Goods transported without proper Rule 138 declaration before transport liable for detention and penalty under Section 129

Kerala HC held that goods transported without proper declaration under Rule 138 uploaded before transport commenced are liable for detention and seizure under Section 129 of CGST/SGST Acts. The court ruled that delivery challan alone is insufficient as it can be manipulated, and declaration uploaded after detention cannot absolve penalty liability. While the assessee is entitled to adjudication, they must prove prior declaration was made before transport to avoid tax and penalty obligations. The unconditional release of vehicle and goods does not prevent subsequent adjudication proceedings. Petition allowed favoring revenue.

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Issues Involved:
1. Detention and seizure of goods under Section 129 of the CGST Act and SGST Act.
2. Requirement of declaration under Rule 138 (KER-I) for non-taxable transport.
3. Interpretation of Sections 129 and 130 of the CGST Act regarding detention and penalty.
4. Applicability of mens rea in the imposition of penalty under Section 129.
5. Validity and genuineness of delivery chalan accompanying the transport.
6. Adjudication process under Section 129(3) and its implications.

Detailed Analysis:

Issue 1: Detention and Seizure of Goods under Section 129 of the CGST Act and SGST Act
The primary question was whether goods with no tax liability could be detained and seized under Section 129 of the CGST Act and SGST Act. The court examined the facts of the cases where the goods were detained due to the lack of a declaration under Rule 138 (KER-I), despite being accompanied by a delivery chalan.

Issue 2: Requirement of Declaration under Rule 138 (KER-I) for Non-Taxable Transport
The court found that the transport of goods without the required declaration under Rule 138 (KER-I) constituted a violation of the Act and Rules, even if the goods were non-taxable. The delivery chalan alone was insufficient, and the absence of the declaration raised a reasonable presumption of an attempt to evade tax.

Issue 3: Interpretation of Sections 129 and 130 of the CGST Act Regarding Detention and Penalty
The court interpreted Sections 129 and 130, concluding that detention under Section 129 is justified only when there is a suspicion of goods being liable to confiscation. Mere procedural infractions, such as the absence of a declaration under Rule 138, could result in penalties but not necessarily detention. However, the court vacated the learned Single Judge's finding that procedural infractions alone cannot justify detention.

Issue 4: Applicability of Mens Rea in the Imposition of Penalty under Section 129
The court referred to precedents, including Guljag Industries and D.P. Metals, to determine that mens rea (guilty mind) is not a necessary requirement for imposing penalties under Section 129. The statutory scheme under Section 129 imposes a civil liability for contraventions without reference to mens rea. However, the court emphasized that if a declaration was uploaded before the transport, the absence of mens rea could absolve the liability.

Issue 5: Validity and Genuineness of Delivery Chalan Accompanying the Transport
The court noted that the delivery chalan, which is prepared by the consignor and not issued by the department, could be subject to manipulation. The genuineness of the delivery chalan was not disputed by the detaining officer, but the absence of a declaration under Rule 138 was a significant procedural infraction.

Issue 6: Adjudication Process under Section 129(3) and Its Implications
The court clarified that the adjudication process under Section 129(3) is not a mere formality. The transporter or consignor must prove that the declaration was uploaded before the transport commenced. If proven, they would be absolved of the penalty. Otherwise, the penalty would be imposed as per Section 129. The court directed that the adjudication process be completed, and if penalties are imposed, the respondents must satisfy them.

Conclusion:
The court vacated the judgment of the learned Single Judge, allowing the appeals and directing further adjudication under Section 129(3). The vehicle and goods, already released unconditionally, would be subject to the outcome of the adjudication process. The court emphasized the importance of compliance with procedural rules and the statutory requirement of declarations under Rule 138 for non-taxable transports.

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