2023 (9) TMI 45 - HC - GST

Frozen shrimp detention orders quashed as export goods were tax-exempt under Section 129(1)(a) GST Act penalty cap

Qfroz Trades Pvt. Ltd., Versus The Assistant State Tax Officer Ernakulam, The State Tax Officer, Ernakulam, The Commissioner Of State Tax, Thiruvananthapuram

The Kerala HC set aside detention orders for frozen shrimp transported without E-way bill. The goods were export-bound and tax-exempt. The court held that ... Detention of goods (frozen shrimp) alongwith conveyance - no E-way bill accompanied the goods in transit - HELD THAT:- Section 129(1) provides for detention of goods where such goods are transported in contravention of the provisions of the Act or the Rules made thereunder. Section 129 (1)(a) provides for release of the goods on payment of penalty equal to two hundred percent of the tax payable on such goods and in case of exempted goods, on payment of an amount equal to two percent of the value of the goods or twenty-five thousand rupees, whichever is less. In the instant case, the allegation that the goods were intended for export and were not exingable to tax not being under dispute, it is opined that the contention of the respondents that the penalty payable is as calculated in Exhibit P5 cannot be accepted under any circumstances. Since the instant case involves a palpable erroneous exercise of jurisdiction and would result in miscarriage of justice, if this Court declines jurisdiction, the further contention that the petitioner ought to have availed the statutory remedy of appeal before approaching this Court also cannot be accepted. Exhibits P5 and P6 orders are set aside. The amount claimed in Exhibit P5 is limited to Rs. 25,000/- under Section 129(1) (a) of the GST Act. On payment of such amount, all proceedings against the petitioner with regard to the transaction in question shall stand dropped - petition disposed off. Issues involved: Detention of goods en route due to lack of E-way bill and letter of undertaking, demand for tax and penalty, confiscation of goods and vehicle, interpretation of exempted goods for export, compliance with GST rules, statutory appellate remedy, jurisdiction of High Court.The petitioner, an exporter of sea food, faced detention of frozen shrimp consignment en route at Panangadu due to lack of E-way bill and letter of undertaking as per CGST Act and Rules. The respondents demanded tax and penalty totaling Rs. 8,68,736/-, and proposed confiscation of goods and vehicle. The petitioner contended that since the goods were for export and exempted from tax, only Rs. 25,000/- could be demanded. The petitioner argued that confiscation proceedings under Section 130 cannot be initiated without willful non-payment of penalty. The petitioner also raised concerns about lack of opportunity to challenge the initial order before receiving the subsequent notice. The counter affidavit by the 2nd respondent stated that the vehicle carrying frozen processed shrimps was detained for lack of E-way bill during transportation. The petitioner's explanation citing the triple lockdown due to Covid was deemed unsatisfactory as the E-way bill was not generated at the time of detention. The respondent argued that the commodity in question was taxable at 5% under HSN Code 030617, not exempted as claimed by the petitioner. The respondents justified the issuance of further notices based on non-compliance with the initial order and lack of response from the petitioner.The Government Pleader referred to notifications specifying tax rates for commodities including crustaceans and Vannamei Shrimp, emphasizing that the specific item transported by the petitioner was taxable at 5%. The petitioner relied on a notification exempting certain goods from central tax, including crustaceans under tariff item 0306. The Government Pleader invoked a Supreme Court judgment aligning GST with HSN codes and Customs Tariff Act for tax liability determination.The judgment noted that the commodity being frozen shrimp for export was not disputed. The discrepancies in lack of E-way bill and letter of undertaking were acknowledged. The Court held that the penalty demanded by the respondents was excessive, limiting it to Rs. 25,000/- as per Section 129(1)(a) of the GST Act. The orders demanding higher amounts were set aside, and proceedings against the petitioner were dropped upon payment of the reduced penalty. The Court exercised jurisdiction due to the erroneous exercise of authority and potential miscarriage of justice, bypassing the statutory appellate remedy requirement.