2021 (1) TMI 216 - HC - GST

Court Restores Show Cause Notice for Tax Levy with Hearing Opportunity

M.S. Meghdoot Logistics Versus Commercial Tax Officer (Enforcement-09)

The court restored the Show Cause Notice dated 25.08.2020, directing the respondent to decide on the proposed levy of tax, penalty, and cess with a ... Detention of conveyance and seizure of Goods - proceedings under section 129(3) of Act started and then notice under 130 (4) of the Act issued - subsequent forming of opinion - controversy in the present case is that, after the goods are seized in transit with the conveyance being detained, the respondent, on the basis of the information collected and available, has formed an opinion that there is an effort to evade payment of tax. Whether there cannot be independent or simultaneous confiscation proceedings under Section 130 of the Act with the detention and seizure proceedings under the provisions of Section 129 of the Act, in the case of contravention of the provisions of the Act/Rules when the goods are being transported, or goods are stored in transit? HELD THAT:- The respondent, who had issued notice under sub-clause (4) of Section 129 of the Act (Show Cause Notice dated 25.08.2020), has issued subsequent notice under sub-clause (4) of Section 130 of the Act (the impugned Show Cause Notice dated 07.09.2020) observing that the earlier notice has abated and calling upon the petitioner to show cause against confiscation and why the tax, penalty and other charges payable in respect of such goods and the conveyance should not be paid by the petitioner. The chief contention is that there cannot be independent or simultaneous confiscation proceedings under Section 130 of the Act with the detention and seizure proceedings under way in accordance with the provisions of Section 129 of the Act in the case of contravention of the provisions of the Act/Rules when the goods are being transported, or goods are stored in transit. It is settled that a decision is an authority for what it decides. The Hon’ble Supreme Court in ROYAL MEDICAL TRUST AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [2017 (9) TMI 1849 - SUPREME COURT] has held that every judgement must be read as applicable to the particular fact proved, or assumed to be proved, since the generality of the expressions which may be found are not intended to the expositions of the whole law, but are governed and qualified by the particular fact of the case inwhich such expressions are to be found - When the decision in Sree Enterprises is examined as against this touchstone, this Court must hold that the question which is presented for consideration in the present case did not come up for consideration before this Court in such case and therefore, this decision is not helpful to the petitioner. If a person transports any goods, or store any goods while they are in transit in contravention of the provisions of the Act or the rules made thereunder consequences would have to follow to ensure there is substantial deterrent in continuing with such contravention. There cannot be any doubt, or quarrel, that the provisions of Section 129 of the Act are intended to achieve this object. The provisions of Section 130 of the Act deals with confiscation. Under Section 130 of the Act, proceedings for confiscation could be initiated if there is reason for the authorities to opine that there is contravention with the provisions of the Act/Rules in the supply or receipt of goods with the intention to evade tax Section 130(1)(i) and (iv) or there is inability to account for the goods Section 130(1)(ii) or goods liable to tax under the Act are supplied without having applied for registration Section130(1)(iv) or if conveyance is used as a means of transport for carriage of goods in contravention of the provisions of the Act Section 130(1)(v). The object of the provisions of Section 130 of the Act, when seen with the object of the provisions of section 129 of the Act, are wider i.e., it is to curb contraventions of the provisions of the Act/ Rules with a certain intent. The consequences of the proceedings Section 129 and Section 130 are different though there is cross reference as regards the determination of applicable Tax and Penalty. If there has to be determination of penalty as contemplated under Section 129(1)(a) or 129(1)(b) of the Act and payment thereof along with applicable tax for closure of the proceedings under Section 129 of the Act. Even for the completion of the confiscation proceedings under Section 130 of the Act there has to be determination of such penalty and payment of applicable tax. Though, both the owner of the goods and owner of the conveyance, can avoid confiscation by paying different Fine as prescribed, this will be in addition to the liability to pay any tax, penalty and charges payable in respect of such goods/conveyance. In SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [2019 (12) TMI 1213 - GUJARAT HIGH COURT], a Division bench of the Gujarat High Court, whileconsidering the question whether both Sections 129 and 130 of the Act are independent of each other or they could be used interchangeably at the discretion of the authorities, after a conspectus reference to the decisions by the Hon’ble Apex Court on different aspects given the specific features of these provisions such as both the provisions beginning with the non-obstante clauses, the cross reference in each of these provisions to the liability to pay the applicable tax, penalty and fine, the conditions attached for initiation of proceedings for confiscation under Section 130 of the Act, the need for restraint in the authorities to initiate proceedings for confiscation for every infraction and to initiate such proceedings only if it could from the circumstances of the case form an informed opinion. Thus, this Court is of the considered view that the it cannot be held that the provisions of Section 130 of the Act could be invoked in cases of conveyance/ goods detained/ seized while in transit only if there is a failure to pay the amount of tax and penalty as provided under section 129 (6) of the Act. This Court, for the reasons discussed hereafter, would also hold that the failure to pay the amount of tax and penalty as contemplated under Section 129(6) of the Act would be just one of the circumstances in which proceedings under Section 130 of the Act could be initiated in cases of