2019 NTN Supreme Court & High Courts 409

[2019] 71 NTN DX 409

[SUPREME COURT OF INDIA]
Hon'ble A.M. Khanwilkar and Hon'ble Dinesh Maheshwari, JJ.
Civil Appellate Jurisdiction
Civil Appeal No.8941/2019
Civil Appeal No.8942/2019
(@SLP(C) No. 25292/2019)
Civil Appeal No.8944/2019
(@SLP(C) No. 27609/2019)
(@Petition for Special Leave to Appeal (C) No. 25291/2019)
State of Uttar Pradesh & Ors.
Vs.
Kay Pan Fragrance Pvt. Ltd.
Date of Decision : 22nd November, 2019
Seizure - Penalty - Release of goods - Directions for release beyond
provisions of Act and Rules - Special leave petition - Whether Special
leave petition filed by State Government against the orders of High Court
directing release of seized goods contrary to the provisions of Section 67
of CGST ACT, 2017 be accepted? - Held - Yes - The Hon'ble Supreme Court
allowed the Special leave petition and directed compliance of Rule 67 in all the
cases referred to in affidavit of State. For consistency direction also given to
adopt similar methodology in other cases to come. Authorities directed to make
compliance in all cases within 4 weeks without exception. Writ petitions/
Applications pending before High court disposed by this common order. -
Article 226- Section 67 - CGST Act 2017- SGST Act 2017- Rule 140,141 -
CGST Rules 2017- SGST Rules 2017.
In the first place, we find force in the submission canvassed by the State that a
complete mechanism is predicated in the Act and the Rules for release and
disposal of the seized goods and for which reason, the High Court ought to have
been loathe to entertain the Writ Petitions questioning the seizure of goods and
to issue directions for its release.
There is no reason why any other indulgence need be shown to the assessees,
who happen to be the owners of the seized goods.They must take recourse to
the mechanism already provided for in the Act and the Rules for release, on a
provisional basis, upon execution of a bond and furnishing of a security, in such
manner and of such quantum (even up to the total value of goods involved),
respectively, as may be prescribed or on payment of applicable taxes, interest
and penalty payable, as the case may be, as predicated in Section 67 (6) of the
Act. In the interim orders passed by the High Court which are subject matter of
assail before this Court, the High Court has erroneously extricated the
assessees concerned from paying the applicable tax amount in cash, which is
contrary to the said provision.
In our opinion, therefore, the orders passed by the High Court which are
contrary to the stated provisions shall not be given effect to by the authorities.
Instead, the authorities shall process the claims of the concerned assessee
afresh as per the express stipulations in Section 67 of the Act read with the
relevant rules in that regard. In terms of this order, the competent authority shall
call upon every assessee to complete the formality strictly as per the
requirements of the stated provisions disregarding the order passed by the High
Court in his case, if the same deviates from the statutory compliances. That be

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410 State of Uttar Pradesh Vs. Kay Pan Fragrance 2019 NTN

done within four weeks without any exception.

We reiterate that any order passed by the High Court which is contrary to the
stated provisions need not be given effect to in respect of all the cases referred
in the affidavit by the State Government before this Court and fresh cases which
may have been filed or likely to be filed before the High Court in connection with
the subject matter of these appeals, by all concerned and are deemed to have
been set aside/modified in terms of this order.
In view of this order, all the Writ Petitions pending before the High Court, list
whereof has been furnished in the affidavit are deemed to have been disposed
of accordingly. We have passed this common order to cover all cases of seizure
during the relevant period, to obviate inconsistency in application of Law and
also to do away with multiple appeals required to be filed by the State/
assessee to assail the unstatable orders/directions passed by the High Court in
subject writ petition(s) referred to in the affidavit filed by the State before this
Court.
Accordingly, the appeals are disposed of in the aforestated terms. All pending
applications are also disposed of.
Editor's Note:- The appellate establishment under GST is yet to set up and
function. In the State of Uttar Pradesh Tribunal are not set up even after more
than 2 years of introduction of GST. The observation of Apex court that the
High Court ought to have been loathe to entertain the Writ Petitions
questioning the seizure of goods and to issue directions for its release., might
hamper the course of justice for those facing high handedness of GST
authorities in such matters.
The provisions of detention and seizure of goods and instant penalty are harsh
and deposit of tax and penalty for release of goods not only create huge
hardship but provisions are unreasonable too. The provisions needs re look by
GST council and role of judicial intervention redefined.
ORDER
Leave granted.
Heard the learned counsels appearing for the parties.
These appeals throw up common issues for consideration. The first set of
appeals is filed by the State of U.P., questioning the interim order passed by
the High Court directing the State to release the seized goods, subject to
deposit of security other than cash or bank guarantee or in the alternative,
indemnity bond equal to the value of tax and penalty to the satisfaction of the
Assessing Authority. It has come on record that similar orders came to be
passed in several other writ petitions by the High Court, details whereof have
been mentioned in the affidavit filed by the State in this Court. It was brought
to our notice that the High Court, after passing the said interim order would
then dispose of the main Writ Petition as having become infructuous,
consequent to release of goods by the appropriate authority in terms of the
interim order of the High Court. In the context of that grievance, this Court
had to pass an order on 16.9.2019 which reads thus:
“Applications for exemption from filing certified copy of the impugned
order and official translation are allowed.

