Search conducted under Section 129 of the CGST Act, 2017 in respect of immovable property is not a valid proceeding.

Case Title: Mahavir Polyplast (P.) Ltd. vs State of Uttar Pradesh

Court: High Court of Allahabad

Petition Number: Writ Tax Nos. 56 and 57 of 2020

Relevant Section: Section 129(3), Uttar Pradesh GST Act, 2017

Category of Dispute: Detention and Penalty under GST – Jurisdictional Overreach

Date of Judgement: 6 August 2022

Relevant Sections: Section 129(3), Section 67 – UPGST Act

Facts of the Case

1. The petitioner, Mahavir Polyplast Pvt. Ltd., a manufacturer of PVC pipes, faced a search and seizure operation on 7.8.2018 at its business premises in Agra by the Special Investigation Branch (SIB) of the Commercial Tax Department, alleging a shortage of physical stock compared to its registers. [Para 5]
2. The petitioner immediately contested the shortage, asserting that stock from another godown not covered under search had not been accounted for. [Para 5]
3. Subsequently, two separate Mobile Squad officers (Unit-II and Unit-V) issued identical show cause notices (MOV-7) dated 10.8.2018 and 14.8.2018 respectively, both under Section 129(3), incorrectly citing the vehicle description as “UPGODOWN02” and “GODOWON” while no transport was involved. [Paras 6–7]
4. Both officers proceeded to issue seizure orders and demanded tax and penalty of ₹4,99,813/- each (total ₹9,99,626), upheld in appeal by the Additional Commissioner (Appeals)-2. [Para 4]

Question(s) in Consideration

1. Whether seizure of goods from a stationary godown (not during transportation) under Section 129(3) is legally valid? [Paras 4, 9]
2. Whether issuance of two separate penalties for the same alleged discrepancy amounts to double jeopardy? [Para 4]

Observation of the Court

1. The Court found that both officers misused their powers by invoking Section 129(3), which applies only to goods in transit, not immovable premises like godowns. They used misleading descriptions to imply that a vehicle was checked. [Paras 9–10]
2. The power to search premises like godowns requires action under Section 67 based on “reasons to believe,” which was not invoked in this case. [Para 9]
3. The conduct of officers indicated deliberate misuse of jurisdiction and required departmental scrutiny and action. [Paras 10–11]

Judgement of the Court

1. Both orders dated 26.11.2019 and 22.11.2019 confirming the tax and penalty were quashed. [Para 13]
2. The proceedings initiated under Section 129(3) were held to be without jurisdiction. [Para 12]
3. Any deposited amount must be refunded with 8% interest, subject to the outcome of separate adjudication proceedings. [Para 13]
4. The Court directed the Commissioner, Commercial Tax, UP to investigate the officers’ conduct and take suitable corrective and disciplinary actions. [Para 11]
5. Both writ petitions were allowed. [Para 14]

Between Fine Lines

• This judgment clarifies that Section 129(3) of the GST Act applies strictly to goods in transit and cannot be stretched to include stationary godown seizures.
• Double imposition of tax and penalty for the same event from two different officers is legally impermissible.
• The Court reinforced that procedural integrity under GST law must be respected.
• Officers acting beyond jurisdiction are accountable and subject to inquiry.
• Relief was granted with direction for refund and future safeguards against such arbitrary actions.

Summary of Referred Cases