TaxTMI 
TaxTMI 
2021 (1) TMI 552
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.... by Sri.Manoj Chandran for the petitioner in W.P(C) No.22608 of 2020, Sri.A.Kumar, the learned counsel for the petitioner in W.P(C).No.22072 of 2020, Sri.Karthik S. Nair, the learned counsel for the petitioner in W.P(C) No.17379 of 2020 and the learned Govt. Pleader Smt.Dr. Thushara James for the respondents in all the writ petitions. 3. For the sake of convenience, the general provisions regarding detention and their scope and ambit are discussed first, and the application of the legal principles to the facts of the individual cases discussed thereafter. I have chosen to resort to said format because I have come across numerous instances of writ petitions being filed in this court challenging detention orders passed under the GST Act when the scheme of the Act clearly indicates that the writ court is not to be ordinarily approached in detention cases where effective alternate remedies by way of provisional clearance, and appeal thereafter, are provided against alleged arbitrary/illegal detention orders. The legal position in this regard was recently reiterated by the Supreme Court in State of Uttar Pradesh v. Kay Pan Fragrance Pvt. Ltd. - [2020 (74) GSTR 281 (SC)] when it obser....
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....s in the levy and collection of taxes that must inform the authorities entrusted with the said task, for fair implementation of the law has been recognised as an essential attribute of the rule of law in a republic such as ours. 7. Our nation witnessed a paradigm shift in the matter of levy and collection of indirect taxes with the introduction of GST, a destination based consumption tax on the supply of goods and services, through the Constitution (101st Amendment) Act, 2016. The GST regime that came into effect from 01.07.2017 provides for concurrent exercise of taxing powers by the Centre and the States on the same subject and the Centre and the States are to act in tandem based on the GST Council's recommendations. 8. Section 129 of the GST Act is contained in Chapter XIX thereof that deals with offences and penalties and reads as follows: "129 - Detention, seizure and release of goods and conveyances in transit (1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as ....
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....sage of time, the said period of fourteen days may be reduced by the proper officer." A schematic analysis of Section 129 of the Act reveals the following salient features of the said provision; 1. Section 129, not surprisingly, opens with a non-obstante clause that conveys the legislative intention that the provisions of the statute shall not be an impediment to the measure envisaged thereunder. It is an indication by the legislature that the detention provision, which appears to run counter to the general presumption that trade, commerce and intercourse throughout the territory of India will be free, does not unreasonably restrict the said freedom, but is merely a machinery provision that is intended to check evasion of tax and which must be read along with the substantive provisions of the statute that provide for the levy and collection of tax. 2. The provision itself is attracted whenever there is a transportation of goods or storage of goods while in transit, in contravention of the provisions of the Act or Rules made thereunder. This is obviously a reference to those provisions of the CGST/SGST/IGST Act and Rules that deal with the manner of transp....
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.... only upon execution of a bond for the value of the goods, and on furnishing security in the form of bank guarantee equivalent to the amount of applicable tax, interest and penalty payable. It is apparent, therefore, that a determination of contravention of the provisions of the Act and Rules under Section 129 (1) automatically attracts the liability to pay (i) the tax due in respect of the goods, and (ii) a penalty equivalent to 100% of the tax payable on the goods or (iii) in the case of exempted goods, the prescribed amount equal to the specified percentage of the value of the goods, depending on whether or not the owner of the goods comes forward for payment of the tax and penalty, and that the detaining authority does not have any discretion to reduce the quantum of the amount stipulated for payment under the statute. 4. Sub-sections (3) and (4) of Section 129 spell out a requirement for the proper officer detaining or seizing the goods or conveyance to issue a notice specifying the tax and penalty payable and thereafter passing an order for payment of the same after giving the person concerned an opportunity of being heard. Inasmuch as there is no discretion availabl....
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....antee, while simultaneously obviating the need for persons concerned to approach the writ court challenging the detention orders. 6. Section 129 (6) provides for a situation where a person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty stipulated in Section 129 (1) within a period of fourteen days of the detention or seizure of the goods. In such cases, proceedings under Section 130 of the Act are to be initiated against the person concerned for the purposes of realizing the amounts due to the Government through a sale of the seized/detained goods by following the procedure prescribed under the said provision. 9. It is rather surprising that although the statute provides for a detention of goods and conveyance while in transit, the procedure to be followed by the proper officer concerned is not spelt out in any Rule framed under the parent Act. The central government has, however, chosen to prescribe the procedure for interception of conveyances for inspection of goods in movement, detention, release and confiscation of goods and conveyances through various Circulars issued in exercise of its powers under Section 168 (1) of t....
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....ting the electronic cash ledger or electronic credit ledger of the person concerned in accordance with Section 49 of the CGST Act. ● Where the owner of the goods or the person in charge of the conveyance offers to get a release of the goods by furnishing a security in terms of Section 129 (1)(c) of the CGST Act, the goods and conveyance shall be released by an order under Form GST MOV-5, after obtaining a bond in Form GST MOV-8 along with security in the form of bank guarantee for the amounts demanded. The proceedings under Section 129 can then be finalised and the security adjusted against the demand arising from such proceedings. ● Where objections are filed against the proposed amounts of tax and penalty payable, the proper officer shall consider such objections and thereafter pass a speaking order in Form GST MOV-9, quantifying the tax and penalty payable. The order shall be uploaded on the common portal and the demand accruing from the proceedings shall be added in the electronic liability register and the payment made shall be credited to such electronic liability register by debiting the electronic cash ledger or electronic credit ledger of the person co....
