High Court upholds detention under Central GST Act due to lack of proof, orders Bank Guarantee pending adjudication.

The High Court upheld the detention of goods and conveyance under the Central Goods and Services Tax Act, finding the appellant failed to prove the transaction was not a sale. The appellant was directed to furnish a Bank Guarantee for release of the goods pending adjudication under the Kerala GST Act and Rules. The Court emphasized the need for the appellant to participate in the adjudication process, file objections, and have a personal hearing before the authority. The appellant was granted the opportunity to present their case, with the Bank Guarantee not to be encashed until the authority's decision.

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Issues:
Challenge against detention of transport and notice under CGST Act.

Analysis:
The appellant challenged the detention of transport and notice under the Central Goods and Services Tax Act, 2019. The detention order mentioned that the consignor and consignee were different entities with different GSTINs, and a stock transfer between them was made against the provisions of the Kerala GST/CGST Act. The appellant contended that the transaction was not a supply of goods attracting tax liability and was permissible under the CGST Act. However, the Single Judge found that the appellant failed to establish that the transaction was not a sale and that the ownership of goods was not transferred to the consignee. The definition of supply under Section 7 of the Act was noted to include transfers for purposes other than sale, leading to the detention being deemed justified. The appellant was allowed to release the goods upon furnishing a Bank Guarantee for the specified amounts, with directions for adjudication under the KSGST Act and Rules.

The scheme of Sections 129 and 130 of the CGST Act allows for the detention of goods and conveyance if found to be in contravention of the Act or Rules. The detention must be followed by a notice specifying the tax and penalty payable, with an opportunity for a hearing before determining the tax and penalty. In this case, after the detention order, a notice was issued for the appellant to show cause, and a personal hearing was provided. The appellant's contention that the detention was without jurisdiction was rejected, emphasizing the need for adjudication by the authority to determine if the transit was in contravention of the Act or Rules.

The High Court held that the appellant should be given an opportunity to participate in the adjudication process by filing objections to the show cause notice and appearing for a personal hearing before the authority. The Court directed that the authority should conduct an independent adjudication, disregarding the observations in the impugned judgment. The appellant was granted a further opportunity to present their case, and any Bank Guarantee furnished for release of the transit would not be encashed until the authority's decision was communicated.

In conclusion, the writ appeal was disposed of with terms including maintaining the order for release of the transit upon furnishing a Bank Guarantee, filing objections to the show cause notice, conducting a personal hearing, and ensuring the authority's decision is based on the appellant's contentions during the adjudication process.

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