Authorisation under Section 67(2) of the SGST/CGST Act is not required for every item or person discovered during search operation

The Hon’ble Kerala High Court in the case of M/s. Velayudhan Gold LLP v. State of Kerala and Others [WP (C) No. 34654 of 2023 dated October 20, 2023] disposed the writ petition and held that authorisation under Section 67(2) of the State Goods and Services Act, 2017 ("the SGST Act")  / the Central Goods and Services Act, 2017 ("the CGST Act"), is not required for every person or article, goods, books and documents discovered during the search operation.

Facts

The Intelligence Unit of the Revenue Department ("the Respondent") conducted a search at the business premises of M/s. Sobhana Jewellery. The search took place after the authorisation was given by the Joint Commissioner under Section 67(2) of the SGST Act/ the CGST Act. After conducting the search, Mahazar ("list of goods and documents recovered and seized/detained during a search) was prepared.
However, during the search, employees of M/s. Velayudhan Gold LLP ("the Petitioner") were present, carrying the bag of gold ornaments along with the delivery challan issued by the Petitioner. The delivery challan endorsed 22kt gold ornaments with a net weight of 1332.590 grams in the name of M/s Sobhana Jewellers. At the time of physical verification conducted by the Respondent officials in the presence of witness at the business premises of M/s. Sobhana Jewellery, it was found that the net weight of the gold ornaments was 1647.97 grams. A discrepancy was found between the documents and the actual stock of gold in the bag. Therefore, the gold ornaments found in the bag were seized by the Respondent and a seizure memo was prepared in Form INS 02.  

Further, in violation of Rule 56(17) read with Rule 55 of the State Goods and Service Tax Rules, 2017 ("the SGST Rules") / the Central Goods and Service Tax Rules, 2017 ("the CGST Rules"), the Respondent issued Show Cause Notice dated July 07, 2023 ("the SCN") raising demand for penalty payable at Rs. 91,70,954/-. The Petitioner thereafter submitted the reply on August 14, 2023.

The Respondent adjudicated upon the SCN vide order dated September 23, 2023 ("the Impugned Order"). Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble Kerala High Court on the ground that there was no authorisation granted by the Joint Commissioner for conducting the search and seizure of gold ornaments recovered and seized from the bag of the Petitioner Partner and employees who were present at the premises of M/s. Sobhana Jewellery. Therefore, as per Section 67 of the SGST Act/ the CGST Act, the seizure of gold ornaments becomes illegal, null and void. 

Issue

Is authorisation under Section 67(2) of the SGST Act/CGST Act required for every person or article, goods, books and documents discovered during search operation?

Held

The Hon’ble Kerala High Court in the case of W.P. (C) No. 34654 of 2023 held as under:

• Observed that, when search and seizure operations are conducted, it is not known which items or documents or books might be recovered or kept at a secret place. Authorisation by the Joint Commissioner has to be in general terms and cannot be with respect to any specific books, items, things or documents. The relevant factor while granting authorisation for search and seizure operation is whether, the authority granting the permission, i.e. Joint Commissioner or above has a reason to believe that the goods, documents or things hold relevance, are kept in a secret place and are useful in any legal proceeding conducted under the SGST Act/ the CGST Act.
• Noted that, the search and seizure operation was authorised by the Joint Commissioner and the search was conducted under Section 67(2) of the SGST Act/ the CGST Act, in Form INS 01 issued by the Joint Commissioner. The authorisation was for the search of premises of M/s. Sobhana Jewellers and gold items owned by the Petitioner were found in a bag in the premises of M/s. Sobhana Jewellers. 
• Further noted that, the authorisation under Section 67(2) of the SGST Act/ the CGST Act, cannot be granted in respect of every person or article, goods, books and documents which may be discovered during search operation. The Respondent Officer is liable for any items, books or documents if the Respondent authorised officer has a reason to believe that it would be relevant for proceeding under the SGST Act/ the CGST Act. Therefore, the arguments made by the Petitioner that there was no authorisation under Section 67(2) of the SGST Act/ the CGST Act for the seizure of gold ornaments is devoid of merit. 
• Held that, there is no substance in the writ petition and Petitioner has the right to avail remedy under the SGST Act/ the CGST Act and the SGST Rules / the CGST Rules. Hence, the writ petition is disposed of. 

Relevant Provisions

Section 67 of the CGST Act

"Power of inspection, search and seizure

(1) …………………………..

(2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (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 authorise 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 authorised 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."