M/S Golden Cotton Industries vs. Union Of INDIA

Held

The Court held that the order of prohibition was in accordance with the law. Regarding the first issue, the Court interpreted the word "secreted" in Section 67(2) of the CGST Act, drawing from the Supreme Court's decision in Gian Chand Versus State of Punjab. It was held that "secreted" does not necessarily mean hidden or concealed but can also refer to documents or things not kept in the normal or usual place, or likely to be put out of the way or where officers cannot find them. Therefore, if the authority had reason to believe that goods liable to confiscation were likely to be secreted, they had the power to pass an order of prohibition. Concerning the second issue, the Court found something unusual in the forms (GST-INS-02 and GST-INS-03) where the Assistant Commissioner, who carried out the search and seizure, stated he had reason to believe goods were secreted. The Court noted that the reasonable belief should be entertained by the "Proper Officer" (not below the rank of Joint Commissioner) who can pass such orders himself. The Assistant Commissioner appearing to act on superior orders made the orders defective. However, the Court chose not to go further into the factual aspects and confined its adjudication to the legality and validity of the prohibition order, which it found to be in accordance with law. The petitioner was permitted to invoke Section 67(6) to apply for provisional release of seized goods.

Facts

M/s Golden Cotton Industries, a GST-registered entity processing raw cotton, filed a writ application challenging an order of prohibition dated December 5, 2018, issued by the Assistant Commissioner of State Tax (Enforcement). The petitioner argued that during an investigation on December 4-5, 2018, their premises were searched, documents were impounded, and an order prohibiting them from dealing with stock worth Rs. 2,50,00,000/- was issued without allowing them to represent their case. The petitioner claimed all purchases were made through banking channels, payments were accounted for, and transportation responsibility lay with the supplier, hence they were not in possession of Lorry Receipts. They also challenged a subsequent instruction dated May 23, 2019, extending the prohibition period.

Key Issues

1. Whether the order of prohibition issued under Section 67(2) of the CGST Act, 2017, was legally valid, particularly concerning the requirement of goods being "secreted"? (Question of law). 2. Whether the seizure and prohibition orders were defective due to the issuing authority's apparent lack of personal belief that goods were secreted, suggesting they merely acted on superior orders? (Question of mixed law and fact). Petitioner's arguments: The petitioner contended that the order of prohibition was not in accordance with Section 67 of the Act as there was no indication that the goods were secreted. They also argued that pending confiscation proceedings, seizure or prohibition of goods or documents should not have occurred. Revenue's arguments: The judgment does not explicitly record the revenue's arguments on these specific points. However, the court's reasoning implies the revenue likely argued for the validity of the seizure and prohibition powers under Section 67, and the interpretation of "secreted" as including goods likely to be secreted.