2025 (10) TMI 168 - HC - GST

Movement of wheeled crane for works contract not supply; IGST not leviable; seizure quashed, goods to be released

HC held that movement of a crane on wheels for use in executing a works contract did not constitute supply of goods or services and IGST was not leviable; ... Levy of IGST - Seizure and Detention of goods - Sale/Supply or not - inter-state movement of a crane for use in execution of a works contract - applicability of Circular No.1/1/2017-IGST dated 07.07.2017 which was amended by Circular No.21/21/2017 dated 22.11.2017. - Revenue contended that, if the goods were not intercepted, the petitioner would have succeeded in its attempt in not disclosing the alleged goods in question. He further submits that the documents accompanied with the goods in question clearly shows that a different truck number was mentioned therein, which was rectified after the interception of vehicle on which goods were loaded and after passing of the seizure order. He prays for dismissal of the present writ petition. HELD THAT:- Perusal of the circular clearly shows that if the goods on wheel (crane) sent for interstate movement, but such goods are not for supply of thesame, then it shall be treated 'neither as supply of goods nor supply of services' and squarely no goods and services tax would be leviable on such movement. The perusal of the judgement of Hon'ble Apex Court in the case of Commissioner of C. Ex., Bolpur Vs. Ratan Melting & Wire Industries [2008 (10) TMI 5 - SUPREME COURT] clearly demonstrates that the circulars issued by Board are binding on the authorities concerned and as such, the authorities below cannot take a contrary view. Once the goods in question i.e. crane held to be non vital goods, were sending for the execution of the aforesaid works contract, the same could not have treated as supply of goods and no liability of goods and services tax would be applicable in view of the said circulars and as there was not intent to evade payment of tax, the goods in question ought not to have seized. The Gujarat High Court in the case of Dhiren Chemical Industries [2001 (12) TMI 3 - SUPREME COURT] has held that the scope of the goods and services tax under Section 24 comes into play when there is an intention to evade the tax, but in absence thereof, the goods cannot be seized. Similarly, in the case in hand, the goods in question cannot be treated as supply or service in view of the circulars referred as above, and therefore, there is no liability of tax under the goods and services tax act. In view of the above facts as stated as well as law laid down in the aforesaid judgments, the seizure order is bad and as such, the impugned orders cannot be sustained in the eyes of law and the same are hereby quashed - the writ petition is allowed, directing the authorities concerned to release the goods in question forthwith after the production of certified copy of this order. ISSUES PRESENTED AND CONSIDERED 1. Whether the inter-state movement of a crane sent by the petitioner for use in execution of a works contract amounts to 'supply' taxable under the Goods and Services Tax law, attracting IGST. 2. Whether Circulars issued by the Central Government treating inter-state movement of rigs, tools, spares and 'goods on wheels' (like cranes) as 'neither supply of goods nor supply of service' are binding on administrative authorities and preclude levy of IGST in such movements. 3. Whether seizure/detention and imposition of penalty under Section 129 of the GST Act is sustainable where the goods in movement are covered by the aforesaid circulars and there is no intent to evade tax. 4. Whether statutory/constitutional procedural safeguards (opportunity of hearing) in issuance of detention/seizure orders were complied with in the impugned orders. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Taxability of inter-state movement of crane used for execution of works contract Legal framework: The GST charging provisions distinguish 'supply' and levy IGST on inter-state supplies. Section 25(4) recognises distinct persons for GST registration. Circulars and administrative clarifications address movement of conveyances and goods on wheels. Precedent treatment: The Court relied upon established authority holding that administrative circulars interpreting levy may be binding on authorities unless contradicted by judicial pronouncement. Interpretation and reasoning: The material facts establish that the crane was moved from one State to another solely for use in performance of a works contract (not for sale or onward supply of the same crane). The relevant Central Government circulars expressly treat such inter-state movements of goods on wheels (like cranes) as 'neither supply of goods nor supply of service' except where movement is for further supply of the same conveyance. Applying the circular to the facts, the Court found no element of sale or taxable supply in the movement of the crane. Ratio vs. Obiter: Ratio - where an asset on wheels is interstate-moved for use in execution of a contract and not for further supply, such movement does not constitute supply attracting IGST; authorities must apply the circular in that situation. Observation - factual emphasis that the crane was for execution of a works contract. Conclusion: The inter-state movement of the crane