2022 (9) TMI 210 - HC - GST

Detention orders quashed for pipe conveyor belts under Bill to Ship arrangement despite incorrect invoice party names

M/s. Macmet Engineering Limited, Rep. By its Authorized Signatory, Shri Sathish Kumar Versus The Commissioner of Commercial Taxes, Chennai, The State Tax Officer (Intelligence), Adjudication II (FAC), Madurai

The HC quashed detention orders for vehicles carrying pipe conveyor belts under a Bill to Ship to arrangement. The petitioner, a sub-contractor for a ... Levy of penalty under Section 129(1)(b) of the CGST Act - jurisdiction to detain goods and vehicle - allegation is that the vehicles carried consignments under 'Bill to – Ship to' concept, but the drivers were not in possession of invoices to support transport to 'Bill to' address in Tamil Nadu - HELD THAT:- It is not in dispute that the petitioner is a sub-contractor to M/s.ITD Cementation India Ltd., for the supply of jetty and pipe conveyor system together with allied electrical instrumentation and control works on EPC back to back basis between TANGEDCO and ITD Cementation India Limited. ITD Cementation India Limited had given letter of indent to the petitioner on 28.02.2019. The petitioner had issued purchase order to procure materials from M/s.Phoenix Conveyor Belt India Private Limited for the purchase of pipe conveyor belts and its accessories to be used for the work at TANGEDCO. TANGEDCO is in the process of establishing of 2 x 660 MW Super Critical Thermal Power Project at Udangudi, Thoothukudi District. All India Road Transport Agency name was not recorded in the transport invoices. But, the consignment notice has been rightly recorded, which finds place in the bills. The e-way bill is dated 26.07.2022, in which, the other details such as, e-way bill number, GSTIN number of the supplier and recipient, place of despatch, place of delivery, document number and code are all properly recorded. It is seen that for calculation of applicable penalty, valuation has been done, thereafter, the freight charge at the rate of 2% and gross profit at the rate of 10% taken into account and penalty imposed against the petitioner. As per the Circular of the Commissioner, the Intelligence/Roving Squad detained the vehicles and thereafter, all the records to be handed over to the Jurisdictional Officer or to the Review Cell and thereafter, it is for the Jurisdictional Officer to pass orders on the point of classification and valuation - it is not in dispute that the pipe conveyor belt is a customized article, which is used exclusively for the project of TANGEDCO at Udangudi. This being so, there is no possibility of diversion of the material and thereby, evasion of duty would arise. Considering the nature of contract business, the only mistake committed by M/s.Phoenix Conveyor Belt India Private Limited is that, in the invoice, instead of ITD Cementation India Limited, the petitioner's name is mentioned, except the said mistake, all other particulars properly recorded and 14 vehicles already reached the destination, five vehicles are in detention and 15 vehicles are in transit. It is seen that the petitioner already uploaded the particulars in the G.S.T. Portal even before the detention - petitioner to produce all the documents to the jurisdictional assessing officer, give his explanation and it is for the assessing officer to see whether the triangular transaction 'Bill to', 'Ship to' is complete and thereafter, process the same. This Court quashes the impugned detention orders alone and directs the second respondent to forward all the documents to the concerned jurisdictional assessing officer, who shall take up the issue and decide the same after giving opportunity to the petitioner - Petition disposed off. Issues Involved:1. Detention of vehicles and goods under the 'Bill to - Ship to' concept.2. Compliance with GST regulations, specifically Rule 138-A of the CGST Rules, 2017.3. Alleged errors in documentation and their impact on tax liability and compliance.4. Jurisdiction and authority of the Roving Squad in determining tax liability and imposing penalties.Issue-wise Detailed Analysis:1. Detention of Vehicles and Goods:The petitioner, a subcontractor for ITD Cementation India Limited, was engaged in transporting materials for a thermal project. Five vehicles transporting conveyor belts were intercepted by the State Tax Officer, leading to the detention of goods under Section 68(3) of the CGST Act, due to alleged non-compliance with documentation requirements. The petitioner argued that the goods were transported under the 'Bill to - Ship to' concept, with all necessary documents, including invoices and e-way bills, provided by the supplier. However, the Roving Squad found discrepancies in the consignee details, leading to the detention.2. Compliance with GST Regulations:The petitioner contended that the transportation complied with Rule 138-A of the CGST Rules, which mandates carrying invoices and e-way bills. The supplier, Phoenix Conveyor Belt India Private Limited, issued invoices and e-way bills correctly, but mistakenly mentioned the petitioner's name instead of ITD Cementation India Limited in the consignee details. Despite this error, the petitioner claimed that all other details, including the 'Ship to' address, were correctly mentioned, ensuring no revenue loss to the state.3. Alleged Errors in Documentation:The petitioner admitted the error in the consignee details but argued it was a minor, rectifiable mistake. They provided additional documents, including invoices raised on ITD Cementation India Limited and other supporting documents, to clarify the transaction. The petitioner emphasized that the mistake did not result in tax evasion and should be treated as a minor breach under Section 126(1) of the CGST Act. The Roving Squad, however, viewed the error as a significant violation, leading to potential revenue leakage and imposed penalties accordingly.4. Jurisdiction and Authority of the Roving Squad:The petitioner argued that the Roving Squad lacked the authority to determine tax liability and impose penalties, which should be the jurisdiction of the assessing officer. They cited various judgments supporting the view that bona fide disputes should be resolved by the jurisdictional assessing officer, not the Roving Squad. The court agreed, noting that the mistake was rectifiable and did not justify the detention and penalty imposed by the Roving Squad. The court directed the jurisdictional assessing officer to review the case and determine the tax liability after giving the petitioner an opportunity to present their case.Conclusion:The court quashed the impugned detention orders, directing the second respondent to forward all documents to the jurisdictional assessing officer for a detailed review. The petitioner was instructed to execute a bond for the demand and penalty, ensuring revenue protection while the assessing officer resolved the issue. The court emphasized that the error was minor and rectifiable, and the jurisdictional officer should determine the case's merits. The writ petitions were disposed of with these observations, and no costs were imposed.