Seizure & Prohibition Orders Fall Once GST Assessment Quashed on Limitation

Case Details: Goal Closures vs. State Tax Officer (Int)-1 - [2026] 184 taxmann.com 226 (Madras)

Judiciary and Counsel Details

C. Saravanan, J.
G. Natarajan for the Petitioner.
C. Harsharaj, Special Government Pleader for the Respondent.

Facts of the Case

The petitioner, a registered person, was subjected to inspection and search by the department, pursuant to which goods were placed under Prohibition Order in Form GST INS-03 and Seizure Order in Form GST INS-02. A show cause notice (SCN) in Form GST DRC-01 was thereafter issued alleging belated availment of input tax credit (ITC) under section 16(4) of the CGST Act, which culminated in an assessment order passed in Form GST DRC-07. The said assessment order was subsequently quashed in separate writ proceedings on the ground of limitation. It was also confirmed that no fresh or de novo proceedings had been initiated thereafter and that none of the notices proposed confiscation of the seized goods under section 67(2) of the CGST Act. The petitioner, therefore, challenged the continued operation of the Prohibition and Seizure Orders. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the continuance of the Prohibition Order in Form GST INS-03 and Seizure Order in Form GST INS-02 could not be sustained once the assessment order had been quashed and no fresh proceedings proposing confiscation had been initiated. The Court observed that in the absence of any proposal for confiscation as contemplated under section 67(2) of the CGST Act, the very basis for continuation of such restrictive measures ceased to exist. It further held that mere pendency of remand proceedings, without any substantive action for confiscation, could not justify continuation of seizure or prohibition. Accordingly, the Court concluded that the impugned Prohibition and Seizure Orders were unwarranted and liable to be set aside.