Facts of the Case

The petitioner, Velayudhan Gold LLP, represented by its Managing Director Rishikesh K.K., challenged before the Kerala High Court (WP(C) No. 34654 of 2023) the seizure order dated 26.05.2023 and the confiscation order dated 23.09.2023 passed by the Intelligence Officers of the State GST Department, Kottarakkara and Ernakulam. On 26.05.2023, the Intelligence Unit conducted a search at the premises of M/s Sobhana Jewellery, Ottappalam, under authorisation granted by the Joint Commissioner under Section 67(2) of the SGST/CGST Act, 2017. Gold ornaments found in a bag on the premises, accompanied by a delivery challan from the petitioner covering 22kt gold weighing 1332.590 gms, were physically found to weigh 1647.970 gms, a discrepancy that led to seizure. A show cause notice demanding penalty in lieu of confiscation of Rs.91,70,954/- was issued, and after the petitioner's reply dated 14.08.2023, the confiscation order was passed.

Issues Involved

  1. Whether the seizure of the petitioner's gold ornaments was invalid for want of specific authorisation under Section 67(2) naming the petitioner or its goods.
  2. Whether the discrepancy between the declared and physically verified weight of gold justified seizure and confiscation.
  3. Whether general search authorisation of business premises extends to goods of a third party found on those premises.

Petitioner's Arguments

  • There was no specific authorisation under Section 67(2) of the SGST/CGST Act for seizing the petitioner's jewellery items, which were found at the premises of M/s Sobhana Jewellery, a different entity.
  • Section 67(2) contemplates authorisation, with reasons to believe, by an officer not below the rank of Joint Commissioner, before goods can be seized as being secreted at a place; absent such specific authorisation, the seizure is illegal, null and void.
  • The entire chain of proceedings, including the penalty and confiscation, should be quashed as void ab initio.

Respondent's Arguments

  • The search of M/s Sobhana Jewellery's premises was duly authorised by the Joint Commissioner under Section 67(2) in Form INS-01.
  • Discrepancies were found between the delivery challan (1332.590 gms) and the physically verified stock (1647.970 gms), and violations of Rules 55 and 56(17) of the SGST/CGST Rules were noted, justifying the show cause notice and confiscation order.

Court Order/Findings

  • Authorisation under Section 67(2) must necessarily be general in nature — given at the premises level — since it is not known in advance which items, documents or persons' goods will be found at a secreted place during search.
  • Once the search of the business premises is validly authorised by an officer not below the rank of Joint Commissioner, goods found there — even if belonging to a third party who later claims ownership — can be seized without a separate, item-specific or person-specific authorisation.
  • The petitioner's own Managing Partner had admitted ownership of the seized gold in his statement recorded under Section 70(1), and the authorisation for the search itself (Form INS-01) was not in dispute.
  • Finding no substance in the challenge, the Court dismissed the writ petition, leaving it open to the petitioner to pursue any other remedy available under the SGST/CGST Act and Rules.

Important Clarification

  • Authorisation for search and seizure under Section 67(2) of the SGST/CGST Act need not identify specific goods, documents or persons in advance; a valid, general authorisation for search of the business premises suffices to cover goods discovered and seized there, including those of a third party.
  • A discrepancy between documented (delivery challan) quantity and physically verified quantity of goods can, by itself, justify seizure and confiscation proceedings under Section 130.
  • An admission of ownership recorded under Section 70(1) can bind the person making it in subsequent confiscation proceedings concerning those goods.
  • Dismissal of a writ challenge to confiscation does not foreclose other statutory remedies against the confiscation order itself.

Sections Involved

  • Section 67(2), SGST/CGST Act, 2017 — power of search and seizure by an officer authorised by the Joint Commissioner.
  • Section 70(1), SGST/CGST Act, 2017 — power to summon persons and record statements.
  • Section 130, SGST/CGST Act, 2017 — confiscation of goods and levy of penalty.
  • Rules 55 and 56(17), SGST/CGST Rules, 2017 — requirements for delivery challans and stock records.

Decision – In Favour of

The decision is in favour of the Department/Revenue. The writ petition challenging the seizure and confiscation of the gold ornaments was dismissed.

Related Case Laws

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

Case Details

  • Court: Kerala High Court
  • Case No.: WP(C) No. 34654 of 2023
  • CNR: Not available on record
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 20.10.2023
  • Disposal Nature: Dismissed; search, seizure and confiscation of gold ornaments under Section 67(2)/Section 130 SGST/CGST Act upheld

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