The Hon’ble High Court of Allahabad vide its order dated 06.08.2022 in the matter of Mahavir Polyplast Pvt. Ltd. Vs. State of U.P. And 2 Others in Writ Tax No. – 57 of 2020 and 56 of 2020, quashed the orders invoking Section 129(3) of the UPGST Act, 2017 for search and seizure of goods lying in the Godown being without jurisdiction.

The Petitioner filed the writ petitions before the Hon’ble High Court challenging the order dated 26.11.2019 passed by the Additional Commissioner Grade-2 (Appeal)-2, whereby the petitioner’s Appeal No. GST-71/2018 for the tax period 2018-19 against order dated 16.08.2018 passed by Prashant Kumar Singh-I, Assistant Commissioner (Mobile Squad)-2 Agra was dismissed and another order dated 22.11.2019 passed in the petitioner’s Appeal No.GST-74/2018 for the period 2018-19 against order dated 27.07.2018 passed by Vijay Kumar-VIII, Assistant Commissioner (Mobile Squad)-5, Agra.

Facts: –

• The petitioner is a manufacture of PVC pipes and for that purpose it established its manufacturing unit at Khasara No. 704/3, Mauza Runakata Kirawali Road, Tehsil-Kirawali, Agra. The assessee/petitioner also stores its raw materials and manufactured goods at a godown located on the same premises.
• That on 07.08.2018, a search and seizure operation was carried on the premises of the premises of the petitioner by Special Investigation Branch of Commercial Tax Department, a Panchnama dated 07.08.2018 was drawn, and an allegation of shortage of physical stock as compared to that recorded in the stock registers, was levelled against the petitioner.
• That on the next day 08.08.2018, an application was made by the petitioner disputing the allegation of shortage of stock and it was also submitted that stock reconciliation could be made by taking into account the raw-material and finished goods lying at its other godown, which was not subjected to search and seizure proceedings on 07.08.2022.
• Thereafter, on 09.08.2022, a show cause notice in MOV 07 dated 10.08.2018 was issued to the petitioner by the Assistant Commissioner (Mobile Squad), Unit-II Agra with the description ‘Vahan Sankhiya UPGODOWN02’. Similarly, another show cause notice in MOV 07 dated 14.08.2018 was issued by Assistant Commissioner (Mobile Squad) -5 Agra with description “Vahan Sankhiya GODOWON”
• That two separate show cause notices were issued by the authorities under Section 129(3) for the same search and seizure operation conducted by Special Investigation Branch.
• Further pursuant to the notice, the seizure orders were passed and the petitioners appeals against the aforesaid orders were also dismissed, confirming the orders passed by the authorities, in exercise of powers under Section 129(3) of UPGST Act, 2017, imposing identical liability of tax Rs. 4,99,813/- and equal amount of penalty on a single transaction. Being aggrieved of those appellate authority orders, the petitioner moved the writ petitions before the Court, which were entertained by the Hon’ble Court in the absence of Tribunal.

Held: –

• The Hon’ble Court after considering the submissions made and the facts of the case, found that there is no challenge to search and seizure operation conducted by Special Investigation Branch of Commercial Tax Department on 07.08.2018 as adjudication proceedings are separately initiated, which are pending for consideration in appeal. Therefore, no order was made for the same.
• However, considering the issue of seizure of goods under Section 129 (3), it was found that it is unbelievable that two (not one), authority of the Mobile Squad of Commercial Tax Department chose to act with negligence.
• It was found by the Hon’ble Court that for search & seizure of goods, the provisions of Section 129(3) could not be invoked, when no action was taken under Section 67, which would have mandated existence of ‘reasons to believe’ to subject the premise to search and seize goods and documents found therein. Further, both the authorities i.e., Assistant Commissioner (Mobile Squad)-5, Agra and Assistant Commissioner (Mobile Squad)-2 Agra, chose to exercise powers vested in them for search of a vehicle carrying the goods during transportation, to the search conducted at the goods lying in the godown.
• It was found by the Hon’ble Court that the authorities not only completely ignored the power and jurisdiction that never existed but also deliberately describe the vehicle being checked as “UPGODOWN02” and “GODOWON”. Therefore, it cannot be denied by the authorities that they were not aware that the subject search was not carried out on a vehicle but a ‘Godown’.

The Hon’ble Court with the above findings, without going deeper in to the intentions of the officers concerned issuing such notices for which they had no jurisdiction, allowed the Writ Petitions and quashed the orders dated 26.11.2019 and 22.11.2019, considering the entire proceedings under Section 129(3) of the Act without jurisdiction.  It was directed to communicate this order to the Commissioner Commercial Tax Department, U.P., to look in to the matter and take appropriate action against the erring officers and to take corrective action to avoid such occurrences in future.  It was also directed to refund the amount that may have been deposited by the petitioner, with interest at the rate 8%, subject to adjudication proceedings.