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TMI Blog2019 (3) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... ure operation carried out by the respondent nos. 3 and 4 on 13th and 14th March, 2018 at the factory premises of the petitioner-company situate at Sumerpur, District Hamirpur, Uttar Pradesh as being illegal, arbitrary against the mandatory provisions of law and as a colourable and mala fide exercise of statutory powers. During the pendency of the writ petition the petitioner challenged the confiscation order passed on 29.10.2018 under section 130(2) of the U.P. G.S.T. Act which was served upon the petitioner on 22.11.2018 by means of the amendment application and prayed for the following relief: (a) Issue a writ order or direction in the nature of certiorari calling for the records of the case and to quash the impugned Confiscation Order dated 29.10.2018 (Annexure-10 to this writ petition) passed by the respondent no. 4, the Deputy Commissioner, S.I. B. Range-A, Commercial Tax/UPGST, Kanpur, under section 130(2) of the Act. The facts leading to the filing of the present writ petition are as follows: On 13.3.2018, at about 11.30 A.M., a search party, consisting of the Officers of U.P. GST/Commercial Tax Department, lead by respondent no. 3, started a search at the office premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that assuming for the sake of arguments to be correct, it was impossible for the respondent authorities to have weighed the goods referred to in the list attached to the Panchnama within such a short span of time. Learned counsel for the petitioner has drawn our attention to the documents attached to the Panchnama to demonstrate that there are overwritings (page 51 internal page no. 10 of Annexure-1). It is further stated that a complaint was made by Sri Sunil Gupta on 15.3.2018 before the Commissioner U.P. GST, Lucknow along with his affidavit regarding the highhanded manner in which the search was carried out and further requested that the stocks may be re-verified under the supervision of the District Magistrate. A similar request was also made to the District Magistrate, Hamirpur on 14.3.2018. It is thus argued that the entire exercise of wrongly recording the goods in an arbitrary and mala fide manner was only to saddle the petitioner-company with heavy duty and penalty. The petitioner argued that Section 67 of the U.P.GST confers the power of inspection, search and seizure on the proper officer, who has 'reasons to believe' that a taxable person has suppressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods seized vide the impugned Seizure Order and Panchnama dated 14.3.2018. (iv) issue a suitable writ order or direction in the nature of mandamus directing the respondents, to return back the sale and purchase invoices which are yet to be incorporated in the stock register, seized during the course of search, to find out actual figure of purchases and sales. (v) issue any other writ, order or direction which this Hon'ble Court may deem fit and proper in facts of the instant case. And for prayer made through amendment application. (a) Issue a writ order or direction in the nature of certiorari calling for the records of the case and to quash the impugned Confiscation Order dated 29.10.2018 (Annexure-10 to this writ petition) passed by the respondent no. 4, the Deputy Commissioner, S.I. B. Range-A, Commercial Tax/UPGST, Kanpur, under section 130(2) of the Act. Learned counsel for the respondents, on the other hand, has filed counter affidavit denying the allegations made in the writ petition. The counter affidavit filed by respondent no. 3 and sworn by one Bhanu Prakash Mishra states that the petitioner provided steel billets to its sister concerned namely M/s. Juhi All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther stated that the search was conducted in accordance with the provisions of Section 67 of the U.P. GST Act and were conducted under the supervision of respondent no. 3. The respondents emphatically denied that the signature of Sri Sunil Gupta were obtained on blank papers and further states that no report in this regard has been given to the police authorities. As regards the overwriting it has been stated that the entries were recorded by mistake and were thus corrected and the corrected sheet was also signed by nominated persons of the petitioner. As regards the witnesses it is stated that the factory premises of the petitioner is situated at industrial area and in the near about vicinity, there is no residential area and the witnesses were present and were ready to sign as witness and their addresses were mentioned by the said witnesses and it was not possible to verify their addresses at that point of time. However, to establish the genuineness of those persons a copy of I.D. proof was received. It has been further denied that the weighment was not done properly and, in fact, the said weighment sheets were duly signed by authorized representative of the petitioner-company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said counter affidavit denying the averments made. The petitioner has filed written submissions in support of the arguments wherein it has been argued that the challenge to the entire search and seizure operation is primarily on two grounds: (a) the competent authority could not have reason to believe that the circumstances enumerated in Clauses (a) and (b) of sub-section (1) and of sub-section (2) of section 67 of the UPGST Act, 2017 (hereinafter referred to as the Act) existed to authorized search and