Facts of the Case

The Petitioner, M/s Kashish Optics Ltd., challenged the continued retention of goods seized by the GST authorities pursuant to a search conducted on 22/23 October 2020, followed by a seizure order dated 23.10.2020.

The grievance of the Petitioner was that despite the statutory mandate under Section 67(7) of the Central Goods and Services Tax Act, 2017, the seized goods were not returned within the prescribed time limit. The Department had allegedly extended the seizure period without issuing notice to the Petitioner and continued to retain goods beyond the permissible period.

A Show Cause Notice (SCN) dated 20.10.2021 under Section 130 CGST Act (confiscation) was also relied upon by the Respondents.

Issues Involved

  1. Whether goods seized under Section 67 CGST Act can be retained beyond 6 months (extendable up to 12 months) without issuing notice to the affected person.
  2. Whether extension of seizure period requires prior notice and opportunity of hearing.
  3. Whether Section 67 CGST Act is pari materia with Section 110 of the Customs Act, 1962.
  4. Whether internal note sheets can constitute “sufficient cause” for extension.
  5. Whether confiscation notice under Section 130 CGST Act can substitute compliance under Section 67(7).

Petitioner’s Arguments

  • The Petitioner contended that under Section 67(7) CGST Act, seized goods must be returned if no notice is issued within 6 months, extendable only up to a maximum of 12 months.
  • No prior notice or hearing was given before extending the seizure period, making the extension illegal.
  • Reliance was placed on Supreme Court judgments:
    • Assistant Collector of Customs vs Charan Das Malhotra
    • I.J. Rao vs Bibhuti Bhushan Bagh
  • It was argued that:
    • Extension without notice violates principles of natural justice.
    • The alleged SCN was improperly served (by affixation) and beyond limitation.
  • Continued seizure caused commercial loss, as goods (spectacle frames) would go out of fashion. 

Respondent’s Arguments

  • The Department argued that:
    • Section 67 CGST Act and Section 110 Customs Act are not pari materia.
    • “Sufficient cause” existed as reflected in internal note sheets.
    • SCN dated 20.10.2021 was validly served via affixation under Section 169 CGST Act.
  • It was also contended that:
    • The Petitioner could have sought provisional release under Rule 140 CGST Rules, but failed to do so. 

Court’s Findings / Order

The Delhi High Court held:

  • Section 67 CGST Act is pari materia with Section 110 Customs Act.
  • The principles laid down in I.J. Rao apply fully to GST proceedings.
  • Extension of seizure requires:
    • Prior notice
    • Opportunity of hearing
  • The right to return of goods after 6 months is a valuable statutory right, which cannot be defeated unilaterally.

Key Findings:

  • No notice was issued before extension → Violation of Section 67(7)
  • Internal note sheets are not valid compliance as they are unilateral and not disclosed to the assessee
  • “Sufficient cause” must be objective and communicated, not internal
  • Departmental lapses (missing records, improper valuation) cannot justify extension

Final Order:

  • Seized goods directed to be released upon deposit of valuation amount
  • Proceedings to be concluded within 6 weeks
  • Electronic devices to be returned after copying data
  • Copies of seized documents to be provided

Important Clarifications

  • Notice is mandatory before extension of seizure period
  • “Sufficient cause” must be:
    • Real
    • Justifiable
    • Communicated to the affected party
  • Confiscation proceedings (Section 130) are separate and cannot cure defects in seizure extension
  • Provisional release under Rule 140 does not override statutory safeguards under Section 67(7)
  • Internal administrative inefficiency is not a valid ground for continued seizure 

Sections Involved

  • Section 67(2) & 67(7), CGST Act, 2017 – Search, seizure & time limit
  • Section 130, CGST Act, 2017 – Confiscation
  • Section 169, CGST Act, 2017 – Service of notice
  • Rule 140, CGST Rules, 2017 – Provisional release
  • Section 110 & Section 124, Customs Act, 1962 – Seizure & notice

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/68003032025CW77412022_152639.pdf

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