Facts of the Case:

The Petitioner challenged the continued detention and prohibition of its goods pursuant to the prohibition order dated 26 September 2024, issued in Form GST INS-03 under Section 67(2) read with Rule 139(4) of the CGST Rules, 2017. The Petitioner contended that continuation of the prohibition beyond the statutory period prescribed under Section 67(7) of the CGST Act, 2017 was unlawful and sought release of the goods.

In their affidavit, the Respondents themselves admitted that the prohibition order was initially valid for three months and, upon extension, remained operative for the prescribed extended period of six months, after which it automatically ceased to have effect without requiring any separate revocation order.

Issue:

Whether a prohibition order issued under Section 67(2) of the CGST Act can continue beyond the maximum period prescribed under Section 67(7), and whether a separate order is required to revoke such prohibition upon expiry of the statutory period.

Held That:

The High Court allowed the petition and directed release of the Petitioner’s goods, holding that the prohibition imposed under Section 67(2) of the CGST Act, 2017 could not continue beyond the maximum period prescribed under Section 67(7). The Court took particular note of the Respondents’ own categorical admission in their affidavit that the prohibition order dated 26 September 2024, issued in Form GST INS-03 under Section 67(2) read with Rule 139(4), was initially valid for three months and, upon extension, remained operative only for the statutory extended period of six months. The Respondents expressly admitted that, upon expiry of this extended period, the prohibition order automatically ceased to operate and no separate order of revocation was required.

In view of this admission, the Court found that there was no legal basis for the continued detention or prohibition of the Petitioner’s goods after expiry of the prescribed period. Since the very authority relied upon for continuing the prohibition had itself accepted that the order had automatically come to an end, the continued restraint over the goods could not be sustained. Accordingly, the Court granted the relief sought by the Petitioner under the relevant prayer clauses and directed that the goods be released forthwith.

The Court, however, made an important distinction between the validity of the prohibition over the goods and the continuation of the departmental investigation. It clarified that release of the goods consequent upon expiry of the prohibition period would not in any manner prejudice or invalidate the investigation undertaken by the Department. Likewise, the evidentiary material already collected during the investigation would not become inadmissible or otherwise lose its legal effect merely because the prohibition order had expired. Thus, the Department remained entitled to continue its investigation and take further action in accordance with law, notwithstanding the release of the goods.

The Court therefore confined its interference strictly to the continued prohibition/detention of the goods beyond the statutory period. The petition was allowed in terms of prayer clauses (a) and (b), while the interim application was disposed of as having become infructuous.

Case Name: Abubakar Mines and Minerals Versus The Additional Commissioner (AE) CGST, Kolhapur and Another. Dated 02.09.2026

Citation No.  2026 Taxo.online 2667