Authorities to Wait for Confiscation Order If Search and Seizure Challenged: Allahabad High Court [Read Judgment]

The Allahabad High Court in a writ petition Rimjhim Ispat Ltd. v. State of U.P. partly holding in favour of the appellant held that even though there was no stay order restraining the respondents from passing the confiscation order, the respondent authorities should have awaited the outcome of the challenge made to the search by the petitioner.

The petitioner vide the petition has challenged the entire search and seizure operation carried out by the respondents alleging the same to be illegal, arbitrary against mandatory provisions of law and as colourable and mala fide exercise of statutory powers. The petitioner has also challenged the confiscation order in addition to the above on the ground that reasonable opportunity had not been provided to the petitioner.

It was contended by the petitioner that the UP GST under its Section 67 confers the power of inspection, search and seizure on the proper officer, on the standards of ‘reasons to believe’, It was contended that the respondents were in complete disregard of the provision and also of provisions of Section 100 and Section 165 of the CrPC.

The Hon’ble Court after referring to the principles that are culled out from the catena of cases held that there should exist ‘reasons to believe’ and reasonable material. Also, the reasons may not be communicated to the assessee but the same should exist on record. For the issue regarding quashing of the confiscation order, it was observed that the confiscation order was passed ex parte. The petitioner had informed the authorities concerned to defer the adjudication on confiscation because the issue of the validity of the search was engaging the attention of the High Court.

Hence, the Court constituting of Justice Pankaj Mithal and Justice Pankaj Bhatia held that Department had ‘reasons to believe’ and, in pursuance of the said reasons, the search and seizure operations were carried as such the writ petition fails as regards insufficiency of material for carrying out the search and seizure. Further, for the issue concerning confiscation order, it was held that even though there was no stay order restraining the respondents from passing the confiscation order, the respondent authorities should have awaited the outcome of the challenge made to the search by the petitioner. The confiscation order was hence quashed, ruling in favour of the assessee.