in this case did not amount to a taxable supply and no IGST liability arose on that movement. Issue 2 - Binding effect of Central Government circulars on authorities and applicability here Legal framework: Administrative circulars are instruments of executive clarification of statutory provisions; their binding effect on revenue authorities has been recognised subject to the Court's statutory interpretation. Precedent treatment: The Court followed prior authority that circulars issued by the Board/Central Government are binding on revenue authorities and must be given effect unless a court has declared a contrary legal position; circulars represent the executive's understanding and are to be followed by administrative officers. Interpretation and reasoning: The circular explicitly extended a non-taxable classification to inter-state movements of rigs, tools, spares and goods on wheels (like cranes), except where movement is for further supply. The facts fall squarely within the circular's scope (movement for use in execution). Since no judicial decision contradictory to the circular was shown to the Court, the authorities were bound to apply the circular and treat the movement as non-taxable. Ratio vs. Obiter: Ratio - administrative authorities are bound to follow the circular in applying the law to movements covered by it; where circular exempts IGST, seizure for alleged tax liability is not warranted absent contrary judicial declaration or differing statutory trigger. Conclusion: The circular applies and binds the authorities; it precludes treating the crane movement as taxable IGST supply in the circumstances of this case. Issue 3 - Legality of detention/seizure and imposition of penalty under Section 129 absent intent to evade tax Legal framework: Section 129 empowers detention/seizure where goods in movement are liable to tax or where contraventions are alleged; jurisprudence recognises that seizure powers must be exercised when there is a legal basis and often consider intent to evade tax as a relevant factor for severe coercive measures. Precedent treatment: The Court followed earlier decisions indicating that seizure and penalty provisions operate where there is an intention to evade tax and that, in absence of such intent and where documents/circulars show no tax liability, detention/seizure and penalties are improper. Interpretation and reasoning: Given the circular's non-taxable classification and the absence of any allegation or material showing intention to evade tax, the authorities lacked legal justification to detain and subsequently confiscate the goods or levy penalty under Section 129. The fact that the transport document had an incorrect vehicle number (a discrepancy) did not convert the nature of the transaction into a taxable supply nor demonstrate fraudulent intent sufficient to sustain seizure and penalty. Ratio vs. Obiter: Ratio - seizure/detention and penalty under Section 129 are unsustainable where goods in interstate movement are non-taxable by applicable circulars and there is no intent to evade tax. Observation - administrative discrepancies in transport documentation do not automatically establish evasion. Conclusion: The seizure/detention orders and penalty were unlawful and liable to be quashed; the goods should be released. Issue 4 - Procedural fairness: opportunity of hearing in issuance of detention/seizure orders Legal framework: Principles of natural justice and statutory procedural safeguards require that an affected person be given meaningful opportunity of hearing before adverse orders are passed; statutory forms and notices prescribe time and manner for hearings in detention/seizure proceedings. Precedent treatment: The Court applied settled administrative law principles and prior judicial findings on requirement of hearing in tax detentions/seizures. Interpretation and reasoning: The impugned detention/seizure process revealed that a hearing date/time was fixed in the notice but the detention/seizure order bore an earlier timestamp indicating signing prior to the scheduled hearing, suggesting denial of effective opportunity. Coupled with the absence of lawful basis for tax liability (per circular), the procedural lapse reinforced invalidity of the confiscatory action. Ratio vs. Obiter: Ratio - administrative detention/seizure orders must comply with prescribed notice and hearing requirements; signing/sealing of orders prior to the scheduled hearing renders the process vitiated by denial of opportunity to be heard. Conclusion: The procedure adopted by authorities did not afford the petitioner proper hearing, contributing to the illegality of the impugned orders. Overall Disposition / Court's Conclusion The Court held that (a) the inter-state movement of the crane for use in execution of a works contract did not amount to a taxable supply under GST given the applicable circulars; (b) the circulars are binding on the authorities and foreclose an IGST liability in these circumstances; (c) seizure, detention and penalty under Section 129 were unjustified in absence of tax liability or intent to evade tax and were procedurally defective for failure to afford a hearing; and (d) the impugned orders of detention/seizure/penalty were quashed and the authorities directed to release the goods on production of the certified copy of the order.