2026 (3) TMI 396 - HC - GST

Valuation of goods in transit is for the assessing authority, not check post officers; contested consignments must be released pending adjudication.

Valuation of goods in transit cannot be conclusively determined at roadside check posts under proceedings under the Central Goods and Services Tax regime; ... Valuation of goods in transit - Jurisdiction of check post authorities​​​​​​​ under Section 129/130 - sample drawing and sealing procedure - e-way bill compliance - confiscation or penalty by transit State for evasion in another State - compliance with Rule 138C - contemporaneous inspection report (Form A) requirement. Valuation by check-post authorities under Section 129/130 - Officials at a check post cannot adjudicate the question of valuation of goods under proceedings initiated under Section 129 or Section 130 of the G.S.T. Act. - HELD THAT: - The Court held that the power exercisable at check posts under Sections 129 and 130 is not intended for undertaking valuation and determination of tax liability; such matters fall within the jurisdiction of the Assessing Authority. The view of several High Courts supporting this principle was noted and applied. The Court observed that allowing check-post officials to determine valuation and tax payable would be an unreasonable exercise of power by a State through whose territory goods merely transit, and could lead to loss of revenue or improper exercise of authority. Consequently, valuation disputes cannot be resolved in interception/confiscation proceedings at the check post and must be referred to the appropriate assessing authority for determination. [Paras 5, 6, 7, 8] Question of valuation cannot be undertaken by check-post authorities in proceedings under Section 129/130; valuation and tax assessment must be left to the jurisdictional Assessing Authority. Compliance with Rule 138C - contemporaneous inspection report (Form A) requirement - Failure to record the mandated online inspection report in Part A (Form A) within 24 hours, and related non-compliance with Rule 138C, vitiates the basis for continued detention/confiscation of the goods and warrants release in the interlocutory context. - HELD THAT:- The Court examined the factual record relating to inspections and found that an earlier inspection was not recorded online as required by Rule 138C, while only a later inspection was placed on record. The respondents' assertion of an earlier inspection was not accepted in view of the absence of an online Part A record and the timeline for recording inspections prescribed by the Rule. On that basis the Court found the procedural requirement was not complied with, undermining the legality of seizure/detention in the interlocutory matters and directed release of the goods. [Paras 11, 12, 13, 14, 15] Interlocutory applications for release are allowed because the required contemporaneous inspection report under Rule 138C/Form A was not recorded; goods (and seized or detained vehicles) shall be released to the petitioners. Sampling in transit inspections - referral to jurisdictional assessing officer - HELD THAT: - The Court found that the manner of valuation by the Authorities was one-sided - samples had been sent for valuation without participation or presence of the petitioners. To ensure fairness and permit proper assessment by the competent authority, the Court ordered that samples be drawn afresh from the consignments, divided into three parts (one retained by the respondents, one sent to the jurisdictional Assessing Officer, and one given to the petitioners), sealed and countersigned by both officers and the petitioners or their representatives. The Court made clear that it is open to the jurisdictional Assessing Officer to take up assessment proceedings on the basis of such samples, thereby directing that valuation and tax liability be considered by the proper assessing authority rather than by check-post officials. [Paras 16, 17, 18, 19] Respondents to draw fresh samples in triplicate, seal and countersign them with petitioners or representatives; one part to go to the jurisdictional Assessing Officer who may proceed further on that basis. Final Conclusion: Interlocutory applications for release are allowed: seized goods and any detained vehicles are to be released because (i) valuation cannot be determined by check-post officials in proceedings under Sections 129/130, (ii) required online inspection report under Rule 138C/Form A was not recorded as mandated, and (iii) respondents must draw and divide samples in the prescribed manner so that the jurisdictional Assessing Officer may undertake any further valuation or assessment proceedings. Issues: (i) Whether authorities at a check post can determine valuation of goods under proceedings initiated under Section 129/Section 130 of the Central Goods and Services Tax Act, 2017; (ii) Whether goods seized or confiscated under impugned orders should be released pending adjudication; (iii) Whether the inspection and online reporting in W.P. No.3258 of 2026 satisfies the requirements of Rule 138C of the Central Goods and Services Tax Rules, 2017.Issue (i): Whether authorities at a check post can undertake valuation of goods under Section 129/Section 130 of the Central Goods and Services Tax Act, 2017.Analysis: The issue was considered in the light of precedent from various High Courts and the statutory scheme governing seizure/confiscation under Section 129 and Section 130. The valuation question falls within assessment jurisdiction and is not a matter designed to be conclusively determined at roadside check post proceedings. The records show reliance on external valuation without participation of consignors and without proper sample protocol.Conclusion: The valuation of goods cannot be conclusively undertaken by check post authorities under Section 129 or Section 130; the matter of valuation is for the jurisdictional assessing authority.Issue (ii): Whether goods seized or confiscated under the impugned orders shall be released to the petitioners pending further proceedings.Analysis: The statutory objectives of Sections 129 and 130 are to protect revenue but must be exercised within reasonable jurisdictional limits. In the present cases there were procedural and substantive defects in the seizure/confiscation process, including one-sided valuation and deficient sample handling. For consignments in transit where statutory documents under Section 68 were available (except in one matter), continued detention is not justified pending appropriate procedures by the assessing authority.Conclusion: The interlocutory applications for release of goods are allowed and the seized/confiscated goods and any detained vehicles shall be released to the petitioners.Issue (iii): Whether the inspection and online reporting in W.P. No.3258 of 2026 complied with Rule 138C of the Central Goods and Services Tax Rules, 2017 and whether an E-Way Bill generated after inspection validates the seizure.Analysis: Rule 138C requires a Part A summary report within 24 hours of inspection and a Part B final report within three days. The respondents recorded only one inspection online (the second) and no report for the first alleged inspection was produced. Evidence suggested the E-Way Bill was prepared after the recorded inspection, and there was no proof of an earlier inspection being logged as required.Conclusion: The inspection and reporting in W.P. No.3258 of 2026 did not satisfy the requirements of Rule 138C; the consequential seizure/detention cannot be sustained on that basis and the consignment/vehicle shall be released.Final Conclusion: Orders for release of the seized goods and vehicles are directed, with a requirement that respondents draw tripartite sealed samples (one retained by respondents, one sent to the jurisdictional assessing officer, and one given to the petitioner or representative) to enable appropriate adjudication by the assessing authority without prejudice to further proceedings.Ratio Decidendi: Valuation of goods in transit is not to be conclusively determined by check post officers under Section 129 or Section 130 of the Central Goods and Services Tax Act, 2017; procedural safeguards for inspection reporting (Rule 138C) and tripartite sample-taking must be followed and valuation issues are to be referred to the jurisdictional assessing authority.