2022 (8) TMI 393 - HC - GST

Person paying under Section 129(1)(a) for goods release retains right to appeal against detention proceedings

The Kerala HC held that a person who opts to make payment under Section 129(1)(a) of CGST/SGST Acts to secure release of detained goods retains the right ... Right to appeal under Section 107 against proceedings under Section 129 - obligation to issue order under Section 129(3) and upload summary in Form DRC-07 - effect of payment under Section 129(1)(a) and the deeming provision in Section 129(5) - electronic summary of order and levy of demand under Rule 142 and Form DRC-07 - compatibility of statutory interpretation with Article 265 of the ConstitutionObligation to issue order under Section 129(3) and upload summary in Form DRC-07 - electronic summary of order and levy of demand under Rule 142 and Form DRC-07 - Whether the proper officer is required to pass an order under Section 129(3) and upload a summary of that order in Form DRC-07 even where payment under Section 129(1)(a) has been made and goods/conveyance released. - HELD THAT: - The court examined Section 129(3), Rule 142(5) and Circular No.41/15/2018-GST which, read together, impose a continuing duty on the officer who detains or seizes goods to pass an order under Section 129(3) and to upload a summary of that order electronically in Form DRC-07. Rule 142(5) expressly requires uploading a summary of orders made under Section 129; the circular reiterates that orders in FORM GST MOV-09 must be uploaded and the resulting demand entered in the electronic liability register and reflected in DRC-07. Consequently, the procedural responsibility to record and upload the order/demand exists irrespective of whether the person opts to pay the tax and penalty under Section 129(1)(a) or furnishes security under Section 129(1)(c). The court rejected any interpretation that would make the uploading of DRC-07 contingent on the absence of prior payment, noting the statutory and regulatory scheme mandates generation of the summary of order.The officer must pass the order under Section 129(3) and upload the summary in Form DRC-07 even where payment under Section 129(1)(a) has been made and goods released.Right to appeal under Section 107 against proceedings under Section 129 - effect of payment under Section 129(1)(a) and the deeming provision in Section 129(5) - compatibility of statutory interpretation with Article 265 of the Constitution - Whether payment under Section 129(1)(a), read with Section 129(5), deprives the person of the statutory right to file an appeal under Section 107 against the proceedings culminating in an order under Section 129. - HELD THAT: - The court construed Section 129(1)(a) and the deeming provision in Section 129(5) alongside the wide language of Section 107 which permits any person aggrieved by any order or proceedings under the CGST/SGST Acts to appeal. Section 129(5) contemplates the conclusion of the detention/seizure proceedings once payment is made but does not extinguish the statutory right to challenge the validity or legality of the proceedings that culminated in the order. Read cumulatively with Rule 142(5) and the circular, permitting the officer to document the order and generate an electronic demand ensures the person can exercise the right of appeal. Denying the right to appeal on the ground that the electronic system did not generate a DRC-07 would frustrate the legislative scheme and could infringe the constitutional principle that taxes and demands must be imposed by law; such an interpretation is untenable. The court therefore held that the choice to make payment under Section 129(1)(a) does not deprive the affected person of the right to challenge the proceedings before the appellate authority under Section 107.Payment under Section 129(1)(a) does not strip the person of the right to file an appeal under Section 107 against the proceedings/order under Section 129; the statutory right to challenge the proceedings survives payment.Final Conclusion: Writ petitions allowed: officers must complete the procedural step of issuing the order under Section 129(3) and upload the summary in Form DRC-07 so that affected persons who paid under Section 129(1)(a) are not deprived of their statutory right to appeal under Section 107; respondents directed to take necessary action within one month and to issue a clarificatory circular to avoid recurrence. Issues:Whether a person who opts to make payment in terms of Clause (a) of Sub-Section (1) of Section 129 of the Central Goods & Services Tax Act / State Goods & Services Tax Act is deprived of the right to file an appeal against the proceedings.Analysis:Issue 1: Right to File AppealThe main issue in this case was whether a person who opts to make payment under Section 129(1)(a) of the CGST/SGST Acts is deprived of the right to file an appeal against the proceedings. The petitioners argued that they should not be deprived of this right, while the State contended that all proceedings are concluded upon payment under Section 129(1)(a) as per sub-section (5) of Section 129.Detailed Analysis:The judgment highlighted that the provisions of Section 129 of the CGST/SGST Acts deal with the detention, seizure, and release of goods, conveyance, and documents. It emphasized that whether a person chooses to make payment under Section 129(1)(a) or provide security under Section 129(1)(c), the officer detaining or seizing goods must issue a notice specifying the tax and penalty payable. The judgment referred to Rule 142(5) of the CGST/SGST Rules, which mandates the uploading of a summary of the order in Form DRC-07 for various sections, including Section 129. The circular No.41/15/2018-GST dated 13.04.2018 also outlined the procedure for releasing goods upon payment of tax and penalty under Section 129(1)(a).The judgment concluded that the responsibility of the officer to pass an order under sub-section (3) of Section 129 and upload a summary of the order/demand in Form DRC-07 continues regardless of whether payment is made under Section 129(1)(a) or security is provided under Section 129(1)(c). It emphasized that the right to challenge proceedings under Section 129 before the Appellate Authority under Section 107 remains intact for the person subject to such proceedings. The judgment clarified that the system's failure to generate a demand or allow an appeal without a demand does not alter the legislative intent to provide the right to file an appeal under Section 107 for aggrieved parties.In conclusion, the writ petitions were allowed, granting the petitioners the right to file an appeal under Section 107 of the CGST/SGST Acts. The judgment directed the concerned respondents to take necessary actions within one month and recommended the issuance of a circular by the Commissioner of the State Goods & Services Tax Department to prevent similar issues in the future.