Facts of the Case

The appellant, Velayudhan Gold LLP, had challenged before a Single Judge (WP(C) No. 34654/2023) an order passed under Section 67 of the Kerala State Goods and Service Tax Act, 2017 and the CGST Act, by which 1,647.970 grams of gold was seized from it as unaccounted gold detected at the premises of M/s Sobhana Jewellery. The appellant's case was that the gold did not belong to Sobhana Jewellery's stock-in-trade but was its own gold, taken to the jewellery's premises for display in the hope of a sale. The department rejected this explanation, confirmed the demand raised in the show-cause notice, and rejected the appellant's contention that the seizure lacked proper authorization under the SGST/CGST Act. The learned Single Judge found the search and seizure was not unauthorized and relegated the appellant to its statutory appeal remedy. The appellant carried the matter in intra-court appeal, contending the Single Judge erred in entering categorical findings on the legality/authorization of the seizure while simultaneously relegating the appellant to an alternate remedy, since such findings would prejudicially bind the appellate authority.

Issues Involved

  1. Whether the Single Judge erred in entering categorical findings on the legality of authorization for the seizure of gold under Section 67(2) of the SGST/CGST Act, while simultaneously relegating the appellant to its statutory appellate remedy.
  2. What is the appropriate scope of a writ court's findings when a case is ultimately disposed of by relegating the party to a statutory appeal.

Petitioner's Arguments

  • The Single Judge should not have entered findings on the merits of the jurisdiction/legality of the search and seizure while relegating the appellant to the appellate authority, as such findings would improperly bind the appellate authority.
  • The factual question of ownership of the gold (whether it belonged to the appellant or formed part of Sobhana Jewellery's stock) required independent determination by the appellate authority.

Respondent's Arguments

  • The Single Judge's finding that the search and seizure was validly authorized under Section 67(2) was correct and needed no interference.

Court Order/Findings

  • The Division Bench held it was inappropriate for the Single Judge to have entered categorical findings on the legality/authorization of the search when the writ petition was ultimately being disposed of by relegating the appellant to the statutory appeal, and agreed that the factual question of ownership of the seized gold must be independently ascertained by the appellate authority.
  • The Court maintained the Single Judge's order to the extent it dismissed the writ petition and relegated the appellant to the statutory remedy, but vacated the findings in paragraphs 5, 5.1 and 5.2 holding the authorization for seizure legal under Section 67(2).
  • The First Appellate Authority was directed to independently examine the validity of the authorization for seizure, uninfluenced by the vacated findings, and to decide the appeal (if filed within three weeks) within a further month after hearing the appellant.

Important Clarification

  • Where a writ court disposes of a petition by relegating the party to a statutory appellate remedy, it should ordinarily refrain from entering categorical findings on contested factual or jurisdictional issues (such as legality of authorization for search/seizure), since such findings could improperly bind or prejudice the appellate authority's independent consideration.

Sections Involved

  • Section 67, Kerala SGST Act, 2017 / CGST Act, 2017 – power of inspection, search and seizure.
  • Section 107, SGST Act, 2017 / CGST Act, 2017 – appeal to the appellate authority.

Decision – In Favour of

Disposed of with directions, partly in favour of the assessee/appellant – the underlying dismissal and relegation to appeal was upheld, but the appellant secured the specific relief of having the Single Judge's adverse merits findings on legality of seizure vacated, leaving that issue open for independent appellate determination.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WA NO. 1903 OF 2023 (against judgment in WP(C) 34654/2023)
  • CNR: Not available
  • Coram: Hon'ble Dr. Justice A. K. Jayasankaran Nambiar and Hon'ble Dr. Justice Kauser Edappagath
  • Decision Date: 31.10.2023
  • Disposal Nature: Disposed of (relegated to statutory appeal; Single Judge's findings on legality of seizure vacated)

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