The Delhi High Court while quashing the seizure Order said that the Search and Seizure power of GST Authority is intrusive power and needs to be wielded with utmost care.
The petitioner, M/S. R.J. Trading CO. (RJT) has been engaged in the business of trading in cigarettes that are supplied to it by authorized dealers of well-known manufacturing companies. It is also averred by RJT that since the time it commenced business, it has traded in tobacco products, which includes cigarettes, and in that regard, has complied with the provisions of not only the CGST Act but also the Delhi Goods and Services Tax Act, 2017. It is claimed by RJT that it has deposited tax from time to time as required under the said statutes. The details of the tax deposited and copies of challans have been filed along with the writ petition. There is also an assertion that necessary filings (GSTR – 3B) as required under the law, have been made by RJT for the period spanning between September to December 2020 and January and February 2021. It is claimed that GSTR – 1 was filed from March 2021 as well.
Given the statutory compliances said to have been made by RJT, it claims it was surprised, when on 13.02.2021 the officers of Directorate General of Goods and Services Tax Intelligence (DGGI), Ahmedabad Zonal Unit, (AZU) visited its premises located in Delhi backed by an authorization issued by Joint Director, DGGI (AZU) under Section 67(2) of the CGST Act. The team which visited RJT’s premises also comprised various officers attached to DGGI Delhi Zonal Unit (DZU) including Inspector, CGST South Commissionerate Delhi, South Delhi.
Mr. Priyadarshi Manish, who appears on behalf of the petitioner contended that There was no investigation pending before CGST Commissionerate, Delhi North concerning RJT and therefore, the search, seizure, and authorization issued by the respondent were unlawful.
“The respondents have failed to place on record any document, which would show, that power had been delegated to respondent no. 5 i.e. Inspector (Anti Evasion), CGST, Delhi North to seize the goods. There is a marked difference between authorization (the expression found in Section 67(2) of the CGST Act) and delegation of power. Since there was no valid authorization, in favor of respondent, he had, in law, no power to seize the goods,” Mr. Manish added.
On the other hand, Mr. Harpreet Singh contended that RJT was required to maintain the stock register on a real-time basis. The obligation to maintain a stock register is embedded in Section 35 of the CGST Act read with Rule 56 of the Rules. The mere fact that RJT‟s stock register was seized, on 14.02.2021, by officers of DGGI (AZU) cannot absolve RJT of the obligation to maintain a stock register. RJT could have applied to DGGI (AZU) for copies of the seized documents including the stock register.
The division bench of Justice Rajiv Shakdher and Justice Talwant Singh noted that the Additional Commissioner, CGST Delhi North Commissionerate exercised his powers for authorization to conduct search and seizure, at RJT’s premises, even though the jurisdictional ingredients were absent. The request of Joint Commissioner (AE), Gautam Budh Nagar conveyed through the communication, was only to ascertain as to whether RJT, which was the L2 supplier of M/s Mridul Tobie Inc., was in existence. There was no independent application of mind by the Additional Commissioner, CGST Delhi North Commissionerate.
“The officers concerned should bear in mind that the search and seizure power conferred upon them, is an intrusive power, which needs to be wielded with utmost care and caution. The legislature has, therefore, consciously ring-fenced this power by inserting the controlling provision, i.e., “reasons to believe,” the court while declaring search and seizure conducted by CGST Delhi North Commissionerate unlawful, said.
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