In the case of Bhima Enterprises, the Madras High Court, in conclusion, has mentioned that the legality of the search or inspection under Goods and Services Tax ( GST ) cannot be contested after the provisional release of goods.
Justice G. R Swaminathan stated that, “Inspection and search are stages anterior to seizure. When seizure itself has been implicitly upheld, one cannot nullify the search that preceded seizure.”
The applicant, Bhima Enterprises, has submitted the writ petition seeking to set aside the GST search and specify it as illegal for the cause that it was issued without a proper DIN (Document Identification Number) as mandated under CBIC circular No.122/41/2019-GST, dated 05.11.2019. They assert that the payment of Rs. 32 lakhs was made under coercion and not voluntarily.
On 16th August 2023, the department performed a search u/s 67(2) of the GST Act, and they seized gold ornaments and physical gold bullion of Rs 2.2 crores and Rs 3.2 crores respectively as per this excess stock.
One of the applicant’s requests was to specify the search itself as illegal. It was asserted that no DIN was generated at the time of the search and therefore the generated DIN was not shared with the applicant, which is regarded to be unsustainable.
Thinking on the matter of the, the Court stated that the applicant had earlier submitted a writ petition asking for the provisional release of seized goods. The applicant in that petition requested to set aside the seizure; however, the Court, vide its order dated 26.09.2023 marking the payment of Rs 32 lakhs made by the applicant to the department, asked to release the goods provisionally without setting aside the seizure.
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The bench denied invalidating or declaring the search illegal. As per the present court, the search legality must not have been made while seeking the provisional release. The inspection/search legality could not be contested after getting relief of provisional release of goods, said the single bench, citing that it was too late to contest the inspection validity.
Although the court was satisfied that the search was not performed in accordance with the statute and that the payment was not made voluntarily, which entitled the applicant to a refund of the tax paid, it did not grant the refund immediately. This was because the relief granted in the earlier writ petition was limited to the release of the goods, despite the legality of the seizure being challenged. As a result, the present court refused to approve the refund outright.
It was observed, “What the petitioner failed to achieve in W.P.(MD)No.23502 of 2023 cannot be indirectly achieved in these proceedings by nullifying the authorisation order dated 15.08.2023.”
The court disposed of the case, asked the department to start fresh proceedings against the applicant, and mentioned that the writ applicant should come to the court with clean hands, and if the department committed any illegality, they cannot be permitted to walk freely.
From the instructions of the department, the court said, “The department too cannot be allowed to succeed by solely taking advantage of the conduct of the assessee/petitioner. The bar that the Court will set for the department will be higher than the one meant for the taxpayer.”
| Case Title | Bhima Enterprises Vs Principle Chief Commissioner of GST |
| Case No. | W.P(MD)No.9040 of 2024 |
| For Petitioner | Mr R.Karthik Ranganathan |
| For Respondent | Mr AR.L.Sundaresan, Mr N.Dilip K |
| Madras High Court | Read Order |
