2019 (4) TMI 147 - HC - GST

Court quashes CGST Act confiscation order, emphasizes procedural compliance, directs speedy resolution.

The court quashed the confiscation order issued under the CGST Act, citing illegal detention of goods and vehicle, unilateral presumption by the ... Detention, seizure and release of goods and conveyances in transit - Confiscation of goods or conveyances and levy of penalty - Requirement of quantification of tax and penalty before confiscation - Opportunity to be heard / consideration of objections under Section 129 - Section 160 - cure for mistakes, defects or omissions - Procedure prescribed by Circular No.41/15/2018-GSTDetention, seizure and release of goods and conveyances in transit - Requirement of quantification of tax and penalty before confiscation - Opportunity to be heard / consideration of objections under Section 129 - Validity of the confiscation order passed without first quantifying tax and penalty and without considering objections filed under the detention notice - HELD THAT: - The Court held that once a notice under Section 129(1)(b) was issued and objections were filed, the proper officer was obliged to consider those objections and pass a speaking order quantifying the tax and penalty before proceeding further. The statutory scheme and the Circular lay down that detention must be followed by a notice specifying tax and penalty, consideration of objections and then issuance of a quantified order in Form GST MOV-09, release on payment or initiation of proceedings under Section 130 only after non-payment. Proceeding straightaway to confiscation without quantifying the tax and penalty and affording the post-objection opportunity to pay is a fundamental procedural lapse which goes to the root of the proceedings and renders the confiscation order unjustifiable. [Paras 11]Confiscation order passed without quantification and without considering objections is unsustainable and liable to be quashed.Section 160 - cure for mistakes, defects or omissions - Procedure prescribed by Circular No.41/15/2018-GST - Whether the defect in procedure (confiscation without quantification/consideration of objections) could be cured by Section 160 of the CGST Act - HELD THAT: - The Court rejected the contention that Section 160 could validate the impugned order. Section 160 does not extend to curing a fundamental procedural infirmity where the mandatory sequence - quantification of tax and penalty after considering objections and affording opportunity to pay - has been ignored. The lapse was not a mere clerical or technical mistake in citation of statutory provisions but a substantial breach of the prescribed procedure envisaged by the statute and circulars; hence Section 160 could not be invoked to sustain the confiscation order. [Paras 11]Section 160 cannot be invoked to cure the procedural defect; the confiscation order cannot be treated as a mere mis-quotation or curable mistake.Confiscation of goods or conveyances and levy of penalty - Procedure prescribed by Circular No.41/15/2018-GST - Remedial direction to set aside the confiscation order and restore the penalty notice for fresh consideration - HELD THAT: - Having found the confiscation order vitiated by procedural lapse, the Court quashed the confiscation order and restored the earlier penalty notice issued under Section 129(1)(b). The matter was remitted to the respondent to consider the objections/reply filed by the petitioners, quantify tax and penalty in accordance with law and, upon quantification, release the goods and conveyance subject to payment of the quantified amount. The Court directed expeditious disposal, preferably within seven days from receipt of certified copy. [Paras 12]Impugned confiscation order quashed; penalty notice restored and respondent directed to reconsider objections, quantify tax and penalty and act accordingly within an expedited timeframe.Final Conclusion: The confiscation order dated 29.01.2019 is quashed; the penalty notice dated 02.01.2019 under Section 129(1)(b) is restored and the respondent is directed to consider the petitioners' objections, quantify tax and penalty in accordance with law and release the goods and conveyance on payment of the quantified amount, the exercise to be completed in an expedited manner. Issues:Challenge to confiscation order under CGST Act - Illegal detention of goods and vehicle - Unilateral presumption by respondent - Violation of procedure prescribed by Government of India - Quoting wrong provision of law - Confiscation order without quantifying tax and penalty - Consideration of objections filed by petitioners - Proper officer's duty to pass speaking order - Fundamental flaw in passing confiscation order - Quashing of impugned order - Restoration of penalty notice - Expedite consideration of objections and quantification of tax and penalty.Analysis:The petitioners challenged a confiscation order issued by the respondent under Sections 130(1), (2), and 122(1)(ii) and (iv) of the CGST Act, claiming it to be illegal. They argued that the respondent detained the goods and vehicle for over a month without any order of confiscation or arrears of tax and penalty, violating prescribed procedures. The respondent suspected fraudulent tax invoices without evidence and passed a confiscation order without considering objections, leading to the petitioners seeking relief to set aside the illegal order.The respondent, represented by the HCGP, defended the order, citing a mistake in quoting the penalty provision but contending that the penalty quantified was valid under Section 129 of the CGST Act. It was argued that any mistakes in orders are not invalid under Section 160 of the Act if they align with the Act's intent. The respondent also alleged the consignor's involvement in bill trading activities, justifying the confiscation order as a penalty order, warranting dismissal of the writ petitions.The court examined the relevant provisions of the CGST Act concerning detention, seizure, release of goods, and confiscation. It highlighted the necessity for the proper officer to issue a notice specifying tax and penalty payable, consider objections, and pass a speaking order quantifying tax and penalty before confiscation. The court emphasized that passing a confiscation order without quantifying tax and penalty, as in this case, was a fundamental flaw not curable under Section 160 of the Act, especially given the prescribed procedures in Circulars by the Government of India.Ultimately, the court quashed the impugned confiscation order and restored the penalty notice, directing the respondent to consider objections, quantify tax and penalty, and release goods upon payment. The court stressed the importance of following due process, especially in the early stages of the GST regime, and ordered an expedited resolution within seven days. The judgment aimed to rectify the procedural errors and ensure compliance with statutory requirements in confiscation cases under the CGST Act.