M/S. Narendra Polypack Industries vs The Additional Director General, ... on 10 November, 2023

Judgment Summary: M/S. Narendra Polypack Industries vs The Additional Director General, DGGI

1. Outcome

The High Court directed the provisional release of the re-seized silver to the petitioner. This release was made conditional upon the petitioner depositing a sum of ₹16,00,000 with the Registry of the High Court within one week. The Court ordered the respondents (GST authorities) to deliver the silver to the petitioner's residence on a specified date and time.

2. Core Issue

The central legal issue is the scope of the power of GST authorities to seize assets under Section 67(2) of the CGST Act, 2017. Specifically, the case examines:
1. Whether assets like silver, which are not the primary goods dealt in by the assessee, can be seized on the ground that they represent unaccounted wealth derived from clandestine supplies.
2. The legality of the department's action of immediately re-seizing goods after releasing them in compliance with a court order.

3. Key Facts

• Initial Search (07.02.2023): The Directorate General of GST Intelligence (DGGI) conducted a search at the petitioner's premises in Delhi and Kanpur. The search was related to the alleged clandestine removal of packing materials, the petitioner's main business.
• Initial Seizure: During the search, officers seized significant quantities of silver (309.75 kgs from Delhi and 289 kgs from Kanpur).
• Court's Previous Order (17.10.2023): The High Court, observing that the seizure of silver as "unaccounted wealth" was prima facie impermissible under Section 67(2), directed the DGGI to "forthwith release" the seized silver.
• Release and Re-seizure (09.11.2023): In purported compliance, the DGGI released the silver to the petitioner at its office. However, as the petitioner was leaving the premises, the officers immediately re-seized the same silver on the ground floor of the same building under a fresh search authorization.
• Present Application: The petitioner filed the current application challenging this re-seizure, seeking its set-aside and the provisional release of the goods.

4. Arguments

• Petitioner's Position:

  • The initial seizure was illegal as silver was not the goods the petitioner was being investigated for, and the power under Section 67 does not extend to seizing assets representing unaccounted wealth.
  • The act of releasing and immediately re-seizing the silver was a "charade" and a deliberate attempt to circumvent and overreach the High Court's order dated 17.10.2023.

• Respondent's (DGGI) Position:

  • The silver was procured from cash generated by the clandestine removal of packing materials.
  • Subsequent investigations revealed that the petitioner was also involved in the clandestine trading of silver, making the silver itself "goods liable for confiscation" under Section 130 of the CGST Act.
  • The counsel for the respondents fairly conceded that the goods could be released provisionally, subject to securing the revenue's interest, which was quantified at ₹16,00,000.

5. Court’s Reasoning

• On the Power of Seizure (reiterating its previous order):

  • The Court relied heavily on its decision in Deepak Khandelwal, establishing that Section 67(2) of the CGST Act empowers the seizure of:
    • Goods: Only those goods which the Proper Officer has reason to believe are liable for confiscation (i.e., goods involved in a taxable supply contravention).
    • Documents, Books, or Things: The word 'things' must be interpreted ejusdem generis (of the same kind) as 'documents and books'. It refers to items that contain information or records relevant to the proceedings, not valuable assets like cash or bullion.
  • Therefore, the power under Section 67 does not extend to seizing valuable assets merely because they are suspected to be unaccounted wealth.

• On the Act of Re-seizure:

  • The Court described the department's action of releasing the silver and re-seizing it on the ground floor as a "charade."
  • It held that this action was, prima facie, a deliberate attempt to "over-reach the orders passed by this Court," as the legality of the seizure was already under judicial consideration.
  • The court noted the absurdity of the re-seizure, as the department could not have had a fresh "reason to believe" that silver was being "secreted" at the ground floor of their own office building, moments after they had released it.

6. Statutory References

• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 2(52): Definition of "goods".
  • Section 67: Power of inspection, search, and seizure.
  • Section 67(2): Empowers a Proper Officer to search a place where they have reason to believe that goods liable for confiscation or relevant documents/books/things are secreted, and to seize the same.
  • Section 130: Pertains to the confiscation of goods or conveyances and the levy of penalty.

7. Precedents Cited

• Deepak Khandelwal Proprietor M/S Shri Shyam Metal v. Commissioner of CGST, Delhi West & Anr. (2023:DHC:5823-DB): This was the key precedent relied upon by the Court to hold that the power under Section 67(2) of the CGST Act does not extend to seizing valuable assets on the ground that they represent unaccounted wealth.