Rimjhim Ispat Limited vs. State Of U.P. And 3 Others

Held

The Court held that the Department had "reasons to believe" to conduct the search and seizure, and the sufficiency of these reasons could not be gone into by the High Court under Article 226. The Court found that the seizure of a truck on March 11, 2018, which was later set aside, did not invalidate the reasons for the search on March 13, 2018. Regarding procedural compliance, the Court found that the witnesses could not be termed interested witnesses without cogent evidence of their dependence on the investigating agency. The Court accepted the revenue's explanation for overwritings as corrections made during weighment. Therefore, the challenge to the search and seizure operation failed. However, concerning the confiscation order dated October 29, 2018, the Court noted it was passed ex parte. Despite the petitioner's request to defer adjudication due to the ongoing challenge to the search, the authorities proceeded. While acknowledging no stay order was in place, the Court felt the authorities should have awaited the outcome of the search challenge. Consequently, the confiscation order was quashed, and the matter was remanded to the authority for fresh adjudication after providing an opportunity of hearing to the petitioner, in terms of Section 130(4) of the UPGST Act.

Facts

Rimjhim Ispat Limited (Petitioner) filed a writ petition challenging the search and seizure operation conducted by the U.P. GST/Commercial Tax Department on March 13-14, 2018, at its factory premises. The petitioner alleged the operation was illegal, arbitrary, and a colourable exercise of power. During the pendency, the petitioner amended the petition to challenge a confiscation order dated October 29, 2018, passed under Section 130(2) of the U.P. GST Act. The petitioner contended that the search was conducted under duress, with pressurized signatures on blank papers, and that stock weighments were based on assumptions and eye estimation, not actual measurement. The petitioner also questioned the independence of the witnesses and alleged overwriting on documents. The search was initiated based on the department's 'reasons to believe' regarding tax evasion.

Key Issues

1. Whether the search and seizure operation conducted by the respondent authorities on March 13-14, 2018, was vitiated by lack of "reasons to believe" as mandated by Section 67 of the U.P. GST Act, 2017, and thus illegal? - Petitioner's argument: The search and seizure lacked a foundation of tangible material to form "reasons to believe," rendering the exercise of power arbitrary and violative of Article 19(1)(g) of the Constitution. All returns and records were filed, and no basis existed for the belief of suppression or evasion. - Revenue's argument: The department had valid materials and reasons to believe, sufficient to authorize the search and seizure. The sufficiency of these reasons cannot be examined by the High Court under Article 226. 2. Whether the procedure followed during the search and seizure, specifically regarding the weighment of goods, the preparation of inventory, and the independence of witnesses, was in compliance with the law? - Petitioner's argument: The goods were not weighed, inventory was based on eye estimation, and witnesses were not independent. Overwriting on documents further indicated procedural irregularities and mala fides. - Revenue's argument: Witnesses were not interested parties unless dependence was categorically established. Overwritings were corrections made during weighment and were signed by the petitioner. The procedure followed was not illegal or tainted with mala fides.