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2019 NTN Supreme Court & High Courts 411
Issue notice on the special leave petition as also on the prayer for
interim relief.
Dasti allowed.
Tag with Special Leave Petition (C) Diary No.24795 of 2019.
Considering the fact that in the present case goods have already been
released pursuant to the impugned order, no interim relief can be
granted.
However, our attention was invited to an order dated 31.01.2019
passed by the High Court in a similar matter i.e. Writ Tax No.141 of
2019 and couple of other case(s), wherein the High Court allowed the
writ petitioner(s) to withdraw writ petition(s) after release of goods
pursuant to the interim order, despite the fact that the interim order
passed by it directing release of goods was subject matter of challenge
pending before this Court. That cannot be countenanced. For, the claim
of the State cannot be made faitaccompli in this manner.
In future, if such occasion arises including in the case of writ
petitioners in this case, it will be open to the petitioner(s) (Department)
to invite the attention of High Court regarding the pending special leave
petition before this Court. We are certain that the High Court will
consider the request for withdrawal of writ petition appropriately.”
(emphasis in italics supplied)
It is now brought to our notice that after the aforementioned order of this
Court, the High Court is disposing of Writ Petitions by referring to Section 67
(8) of the Central Goods and Services Act, 2017 (for short, ‘the Act’) and Rule
141 of the relevant Rules. We deem it proper to advert to one such order
passed by the High Court, which is assailed by the assessee in the second set
of appeal filed before this Court. The said order reads thus:
“Heard learned counsel for the petitioner and learned Additional
Advocate General for the State.
It has been brought to notice of the Court that the goods are perishable
and hazardous in nature.
Sri Manish Goyal, learned Addl. Advocate General has submitted that
the Central Goods and Services Tax Act, 2017 provides a complete
procedure for release of such goods, as contained in Section 67(8) of
the Act read with Rule 141 of the relevant Rules, which are quoted
herein below:
“Section 67(8). The Government may, having regard to the
perishable or hazardous nature of any goods, depreciation in
the value of the goods with the passage of time, constraints of
storage space for the goods or any other relevant
considerations, by notification, specify the goods or class of
goods which shall, as soon as may be, after its seizure under
subsection (2), be disposed of by the proper officer in such a
manner, as may be prescribed.
Rule 141. Procedure in respect of seized goods. (1) Where the
goods or things seized are of perishable or hazardous nature,
and if the taxable person pays an amount equivalent to the
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412 State of Uttar Pradesh Vs. Kay Pan Fragrance 2019 NTN

market price of such goods or things or the amount of tax,

interest and penalty that is or may become payable by the
taxable person, whichever is lower, such goods or, as the case
may be, things shall be released forthwith, by an order in FORM
GST INS05, on proof of payment.”
Subject to compliance of the above provisions of law, the goods so
seized may be considered for release within next one week.
The writ petition is, accordingly, disposed of.”
In the first place, we find force in the submission canvassed by the State that
a complete mechanism is predicated in the Act and the Rules for release and
disposal of the seized goods and for which reason, the High Court ought to
have been loathe to entertain the Writ Petitions questioning the seizure of
goods and to issue directions for its release.
In the second set of appeal filed by the assessee, the relief claimed by way of
Writ Petitions before the High Court is as under:
(a) issue a suitable writ, order or direction in the nature of certiorari
quashing the seizure order dated 25.7.2019 passed by the respondent
No.2 and 3 under Section 67(2) of the Act and the panchnamas dated
19.7.2019 (Annexure – 2 & 3) to the writ petition respectively.
(b) issue a writ, order or direction in the nature of
mandamus/prohibition declaring the search and seizure proceedings
dated 25.7.2019, to be void and restraining the respondent authorities
from taking any coercive action against the petitioner.
(c) issue a writ, order or direction in the nature of mandamus
commanding and directing the respondents to release the goods of the
petitioner forthwith without demanding any security.
(d) issue any such order and further orders which this Court may deem
fit and proper in the facts and circumstances of the case.
(e) Award the cost of the Writ Petition to the petitioner.
It is broadly agreed that similar relief has been claimed in all the writ petitions
filed before the High Court, including the one disposed of by the High Court as
infructuous or by passing order which is impugned by the assessee in the
second set of appeal referred to above.
For the sake of consistency, we have no hesitation in observing that the High
Court in all such cases ought to have relegated the assessees before the
appropriate Authority for complying with the procedure prescribed in Section
67 of the Act read with Rules as applicable for release (including provisional
release) of seized goods.
Section 67 of the Act reads thus:
“Section 67 Power of inspection, search and seizure 67. (1) Where the
proper officer, not below the rank of Joint Commissioner, has reasons
to believe that––
(a) a taxable person has suppressed any transaction relating to
supply of goods or services or both or the stock of goods in
hand, or has claimed input tax credit in excess of his

