2018 (7) TMI 1181 - HC - GST

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 ... Detention and seizure under Section 129 - penalty and tax liability under Section 129(1) - adjudication under Section 129(3) - delivery challan under Rule 55 - requirement of declaration under Rule 138 (KER-1) - confiscation contemplated when goods are liable to confiscation - presumption and role of mens rea in taxing statutesDetention and seizure under Section 129 - delivery challan under Rule 55 - requirement of declaration under Rule 138 (KER-1) - confiscation contemplated when goods are liable to confiscation - Validity of detention/seizure under Section 129 where goods are transported pursuant to transactions alleged to be non-taxable but the declaration in Form KER-1 required by Rule 138 was not uploaded or not accompanied with the transport - HELD THAT: - A combined reading of Sections 129 and 130 shows detention is contemplated where goods are suspected to be liable to confiscation; mere procedural non compliance (delivery challan under Rule 55 without the Rule 138 declaration) cannot be treated as acceptance of non taxability by the Department. The delivery challan under Rule 55 is issued by the consignor and does not itself intimate the Department; the statutory intimation is effected only by uploading the declaration in Form KER 1 as required by Rule 138. Absence of an uploaded pre transport declaration raises a reasonable presumption of an attempt to evade tax and therefore Section 129 can be invoked to detain goods and initiate adjudication. If the declaration was uploaded prior to commencement of transport and this is proved in adjudication, the liability for penalty/tax under Section 129 would be discharged; a declaration uploaded only after detention does not absolve the consignor or transporter from liability. [Paras 13, 21, 22, 24, 25]Detention under Section 129 was lawful in the absence of a pre transport declaration in Form KER 1; respondents are entitled to adjudication under Section 129(3) where they may prove that the declaration was uploaded before transport, failing which they must satisfy tax and penalty as levied.Penalty and tax liability under Section 129(1) - adjudication under Section 129(3) - presumption and role of mens rea in taxing statutes - Whether mens rea is an essential requirement before invoking penalty/tax under Section 129 and the extent to which strict liability applies under the provision - HELD THAT: - The presumption that mens rea is essential can be displaced by the language and object of a taxing statute. Authorities such as Guljag Industries and D.P. Metals distinguish between (a) incomplete/forged/blank departmental declaration forms indicating mens rea and (b) absence of documents accompanying transport where the assessee must be given an opportunity to rebut the presumption. Under the GST scheme, failure to have the Rule 138 declaration uploaded prior to transport permits imposition of tax and penalty under Section 129 subject to adjudication; if the assessee proves that the declaration was validly uploaded before transport there is no mens rea and no liability, but a declaration made only after detention cannot absolve liability. [Paras 19, 22, 23, 24, 25]Mens rea is not an absolute prerequisite where the statute and its scheme displace the presumption; however, the detained party must be given adjudicatory opportunity to prove a pre transport declaration, failing which tax and penalty under Section 129 can be imposed.Final Conclusion: The Single Judge's orders directing unconditional release were set aside. The appeals are allowed and the matter remitted for adjudication under Section 129(3); if the respondents prove a pre transport Form KER 1 upload they will be absolved, otherwise they must satisfy the tax and penalty as determined in adjudication. The parties shall bear their own costs. 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 ActThe 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 TransportThe 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 PenaltyThe 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 129The 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 TransportThe 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 ImplicationsThe 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.