2021 (12) TMI 123 - HC - GST

Provisional Release of Goods under Section 130: Fine vs. Confiscation

The Court held that Section 130 of the Central Goods and Services Tax Act, 2017 allows for the provisional release of goods on payment of a fine in lieu ... Seeking release of goods, even before orders of confiscation are issued - Scope and ambit of the powers of release of goods while the confiscation proceedings are going on - section 130(2) of Customs Act - Whether the provisions of section 130 of the Act contemplate any provisional release of goods, as directed in the interim order of this Court? - HELD THAT:- When the phraseology of section 130(2) of the Act is examined, it reveals a different set of words employed therein vis-a-vis section 130(7) of the Act. The intention behind the said sub-clause can be gathered from the words: (a) whenever confiscation of goods or conveyance is authorised by this Act (b) the officer adjudging it, and (c) give to the owner of the goods an option - Once the confiscation order is issued, ownership of the goods, by operation of the statute, vests with the Government. The use of the present continuous words “officer adjudging it” and the words ‘owner of the goods’ is clearly indicative of the intention behind incorporating section 130(2) of the Act. The intent of section 130(2) of the Act is to provide an option to the owner to redeem the goods before he is divested of his ownership and while the process of adjudication is going on. The two different stages in which the goods can be released - during adjudication and post-adjudication are obviously created with a purpose. The purpose of the two-stage release is that, if the owner of the goods, even before being deprived of his title to the goods or conveyance, is ready to pay the fine stipulated by the officer, then without further wrangles, if the goods and or conveyance can be released to the said owner, the same avoids unnecessary procedural formalities. If the fine in lieu of confiscation is paid at the initial stage, no prejudice would be caused to the revenue also, since by virtue of section 130(7) even after adjudication, an option to pay fine in lieu of confiscation is to be offered peremptorily - section 130(2) of the Act applies before the order of confiscation is issued. Whether the amount payable for release of the goods under section 130 of the Act is fine alone or is it fine, penalty and tax to be paid together for securing release of the goods? - HELD THAT:- At the stage when the fine in lieu of confiscation is paid to obtain release, the adjudication as to whether the goods or conveyance are to be actually confiscated or not, or whether any tax or penalty or other charges are due for the goods or conveyance, have not been ascertained. Similarly the quantum of tax and penalty have also not been ascertained by any form of adjudication. As mentioned earlier, it requires an adjudication. Adjudication requires a hearing. The period within which the adjudication has to be completed, is left to the discretion of the Proper Officer. The words in a statute often take their meaning from the context of the statute as a whole, as is clear from the legal maxim ‘exposition ex visceribus actus’. The words cannot be construed in isolation. The words ‘be liable’ in the context in which it occurs in section 130(3) of the Act only imports a possibility of attracting liability. Merely because the owner of goods or conveyance opts to pay fine in lieu of confiscation does not mean that the facts essential for incurring the liability to order confiscation automatically stands proved. That proof has to come out through the process of adjudication, as otherwise, there would be conferment of unbridled powers upon the Proper Officer to coerce every dealer to pay fine, tax, penalty and other charges without even any adjudication. Such a procedure is against fairness and contrary to the principle of rule of law. In the instant case, if the taxpayer has a dispute on the value fixed tentatively by the Proper Officer, he can dispute the same and during the course of adjudication, get a determination of the market value also. The amount payable is in the realm of a disputed question of fact and this Court cannot determine, in this proceeding, the quantum payable by the dealer. What is the basis or rate for calculating the fine under section 130 of the Act? - HELD THAT:- The basis for calculating the fine in lieu of confiscation under section 130 of the Act is only the market value as defined under section 2(73) of the Act and not the maximum retail price. Issues Involved:1. Provisional release of goods under Section 130 of the Central Goods and Services Tax Act, 2017.2. Amount payable for release of goods under Section 130.3. Basis or rate for calculating the fine under Section 130.Detailed Analysis:Issue No. (i): Provisional Release of Goods under Section 130 of the ActAnalysis:The primary question was whether Section 130(2) of the Act allows for the provisional release of goods before the issuance of confiscation orders. The Court examined the language of Section 130, particularly focusing on the terms 'whenever confiscation of any goods or conveyance is authorised by this Act,' 'the officer adjudging it,' and 'give to the owner of the goods an option.'The Court noted that Section 130(2) mandates the officer to offer the owner of the goods an option to pay a fine in lieu of confiscation during the adjudication process. This provision aims to provide an option to the owner to redeem the goods before being divested of ownership. The absence of the term 'provisional release' in Section 130 does not negate the possibility of such a release. The Court emphasized that Section 130(2) is intended to allow for the release of goods during the adjudication process and not just post-adjudication.Conclusion:Section 130(2) of the Act allows for the release of goods on payment of a fine in lieu of confiscation during the adjudication process, before the final confiscation order is issued.Issue No. (ii): Amount Payable for Release of Goods under Section 130Analysis:The Court explored whether the amount payable for the release of goods under Section 130 includes only the fine or also the tax, penalty, and charges. Section 130(3) stipulates that, in addition to the fine, the owner is liable for any tax, penalty, and charges payable in respect of the goods or conveyance.The Court clarified that while the fine in lieu of confiscation must be paid to obtain the release of goods, the tax, penalty, and charges become payable only after adjudication. The words 'be liable' in Section 130(3) indicate that these amounts fall due after adjudication and not necessarily at the time of paying the fine. The adjudication process is essential to ascertain the quantum of tax, penalty, and charges.Conclusion:At the time of release of goods under Section 130(2), the owner is required to pay only the fine in lieu of confiscation. The tax, penalty, and charges can be paid after adjudication.Issue No. (iii): Basis or Rate for Calculating the Fine under Section 130Analysis:The Court examined the basis for calculating the fine under Section 130. The term 'market value' as defined in Section 2(73) of the Act refers to the full amount a recipient of a supply is required to pay to obtain the goods or services at the same commercial level where the recipient and supplier are not related.The Court emphasized that the market value is not the same as the maximum retail price (MRP). If the goods have an invoice and the Proper Officer has no dispute over the value, that invoice value should be considered the market value. If there is a dispute, the market value must be determined during adjudication.Conclusion:The basis for calculating the fine in lieu of confiscation under Section 130 of the Act is the market value as defined in Section 2(73) and not the maximum retail price.Final Judgment:1. Section 130 of the Act allows for the release of goods on payment of a fine in lieu of confiscation during the adjudication process.2. At the time of release under Section 130(2), only the fine needs to be paid, while the tax, penalty, and charges can be paid after adjudication.3. The fine in lieu of confiscation is to be calculated based on the market value as defined in Section 2(73) and not on the maximum retail price.The review petition was dismissed, upholding the interim order directing the release of goods on payment of the fine in lieu of confiscation.