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2019 NTN Supreme Court & High Courts 413
entitlement under this Act or has indulged in contravention of
any of the provisions of this Act or the rules made thereunder to
evade tax under this Act; or
(b) any person engaged in the business of transporting goods or
an owner or operator of a warehouse or a godown or any other
place is keeping goods which have escaped payment of tax or
has kept his accounts or goods in such a manner as is likely to
cause evasion of tax payable under this Act, he may authorize
in writing any other officer of central tax to inspect any places
of business of the taxable person or the persons engaged in the
business of transporting goods or the owner or the operator of
warehouse or godown or any other place.
(2) Where the proper officer, not below the rank of Joint Commissioner,
either pursuant to an inspection carried out under subsection (1) or
otherwise, has reasons to believe that any goods liable to confiscation
or any documents or books or things, which in his opinion shall be
useful for or relevant to any proceedings under this Act, are secreted in
any place, he may authorize in writing any other officer of central tax to
search and seize or may himself search and seize such goods,
documents or books or things:
Provided that where it is not practicable to seize any such goods, the
proper officer, or any officer authorized by him, may serve on the owner
or the custodian of the goods an order that he shall not remove, part
with, or otherwise deal with the goods except with the previous
permission of such officer:
Provided further that the documents or books or things so seized shall
be retained by such officer only for so long as may be necessary for
their examination and for any inquiry or proceedings under this Act.
(3) The documents, books or things referred to in subsection (2) or any
other documents, books or things produced by a taxable person or any
other person, which have not been relied upon for the issue of notice
under this Act or the rules made thereunder, shall be returned to such
person within a period not exceeding thirty days of the issue of the said
notice.
(4) The officer authorized under subsection (2) shall have the power to
seal or break open the door of any premises or to break open any
almirah, electronic devices, box, receptacle in which any goods,
accounts, registers or documents of the person are suspected to be
concealed, where access to such premises, almirah, electronic devices,
box or receptacle is denied.
(5) The person from whose custody any documents are seized under
subsection (2) shall be entitled to make copies thereof or take extracts
therefrom in the presence of an authorized officer at such place and
time as such officer may indicate in this behalf except where making
such copies or taking such extracts may, in the opinion of the proper
officer, prejudicially affect the investigation.
(6) The goods so seized under subsection (2) shall be released, on a
provisional basis, upon execution of a bond and furnishing of a security,
in such manner and of such quantum, respectively, as may be
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414 State of Uttar Pradesh Vs. Kay Pan Fragrance 2019 NTN

