S.67 Of CGST Act & S.110 Of Customs Act Are Pari Materia; GST Department Must Give Notice To Assessee Before Extending Seizure Period: Delhi HC

The Delhi High Court has held that an assessee must be issued notice within six months of seizure of its goods under Section 67 of the Central Goods and Services Tax Act 2017, failing which the goods must be returned by the Department.A division bench of Justices Yashwant Varma and Harish Vaidyanathan Shankar further held that the period of seizure cannot be extended under Section 67)7) for a further six-month period without giving notice to the accused.This, as the Court found the provision to be pari materia with Section 110 of the Customs Act, 1962, which relates to 'Seizure of goods, documents and things'.The court held, “A perusal of the two provisions makes it evident that the two are similarly worded…Both the Acts are fiscal Acts. Seizure of goods and documents is provided for in both the acts. Such seizure is only on the basis of a “reasonable belief”. Seizure of goods would have serious repercussions on the person whose goods are so seized. Seizure is for the limited purpose of securing the interest of the concerned authorities to conduct their proceedings.”It rejected the contention of the GST Department that the two provisions cannot be pari materia.The Court was dealing with a petition moved by an opticals company, challenging the continued retention of its goods by the Department, following seizure under CGST Act.Petitioner relied on Proviso to Section 67(2) as per which six months seizure period may be extended by the proper officer by a further period not exceeding six months, on sufficient cause being shown. It submitted that since the provision is pari materia with Section 110 Customs Act, Supreme Court's decision in IJ Rao, Asst. Collector of Customs and Others. vs. Bibhuti Bhushan Bagh and Another would apply.The Top Court had held that upon the expiry of six months, the person whose goods are seized becomes entitled to their return and the said right cannot be sought to be defeated unilaterally and the affected person would be entitled to a notice of the proposal for extension prior to the expiry of six months and be heard on the said proposal.In the facts of the present case however, no notice of extension of the seizure was provided to the Petitioner-assessee.The Department on the other hand submitted that the two provisions are different, operate in different fields and in that sense, cannot be held to be pari materia.The High Court said even if it is assumed that the two provisions were not pari materia, the underlying logic and reasoning rendered by the Supreme Court in IJ Rao (supra) would apply to the provisions of the CGST Act and to the case in hand.It further observed, “Section 6(7) is couched in a manner such as to ensure that the “sufficient cause will have to be shown” to the affected person. “Sufficient cause” cannot mean a reason known only to the concerned officials for extending the period of seizure to the detriment of the affected person, thereby denying him his entitlement to the goods.”The Department had also argued that the judgment in IJ Rao (supra) will not apply because of Rule 140 of the CGST Rules, 2017 which, when read with Section 67(7) of the CGST Act, provides for the provisional release of seized goods. However, the Petitioner having failed to make an application in this regard, cannot challenge the non-issue of a notice for extending the period of seizure.Rejecting this submission, the Court held, “The fact that Rule 140 of the Rules provides for release on a provisional basis of seized goods does not obliterate the proviso to Section 67(7) of the CGST Act, including the need for showing “sufficient cause” for extending the period of retaining the seized goods.”The Respondents had also argued that the Petitioner did not show how the retention of the goods would be prejudicial or that they would be diminishing in value.Court found this too incorrect as the Petitioner had stated on various occasions that the frames of spectacles would go out of fashion and resultantly, they would suffer huge losses.As such, the High Court directed that the seized goods be released upon the Petitioner making a deposit as per the valuation.Appearance: Mr. Puneet Agrawal, Mr. Ketan Jain, Ms. Sakshi Bisht, Ms. Shruti Garg and Mr. Chetan Kumar Shukla, Advs. for Petitioner; Ms. Anushree Narain, SSC along with Mr. Ankit Kumar, Adv. for RespondentCase title: M/S Kashish Optics Ltd. v. The Commissioner, CGST Delhi West & Ors.Citation: 2025 LiveLaw (Del) 294Case no.: W.P.(C) 7741/2022Click here to read judgment

S.67 Of CGST Act & S.110 Of Customs Act Are Pari Materia; GST Department Must Give Notice To Assessee Before Extending Seizure Period: Delhi HC

Kapil Dhyani

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