Delhi High Court Refuses To Entertain Challenge To CGST Act Provision Governing Provisional Release Of Seized Goods

The Delhi High Court has declined to interfere with a writ petition challenging the constitutional validity of Section 67(6) of the Central Goods and Services Tax Act, 2017, which governs the provisional release of goods seized during search proceedings.

The Division Bench of Justices Anil Kshetrapal and Shail Jain observed that a petitioner questioning the validity of a statutory provision must establish that it infringes a constitutional mandate.

Petitioner had contended that the expression "on a provisional basis" in Section 67(6) should not apply where the taxpayer has already discharged the tax, interest, and penalty under Section 74A(9).

It also challenged Rule 140 of the CGST Rules and sought quashing of a show cause notice proposing confiscation and penalty proceedings.

It was argued that the latter part of Section 67(6), which provides for provisional release of seized goods, should be interpreted to permit final release once the applicable tax, interest and penalty have been paid.

The Court however observed that both Section 67 and Section 74A operate independently.

The former provision deals with the power of inspection, search and seizure, and specifically provides that goods seized during a search may be released on a provisional basis upon execution of a bond and furnishing of security.

"Section 74A of the CGST Act deals with the determination of tax which has not been paid or has been short-paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised. Both the provisions operate in different and distinct fields," it observed.

So far as the show cause issued to the Petitioner for alleged supply of copper scrap on basis of fraudulent input tax credit is concerned, the Court observed that an appropriate reply to the notice can be filed seeking dropping of the proceedings.

For Petitioner: Advocate Bharat Bhushan, Advocate Nidhi Gupta and Advocate Anunay Mishra.

For Respondents: Senior Panel Counsel Kshitij Chhabra with Advocate Abhijeet Vikram Singh; Senior Standing Counsel (CBIC) Akash Verma with Advocate Anchal Uppal; Senior Standing Counsel Anurag Ojha with Advocates Dipak Raj, Aryaman Singh Chouhan and Aditya Chaudhary.