prescribed or on payment of applicable tax, interest and penalty

payable, as the case may be.
(7) Where any goods are seized under subsection (2) and no notice in
respect thereof is given within six months of the seizure of the goods, the
goods shall be returned to the person from whose possession they were
seized:
Provided that the period of six months may, on sufficient cause being
shown, be extended by the proper officer for a further period not
exceeding six months.
(8) The Government may, having regard to the perishable or hazardous
nature of any goods, depreciation in the value of the goods with the
passage of time, constraints of storage space for the goods or any other
relevant considerations, by notification, specify the goods or class of
goods which shall, as soon as may be after its seizure under subsection
(2), be disposed of by the proper officer in such manner as may be
prescribed.
(9) Where any goods, being goods specified under subsection (8), have
been seized by a proper officer, or any officer authorized by him under
subsection (2), he shall prepare an inventory of such goods in such
manner as may be prescribed.
(10) The provisions of the Code of Criminal Procedure, 1973, relating to
search and seizure, shall, so far as may be, apply to search and seizure
under this section subject to the modification that subsection (5) of
section 165 of the said Code shall have effect as if for the word
“Magistrate”, wherever it occurs, the word “Commissioner” were
substituted.
(11) Where the proper officer has reasons to believe that any person
has evaded or is attempting to evade the payment of any tax, he may,
for reasons to be recorded in writing, seize the accounts, registers or
documents of such person produced before him and shall grant a
receipt for the same, and shall retain the same for so long as may be
necessary in connection with any proceedings under this Act or the
rules made thereunder for prosecution.
(12) The Commissioner or an officer authorized by him may cause
purchase of any goods or services or both by any person authorized by
him from the business premises of any taxable person, to check the
issue of tax invoices or bills of supply by such taxable person, and on
return of goods so purchased by such officer, such taxable person or
any person in charge of the business premises shall refund the amount
so paid towards the goods after cancelling any tax invoice or bill of
supply issued earlier.”
(emphasis in italics supplied)
The relevant rules for release of seized goods are Rules 140 and 141 and the
same read thus:“
Rule 140 – Bond and security for release of seized goods
(1) The seized goods may be released on a provisional basis upon
execution of a bond for the value of the goods in FORM GST INR04 and
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2019 NTN Supreme Court & High Courts 415
furnishing of a security in the form of a bank guarantee equivalent to
the amount of applicable tax, interest and penalty payable.
Explanation. For the purposes of the rules under the provisions of this
Chapter, the “applicable tax” shall include Central Tax and State Tax
or Central Tax and the Union Territory Tax, as the case may be and the
cess, if any, payable under the Goods and Services Tax (Compensation
to States) Act, 2017 (15 of 2017)
(2) in case the person to whom the goods were released provisionally
fails to produce the goods at the appointed date and place indicated by
the proper officer, the security shall be encashed and adjusted against
the tax, interest and penalty and fine, if any, payable in respect of such
goods.
Rule 141 – Procedure in respect of seized goods
(1) Where the goods or things seized are of perishable or hazardous
nature, and if the taxable person pays an amount equivalent to the
market price of such goods or things or the amount of tax, interest and
penalty that is or may become payable by the taxable person,
whichever is lower, such goods or, as the case may be, things shall be
released forthwith, by an order in FORM GST INS05, on proof of
payment.
(2) Where the taxable person fails to pay the amount referred to in
subrule (1) in respect of the said goods or things, the Commissioner
may dispose of such goods or things and the amount realized thereby
shall be adjusted against the tax, interest, penalty, or any other
amount payable in respect of such goods or things.”
There is no reason why any other indulgence need be shown to the assessees,
who happen to be the owners of the seized goods. They must take recourse to
the mechanism already provided for in the Act and the Rules for release, on a
provisional basis, upon execution of a bond and furnishing of a security, in
such manner and of such quantum (even upto the total value of goods
involved), respectively, as may be prescribed or on payment of applicable
taxes, interest and penalty payable, as the case may be, as predicated in
Section 67 (6) of the Act. In the interim orders passed by the High Court which
are subjectmatter of assail before this Court, the High Court has erroneously
extricated the assessees concerned from paying the applicable tax amount in
cash, which is contrary to the said provision.
In our opinion, therefore, the orders passed by the High Court which are
contrary to the stated provisions shall not be given effect to by the authorities.
Instead, the authorities shall process the claims of the concerned assessee
afresh as per the express stipulations in Section 67 of the Act read with the
relevant rules in that regard. In terms of this order, the competent authority
shall call upon every assessee to complete the formality strictly as per the
requirements of the stated provisions disregarding the order passed by the
High Court in his case, if the same deviates from the statutory compliances.
That be done within four weeks without any exception.
We reiterate that any order passed by the High Court which is contrary to the
stated provisions need not be given effect to in respect of all the cases referred
in the affidavit by the State Government before this Court and fresh cases
which may have been filed or likely to be filed before the High Court in
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416 State of Uttar Pradesh Vs. Kay Pan Fragrance 2019 NTN

connection with the subject matter of these appeals, by all concerned and are
deemed to have been set aside/modified in terms of this order.
In view of this order, all the Writ Petitions pending before the High Court, list
whereof has been furnished in the affidavit are deemed to have been disposed
of accordingly. We have passed this common order to cover all cases of seizure
during the relevant period, to obviate inconsistency in application of Law and
also to do away with multiple appeals required to be filed by the State/
assessee to assail the unstatable orders/directions passed by the High Court
in subject writ petition(s) referred to in the affidavit filed by the State before
this Court.
Accordingly, the appeals are disposed of in the aforestated terms. All pending
applications are also disposed of.
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