seizure at the factory of the petitioner company, and (b) the procedure adopted for search and seizure and the surrounding and attendant indisputable facts and circumstances on record demonstrate that entire exercise of search and seizure as also consequential confiscation of goods was a malafide/colourable exercise of power. In support of the arguments regarding non-existence the 'reasons to believe' the petitioner has relied upon the judgement of Hon'ble Supreme Court in the case of Kranti Associates Pvt. Ltd. vs. Masood Ahmad Khan, 2011 (273) E.L.T. 345 wherein the Supreme Court while considering the nature and manner of exercise of powers by the National Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... founded on reason. The petitioner has extensively relied upon analogous provisions for search and seizure as contained in section 132 of the Income Tax Act and have argued that to interpret the phrase 'reason to believe' the Hon'ble Supreme Court in the case of ITO vs. Seth Bros, (1969) 2 SCC 324 has recorded as under: "the section does not confer any arbitrary authority upon the Revenue Officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the conditions for the exercise of the power to order search exist. He must record reasons for the belief." Similar view of the Hon'ble Supreme Court has been followed by the Hon'ble Supreme Court in the case of Director General of Income Tax (Investigation), Pune and Ors. vs. Spacewood Furnishers Private Limited, (2015) 12 SCC 179=(2015) 374 ITR 595 wherein the Supreme Court has summarized the applicable principles as under: 8.2 Such information must be in possession of the authorized official before the opinion is formed. 8.3. There must be application of mind to the material and the formation of opinion must be honest and bonafide. Consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Uddar Gagan Properties Ltd. vs. Sant Singh & Ors., (2016) 11 SCC 378 para 23 and 28 and Delhi Development Authority & Anr. vs. UEE Electricals Engg. (P) Ltd. & Anr., (2004) 11 SCC 213 para 16. Learned counsel for the petitioners has reiterated that blank documents were got signed which the petitioners submits is wholly wrong and, in fact, the petitioner had complained such of such factors of getting blank paper signed before the District Magistrate and the Department. The counsel for the petitioner vehemently argued that the search witnesses were brought from Kanpur by the search team and the averment made in para 22 of the counter affidavit that the factory is situate in an industrial area and there are no residential area in the vicinity and the witnesses were present by chance and agreed to be a witness, is wholly false, inasmuch as, in para 18 of the counter affidavit itself it has been recorded that in the company premises a large number of employees and officers are posted and their residential flats are situated in the company premises. The petitioner has hammered on the fact that the chance witnesses are resident of Kanpur yet they were convenientl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guments, had placed before us the part of the records wherein the officers concerned had recorded their 'reasons to believe' prior to authorizing the search, the 'reasons to believe' were based upon information received by the Department fortified by interception of the goods of the petitioner on 11.3.2018 wherein the e-way bill was found to be suspicious and it is based upon this perception a reason to believe was formed by the Department which led to the search on 13.3.2018. The arguments raised by Sri Vinod Kumar Upadhya, Senior Counsel for the petitioner that the seizure of the truck on 11.3.2018 was set aside by this Court in Writ Tax No. 559 of 2018 vide its judgement and order dated 18.9.2018 is no doubt correct but however the judgement of this Court was given on 18.9.2018 and as on 13.3.2018, the Department had valid materials/reasons to authorize and to conduct search and seizure, the question regarding the sufficiency of material, as held by the Hon'ble Supreme Court cannot be gone into by this Court in exercise of its power under Article 226 and, thus, we are inclined to hold that the Department had 'reasons to believe' and, in pursuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed by the High Court and thus on these two basis proceeded to pass the order of confiscation. Section 130 of the Act confers the power to confiscate the goods, however, Section 130(4) clearly provides that opportunity of hearing shall be granted prior to passing the order on confiscation. In the present case, the petitioner had informed the authorities concerned to defer the adjudication on confiscation because the issue of validity of the search was engaging the attention of the High Court, we are of the view that despite the fact that there was no stay order restraining the respondents from passing the confiscation order but in all fairness as the hearing was going on at the High Court, the respondent authorities should have awaited the outcome of the challenge made to the search by the petitioner. Considering the view that we have now rejected the challenge by the petitioner to the search, we are inclined to quash the order dated 29.10.2018, passed by respondent no. 4, Assistant Commissioner, (SIB) Region-B, Commercial Tax(GST), Kanpur and remand the matter before the said authority to adjudicate on the question of confiscation afresh, after giving an opportunity of hear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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