conveyance/ goods detained/ seized while in transit - If in the use of conveyance for transportation of goods or storing of goods in transit, the contravention of the provisions of the Act/Rules is established, there can be no doubt, with the provisions of Section 130(1)(v) of the Act, the consequence of confiscation would be visited. If the intention to evade payment of tax in transporting the goods by conveyance is established, would be it outside the purview of the provisions of Section 130(1)(iv) of the Act which stipulates that if any person contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax then there shall be confiscation (without limiting to the goods). Thus, it can be concluded that If after interception of conveyance with goods in transit and detention of the conveyance and seizure of the Goods with issuance of notice under section 129(3) of the Act, and when there is information about the intent to evade payment of tax, it is not open to the proper officer to treat the notice under section 129(3) of Act as having abated or truncate such proceedings and initiate proceedings under 130 of the Act for confiscation with the issuance of notice thereunder. The proper officer, who has detained the conveyance and seized the goods, when he is able to form opinion that there is an attempt to evade payment of tax, will have to determine the applicable tax and penalty under Section 129 of the Act while simultaneously initiating proceedings for adjudging confiscation under Section 130 of the Act. If during the pendency of these proceedings, a request for provisional release as contemplated under sub-clause (3) of Section 129 of the Act, is submitted, the same will have to be considered in the light of the provisions of Section 129 read with sub-clause (6) of Section 67 of the Act. If after adjudging confiscation, the option to pay Fine in addition to the tax payable, penalty and other charges is not exercised despite opportunity under section 130(7) of the Act, the Proper officer will have to take and hold possession of the things confiscated subject to consequences as contemplated the re-under. The writ petition is disposed of restoring the Show Cause Notice directing the respondent to decide, in accordance with law, on the proposed levy of tax, penalty and cess as proposed therein with reasonable opportunity of hearing to the petitioner, who shall have the liberty to seek provisional release of goods/conveyance as provided for under sub-clause (2) of Section 129 of the Act. Issues Involved:1. Jurisdiction and validity of the Show Cause Notice dated 07.09.2020.2. Applicability and interpretation of Sections 129 and 130 of the Central Goods and Services Tax Act, 2017.3. Procedural requirements for detention, seizure, and confiscation of goods and conveyance under the Act.4. The interplay between Section 129 and Section 130 of the Act.Detailed Analysis:1. Jurisdiction and Validity of the Show Cause Notice dated 07.09.2020:The petitioner challenged the Show Cause Notice dated 07.09.2020, arguing it was issued without jurisdiction and was an arbitrary exercise of power under the statute. The petitioner contended that the respondent did not pass any orders on the earlier Show Cause Notice dated 25.08.2020, which was required before issuing a new notice under Section 130 of the Act. The petitioner relied on the decision in *Shree Enterprises v. The Commercial Tax Officer*, asserting that the respondent must first conclude the proceedings under Section 129 before initiating proceedings under Section 130.2. Applicability and Interpretation of Sections 129 and 130 of the Act:The petitioner argued that Section 129 deals with the detention, seizure, and release of goods and conveyance in transit, while Section 130 deals with the confiscation of goods or conveyance. The petitioner contended that both sections are mutually exclusive and that proceedings under Section 130 could only be initiated if there was a failure to pay the tax and penalty determined under Section 129 within the statutory period. The respondent, however, argued that both sections are independent and that proceedings under Section 130 could be initiated even if the proceedings under Section 129 were ongoing.3. Procedural Requirements for Detention, Seizure, and Confiscation:The respondent detained the petitioner's conveyance and seized the goods, citing reasons such as the need for further verification of the genuineness of the goods and documents, physical verification to ascertain the origin and source of goods, and confirmation of the existence of the Consignor and Consignee. The petitioner responded by asserting that all necessary documents were in order and that there was no contravention of law or evasion of taxes. The respondent then issued the Show Cause Notice dated 25.08.2020, proposing a levy of tax and penalty, followed by the impugned notice dated 07.09.2020 under Section 130, alleging connivance between the petitioner, the Consignor, and the Consignee to evade taxes.4. The Interplay Between Section 129 and Section 130 of the Act:The court examined whether the authorities could initiate proceedings under Section 130 independently of Section 129. The court referred to the decision in *Synergy Fertichem Pvt. Ltd. v. State of Gujarat*, which held that Sections 129 and 130 are mutually exclusive and independent. The court concluded that the authorities could initiate proceedings under Section 130 if there was sufficient evidence of intent to evade tax, even if the proceedings under Section 129 were ongoing. The court held that the proper officer must determine the applicable tax and penalty under Section 129 while simultaneously initiating proceedings for confiscation under Section 130 if there was an attempt to evade tax.Conclusion:The court disposed of the writ petition by restoring the Show Cause Notice dated 25.08.2020 and directing the respondent to decide on the proposed levy of tax, penalty, and cess with a reasonable opportunity of hearing to the petitioner. The respondent was also directed to contemporaneously decide on the impugned Show Cause Notice dated 07.09.2020 in accordance with the provisions of Section 130 of the Act. The court emphasized that the proper officer must determine the applicable tax and penalty under Section 129 while simultaneously initiating proceedings for confiscation under Section 130 if there was an attempt to evade tax.