Facts of the Case

The petitioner, Sankar Lal Sahoo, challenged the order dated 02.09.2020 passed by the learned S.D.J.M., Panposh, Rourkela in Criminal Misc. Case No. 166 of 2020 whereby his application under Section 457 of the Code of Criminal Procedure, 1973 (Cr.P.C.) seeking interim release of seized iron scrap was rejected.

The criminal case originated from a complaint lodged by the Assistant Sub-Inspector of Jalda Out Post alleging that one Ranjit Sahu was engaged in illegal iron scrap business and was transporting stolen iron scrap in a truck. Acting on the complaint, the police raided the godown of Ranjit Sahu and seized a truck loaded with approximately 4.950 Kgs. of alleged stolen iron scrap.

Although the vehicle was subsequently released to its owner under Section 457 Cr.P.C., the petitioner claimed ownership over the seized iron scrap and sought its release.

The Trial Court rejected the application primarily on the ground that although there was evidence of payment of CGST, the petitioner had failed to produce the corresponding E-Way Bill, making it impossible to conclude that the seized goods belonged to him.

Issues Involved

  1. Whether the absence of an E-Way Bill alone is sufficient to reject a claim for interim release of seized goods under Section 457 Cr.P.C.
  2. Whether documentary evidence such as purchase invoices and proof of tax payment requires deeper verification before rejecting ownership.
  3. Whether the Trial Court ought to have conducted further inquiry through the investigating agency and tax authorities before deciding the ownership dispute.

Petitioner’s Arguments

The petitioner contended that:

  • He was the genuine owner of the seized iron scrap.
  • He possessed valid purchase vouchers and invoices evidencing purchase of the scrap.
  • He had also produced proof of payment of applicable CGST on such purchases.
  • Even if questions were raised regarding the authenticity of invoices, a detailed investigation could establish the nexus between the tax-paid goods and the seized iron scrap.
  • Therefore, rejection of the application merely because an E-Way Bill was unavailable was legally unsustainable.

Respondent’s Arguments

The State submitted that:

  • Information received from the CT & GST Officer, Rourkela indicated that the invoices relied upon by the petitioner were not genuine.
  • Therefore, the petitioner failed to establish ownership of the seized iron scrap.
  • In such circumstances, release of the goods was not justified until proper verification was completed.

Court's Findings

The Orissa High Court observed that:

  • The dispute essentially related to determination of ownership of the seized iron scrap.
  • The petitioner claimed to possess invoices, vouchers and proof of tax payment.
  • At the same time, there was information suggesting that the invoices might not be genuine.
  • Such conflicting factual issues required proper investigation instead of outright rejection of the release application.
  • The Trial Court ought to have conducted a comprehensive inquiry with assistance from both the Investigating Agency and the Tax Department.

The High Court held that a deeper scrutiny was necessary to determine whether the tax-paid goods claimed by the petitioner were in fact the seized iron scrap.

Court Order / Decision

The High Court:

  • Set aside the approach adopted by the Trial Court.
  • Remitted the matter back to the Trial Court.
  • Directed the Trial Court to conduct a proper inquiry through:
    • the Investigating Agency; and
    • the concerned Tax Department.
  • Directed that a fresh order be passed strictly in accordance with law.
  • Clarified that if ownership of the seized iron scrap is established after inquiry, appropriate orders under Section 457 Cr.P.C. should be passed for release of the goods.
  • Accordingly, the Criminal Revision was disposed of.

Important Clarification

This judgment clarifies that:

  • Mere absence of an E-Way Bill does not automatically disentitle a claimant from seeking release of seized goods under Section 457 Cr.P.C.
  • Documentary evidence like purchase invoices and GST payment records deserves proper examination before rejecting ownership.
  • Where conflicting material exists regarding genuineness of invoices, courts should direct a detailed inquiry instead of summarily dismissing the application.
  • Verification by both the investigating agency and the GST authorities is appropriate where ownership depends upon tax documents.

Sections Involved

  • Section 457, Code of Criminal Procedure, 1973 – Procedure regarding disposal and interim release of seized property.
  • CGST provisions relating to tax invoices and payment of GST (referred to in the factual background).
  • E-Way Bill provisions under the GST law (considered while examining ownership).

Related Case Laws

  • Sunderbhai Ambalal Desai vs State of Gujarat (2002) 10 SCC 283 – The Supreme Court emphasized that seized property should not remain in police custody unnecessarily and courts should ordinarily release property to the rightful owner on appropriate conditions.
  • General Insurance Council vs State of Andhra Pradesh (2010) 6 SCC 768 – Reiterated the principles governing prompt release and proper custody of seized property during criminal proceedings.
  • Basavva Kom Dyamangouda Patil vs State of Mysore (1977) 4 SCC 358 – Recognized the need to preserve property while ensuring rightful claimants are not unnecessarily deprived of possession.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783942147_936compressed.pdf

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