2019 (3) TMI 596 - HC - GST

Transporter faces penalties despite no tax liability, court emphasizes compliance with penalty provisions

The court dismissed the appeal, upholding the imposition of penalties on the transporter despite the absence of tax liability. The court emphasized the ... Detention, seizure and penalty under Section 129 of the CGST Act - liability of transporter as person interested in the goods - non-obstante clause in Section 129 as a self-contained code - inapplicability of minor breach doctrine where tax involved exceeds the threshold - consequences of failure to pay within 14 days under Section 129(6) - limited bearing of departmental circular on statutory liability under Section 129Liability of transporter as person interested in the goods - detention, seizure and penalty under Section 129 of the CGST Act - Transporter can be held liable to detention, seizure and payment of tax and penalty under Section 129 even where the transported goods give rise to no tax liability on the consignor/consignee. - HELD THAT: - The Court held that Section 129(1)(b) expressly makes any person 'interested in the goods' liable, which includes a transporter. A purposive reading of Section 129 and the specific consequence in Section 129(6) - providing for further proceedings where a person transporting goods or the owner fails to pay the amount due within 14 days - demonstrates that liability attaches to the transporter as well as to the goods. The Division Bench applied these statutory indicia and declined the contention that absence of tax liability on the transaction absolves the transporter from liability under Section 129. The Court referred to its earlier decision holding that non-compliance with statutory conditions can trigger Section 129 including confiscation where applicable. [Paras 6, 7, 9]The transporter's liability under Section 129 to detention, seizure and demand of tax and penalty is upheld.Non-obstante clause in Section 129 as a self-contained code - inapplicability of minor breach doctrine where tax involved exceeds the threshold - Section 129 operates as a self-contained code and, when attracted, supplants the operation of provisions dealing with minor breaches or general penalties such as Section 126, Section 122 or Section 125. - HELD THAT: - The Court observed that Section 129 begins with a non-obstante clause indicating its primacy when its conditions are met. Consequently, the reliefs or limitations available under provisions addressing minor breaches (Section 126) or general penalty provisions (Sections 122/125) do not apply to cases governed by Section 129. In particular, the Explanation to Section 126 confines 'minor breach' to instances where the tax involved is below the specified threshold, which was not the case here; accordingly Section 126 could not be invoked to avoid the consequences under Section 129. [Paras 6, 8]Section 129 displaces the other cited penalty/relief provisions where its conditions are fulfilled, and Section 126 is inapplicable in the present facts.Limited bearing of departmental circular on statutory liability under Section 129 - A departmental circular clarifying the meaning of 'owner of the goods' does not negate the transporter's statutory liability under Section 129 where the statutory text makes a transporter a person 'interested in the goods' and Section 129 is otherwise attracted. - HELD THAT: - The Court rejected the appellant's reliance on the Government circular asserting that the consignor/consignee are the 'owner of the goods' where invoice accompanies consignment. It held that such administrative clarification cannot override the statutory wording of Section 129 which expressly includes any person transporting goods. Where Section 129 applies, the transporter may be proceeded against even if invoice/documentation accompanies the consignment. [Paras 5, 7]The circular relied upon does not absolve the transporter from liability under Section 129 when the statutory conditions for detention and penalty are satisfied.Final Conclusion: The Writ Appeal is dismissed; the orders of detention, seizure and demand of tax and penalty issued under Section 129 are upheld and the challenge to those orders fails. Issues:1. Detention, seizure, and penalty under Section 129 of the CGST Act for a transporter with no tax liability.Analysis:The case involved the question of whether a transporter with no tax liability could face detention, seizure, and penalty under Section 129 of the Central Goods and Services Tax Act, 2017. The petitioner, a transporting firm, had a vehicle intercepted while transporting goods without complete documentation. The goods had no tax liability, yet the vehicle was detained, and a substantial penalty was imposed. The petitioner argued that the penalty was unjustified as there was no tax evasion, and the breach was minor and easily rectifiable. The petitioner also cited relevant sections of the CGST Act to support their argument that the penalty imposed was excessive. However, the respondent contended that Section 129 is a self-contained provision applicable to any person transporting goods, including transporters, and overrides other penalty provisions. The court noted that Section 129 makes it clear that any person interested in the goods, including a transporter, shall be liable for penalties. Additionally, the court highlighted that failure to pay tax and penalty within the specified period could lead to further proceedings against both the goods and the transporter. The court also referred to a previous judgment to support the application of Section 129 in cases of non-compliance with tax regulations.In conclusion, the court dismissed the appeal, upholding the imposition of penalties on the transporter despite the absence of tax liability. The court emphasized the applicability of Section 129 as a comprehensive provision for penalties in cases of non-compliance, including against transporters. The judgment reaffirmed that the transporter's liability extends to penalties under Section 129, even in the absence of tax evasion, emphasizing the importance of compliance with documentation and procedural requirements.