Facts of the Case

  • The petitioner, Best Crop Science Pvt. Ltd., was subjected to search operations on 05.05.2022 and 26.08.2022 under Section 67(2) of the CGST Act.
  • An order of prohibition was issued on 26.08.2022 restraining the petitioner from dealing with goods.
  • Subsequently, a seizure order was passed on 21.09.2022.
  • A show cause notice dated 01.03.2023 was issued.
  • The petitioner challenged the notice on the ground that it was issued beyond six months, as prescribed under Section 67(7) CGST Act.

Issues Involved

  1. Whether the show cause notice issued beyond six months from the date of prohibition/seizure is time-barred.
  2. Whether an order of prohibition amounts to seizure under Section 67(2).
  3. Whether delay in issuance of notice leads to invalidity of notice or only return of goods.

Petitioner’s Arguments

  • The show cause notice was barred by limitation under Section 67(7) CGST Act.
  • Goods were liable to be returned due to non-issuance of notice within six months.
  • Relied on:
    • Devesh Radheshyamji Kabra v. State of Gujarat
    • Mohd. Salman Khan v. Union of India (Customs Act analogy)

Respondent’s Arguments

  • The relevant date is actual seizure (21.09.2022), not prohibition.
  • The notice dated 01.03.2023 was within six months of seizure.
  • Distinction exists between:
    • Detention / Prohibition
    • Seizure
  • Customs Act provisions are not directly applicable to CGST framework.

Court’s Findings / Order

  • Order of prohibition is equivalent to seizure when physical seizure is impracticable.
  • The six-month timeline applies, but:
    • Non-issuance of notice within six months leads to return of goods,
    • It does NOT invalidate the show cause notice.
  • The argument that notice becomes void due to delay was rejected.
  • Since confiscation proceedings were already initiated separately, no direction for return of goods was issued.
  • Petition was disposed of without granting relief.

Important Clarifications by Court

  • Prohibition order ≈ Seizure (functional equivalence) under Section 67.
  • Authorities cannot delay seizure decision using prohibition as an interim tool.
  • Limitation breach consequence is limited:
    • Only return of goods, not invalidation of proceedings.
  • Distinction between detention and seizure is not absolute in GST context.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB05092023CW2382023_184856.pdf

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