2022 (2) TMI 1159 - HC - GST

Owner of goods and conveyance are separate entities under Section 130 CGST Act, vicarious liability cannot extend indefinitely

The Punjab and Haryana HC allowed a petition seeking release of a conveyance along with goods. The petitioner argued that under Section 130 of the Central ... Detention, seizure and release of goods and conveyances - Confiscation of goods or conveyance and levy of penalty - Option to pay fine in lieu of confiscation - Vicarious liability - Requirement of opportunity of being heardDetention, seizure and release of goods and conveyances - Confiscation of goods or conveyance and levy of penalty - Option to pay fine in lieu of confiscation - Vicarious liability - Whether the owner of the conveyance can be compelled to pay the tax, penalty and fine in respect of the detained goods so as to prevent release of the conveyance when the owner of the conveyance has paid the fine imposed on the vehicle. - HELD THAT: - The court analysed the scheme of Sections 129 and 130 of the Central Goods and Services Act, 2017 and held that Section 129 prescribes the conditions for release of detained goods and conveyances on payment of applicable tax and penalty by the owner of the goods. Section 130 being a penal provision authorises confiscation and permits an owner to be given an option to pay a fine in lieu of confiscation, but it does not authorise indefinite extension of vicarious liability so as to deprive the owner of a conveyance of the protection afforded by the proviso to subsection (2). Relying on the reasoning in M/s Shiv Enterprises this Court observed that the principle of vicarious liability cannot be extended indefinitely and that penal consequences under Section 130 require a direct nexus of intent or culpability attributable to the person sought to be punished. To force the owner of the conveyance to pay tax, penalty and fine on the goods would effectively foist upon the conveyance-owner the vicarious liability for mis-declaration or fraud by the owner of the goods, which is impermissible. Applying these principles to the facts, since the petitioner (owner of the conveyance) paid the fine imposed on the vehicle and there was no justification to treat him as liable for the goods' tax and penalty, the conveyance was ordered to be released forthwith while the goods could be dealt with in accordance with law. [Paras 4, 5, 6, 7]The petition is allowed; the conveyance is directed to be released forthwith while the goods shall be confiscated and disposed of in accordance with law.Final Conclusion: The writ petition was allowed: the court held that the owner of the conveyance cannot be compelled to discharge the tax, penalty and fine attributable to the goods so as to sustain detention of the vehicle; having paid the fine on the vehicle, the petitioner's conveyance must be released immediately while the goods may be dealt with under the Act. Issues:Challenge to action of respondents in not releasing conveyance despite payment of fine under Section 130 (2) proviso of the Central Goods and Services Act, 2017.Analysis:1. The petitioner challenged the respondents' action of not releasing the conveyance despite paying the fine under Section 130 (2) proviso of the Act. The petitioner argued that Section 129 and 130 of the Act establish the separation of liability between the owner of goods and the owner of the conveyance. Section 129 deals with detention and release of goods and conveyances in transit, while Section 130 pertains to confiscation of goods or conveyance and levy of penalty. The petitioner contended that the conveyance owner should not be held liable for the goods' penalty. The petitioner filed a writ petition seeking the release of the conveyance.2. The State counsel argued that under Section 129 (1) of the Act, goods and conveyance can only be released upon payment of applicable tax and penalty. She contended that Section 130 does not absolve the liability imposed under Section 129. The State counsel emphasized that the owner of the conveyance is also responsible for paying the tax, penalty, and fine for both goods and conveyance. She asserted that the proviso in Section 130 (2) does not alter this fundamental provision.3. The Court referenced a previous judgment in a similar case where it was held that Section 130 is a penal clause and more stringent compared to Section 129. The Court emphasized that the intent to evade tax must be directly linked to the trader's activity, and vicarious liability cannot be extended indefinitely. The Court highlighted the legal principle that the law does not compel a person to perform the impossible. The Court concluded that forcing the conveyance owner to pay for the goods' penalty would impose vicarious liability unjustly.4. Consequently, the Court rejected the State counsel's argument and directed the immediate release of the conveyance. The Court ruled that the goods would be confiscated and disposed of by the respondents as per the law. The petition was allowed, and any pending applications were disposed of accordingly.