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....er a contravention of the statutory provisions has indeed been occasioned. It is only if he is satisfied of such contravention, based on the material before him, that he must proceed to pass the order of detention in Form GST MOV-6. If there is no material to come to such a conclusion, he has to issue a release order in Form GST MOV-5 and permit an unconditional clearance of the goods and vehicle. At all the above stages, the proper officer is also required to strictly adhere to the time limits prescribed in the circulars issued from time to time so that the goods are not detained for a period longer than that permitted under the statute. 12. Since the statutory provisions and the circulars envisage the service of a notice in Form GST MOV-7, simultaneous with the issuance of a detention order in Form GST MOV-6, the 'non-finality' of the latter order is statutorily recognised and hence, it will not be open to the person concerned to prefer any statutory appeal or writ petition against the said order in Form GST MOV-6. The person served with an order in Form GST MOV-6, together with a notice in Form GST MOV-7, has the option of either paying the amounts demanded in the not....
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....OV-7 (Exts. P1(a), P2(a), P3(a) and P4(a)) and obtained a provisional release of the goods and conveyance on 14.08.2020, it has chosen to challenge the detention orders in Form GST MOV-6 (Exts.P1, P2, P3 and P4) and the notices in Form GST MOV-7 in this writ petition. The main contention urged in the writ petition is that an alleged mis-classification of goods cannot be the basis for a detention under Section 129 of the GST Act. 2. When the writ petition came up for admission, this court issued notice before admission to the respondents and restrained them from invoking the bank guarantees furnished by the petitioner pending disposal of the writ petition. Although the respondents were directed to pass the adjudication order under Section 129 (3) of the Act in the meanwhile, it is stated that the said order has not been passed till date. 3. In W.P(C).No.22608 of 2020, the petitioner consignee impugns the detention order passed by the respondents detaining a consignment of 'Pappad's' that was being transported to the petitioner's premises from the premises of the manufacturer in Ahmedabad. Although the transportation was duly covered by a Bill of Supply and an e....
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....on of goods at the check post cannot be resorted to in cases where there is a bona fide dispute regarding the very existence of a sale and exigibility to tax. It was observed that in cases where an inspecting authority entertains a suspicion as regards attempt to evade tax, but the records he seizes truly reflects a transaction, and the assessee's explanation accords with his past conduct, then detention cannot be the answer and the inspecting authority can only alert the assessing authority concerned for examining the issue in assessment proceedings. The said reasoning also finds acceptance in the judgment of the Gujarat High Court in M/s Synergy Fertichem Private Limited v. State of Gujarat - [2019 VIL 623 (Guj)] where the court opined that in cases of suspected mis-classification, the inspecting authority can detain the goods only for the purpose of preparing the relevant papers for effective transmission to the jurisdictional assessing officer. 6. Taking cue from the aforesaid decisions, I am of the view that a mere suspicion of mis-classification of goods cannot be the basis for a detention under Section 129 of the Act. It has to be borne in mind that Section 129 forms ....
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....hs from the date of receipt of a copy of this judgment so as to enable the petitioner to approach the appellate authority in the meanwhile. The appellate authority shall examine the legality of the detention only on the second ground of the e-way bill not being a valid document. It is made clear that it will be open to the petitioner to raise all contentions in the appeal before the appellate authority and the sustaining of the detention order, to the limited extent indicated above, shall not be seen as an endorsement of the findings therein on merits. W.P(C) No.22072 of 2020: The petitioner in the writ petition is a Company engaged in the manufacture and sale of Power Cables and is a registered dealer under the GST Act. The petitioner had a contract with the Kerala State Electricity Board for the supply of power cables and towards effecting the said supply, it imported power cable end termination kits through Chennai Seaport. The imported items consisting of 33 numbers of end termination kits were contained in 22 packages, and these were cleared through Customs by filing the necessary Bills of Entry for home consumption. The packages were then loaded onto two vehicles bearin....
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....ee for the amounts demanded in the adjudication order. The respondents were restrained from invoking the bank guarantee during the pendency of the writ petition. 5. Sri. A Kumar, the learned counsel for the petitioner would contend that the respondents erred in detaining the goods and the vehicles for a mere procedural lapse occasioned by the petitioner. Alternatively, it is contended that there was a complete misunderstanding of the scope of Rule 55 of the CGST Rules and the provisions of the said Rule did not get attracted to the transportation in question. As regards the discrepancies pointed out with regard to the delivery chalans, it is contended that the said defects had been subsequently cured, and the details required for co- relating the transport documents with the goods that were being transported were all available with the proper officer who ought to have treated the breach as merely venial or technical and refrained from detaining the goods. 6. On a consideration of the rival contentions, I am of the view that under Section 129 of the Act, if a proper officer who is entrusted with the task of detaining goods, finds that they have been transported in contraventio....