST offices - two proceedings by two authorities of GST department - shortage of stock - validity of proceedings u/s 129(3) of UPGST Act - HELD THAT - While no challenge has been made to the search and seizure operation that was conducted by the Special Investigation Branch of the Commercial Tax Department at the premises of the assessee on 07.08.2018, suffice to note, adjudication proceedings were separately initiated that are pending consideration in appeal. Therefore, no order is being made with respect to the same as may influence the outcome of the adjudication proceedings. Those would have to be tested on their own strength. Insofar as seizure of goods and demand of tax under Section-129 of the Act is concerned, it is unbelievable that two (not one), authority of the Mobile Squad of Commercial Tax Department chose to act with negligence. The provision of Section 129(3) of the Act could not be invoked to subject a godown premises to search and seizure operation unmindful of the Act that no action was taken or contemplated under Section 67 of the Act, as that would have mandated existence of reasons to believe , to subject that premise to search and seize goods or documents found therein. Also, both authorities of the Commercial Tax Department namely, Sri Vijay Kumar-VIII, Assistant Commissioner (Mobile Squad)-5, Agra and Sri Prashant Kumar Singh-I, Assistant Commissioner (Mobile Squad)-2 Agra chose to exercise powers vested in them to search a vehicle carrying goods during transportation to proceed against goods lying in a godown. The Court does not wish to go deeper into the intention of the officers concerned in issuing such notices and drawing up such proceedings for which they had no jurisdiction as that would entail calling of personal affidavits of the officers at the cost of precious time of the Court. However, the officers are accountable for their acts. Therefore, let this order be communicated to the Commissioner Commercial Tax UP to look into the matter, call for explanation and take appropriate action commensurate to the misconduct, if any, that may be found committed by the erring officers and to take consequential and corrective action to avoid such occurrences, in future - Insofar as the present petitioner is concerned, the entire proceedings drawn up against it under Section 129(3) of the Act, are found to be without jurisdiction.

Summary

Issues:
Challenging order of Additional Commissioner Grade-2 (Appeal)-2 under Section 129(3) of the Uttar Pradesh Goods And Services Tax Act, 2017 for imposing tax and penalty on a single transaction.

Analysis:
1. The petitioner, a manufacturer of PVC pipes, challenged the order dated 26.11.2019 passed by the Additional Commissioner Grade-2 (Appeal)-2. The petitioner contended that the appellate authority dismissed two appeals confirming the tax liability and penalty imposed under Section 129(3) of the Act on a single transaction. The appeals were filed against orders passed by Assistant Commissioners regarding a search and seizure operation at the petitioner's premises.

2. The search conducted by the Special Investigation Branch of the Commercial Tax Department led to allegations of stock shortage. The petitioner disputed the shortage and suggested reconciliation considering stock at another godown not part of the search. Show cause notices were issued by two Assistant Commissioners based on the search, leading to tax and penalty demands. The appellate authority upheld these orders, prompting the petitioner to approach the High Court.

3. The High Court noted that the authorities invoked Section 129(3) without proper jurisdiction. The Court criticized the negligence of the Mobile Squad authorities in conducting the search and seizure operation. The authorities failed to follow due process under Section 67 of the Act, which requires "reasons to believe" before seizing goods. The Court highlighted the deliberate misdescription of the search targets as vehicles instead of immovable property, indicating a lack of jurisdiction.

4. The Court refrained from delving into the officers' intentions but emphasized their accountability for the wrongful acts. The Court directed the Commissioner Commercial Tax UP to investigate the matter, seek explanations, and take appropriate actions against the erring officers to prevent such incidents in the future. The Court found the proceedings against the petitioner under Section 129(3) to be jurisdictionally flawed and quashed the orders dated 26.11.2019 and 22.11.2019, ordering a refund of any deposited amount with interest.

5. Consequently, both petitions were allowed by the High Court, declaring the proceedings against the petitioner as lacking jurisdiction and directing corrective actions against the responsible officers.