By TIOL News Service

ERNAKULAM, NOV 15, 2018: THE first petitioner, a company with a branch in Pondicherry, deals in luxury cars; Vishnu Mohan, the second petitioner, a resident of Trivandrum, purchased a car-Mini Cooper S Hatch-from the first petitioner. The company raised the Exhibit P1 invoice.

Mohan had the vehicle temporarily registered in Pondicherry on 27 August 2018 and wanted the car transported to Trivandrum, where he intended to use it.

He requested the Company to transport the vehicle and accordingly, the company raised an invoice and collected the transport charges, raised Exhibit P3 invoice, paid the IGST on the "Logistics & Handling Charges", and then dispatched the vehicle through its lorry to Trivandrum.

En route the Assistant State Tax Officer, the first Respondent, intercepted the vehicle and detained it, invoking Section 129 of the   KSGST Act .

A notice was issued under Section 129 (3) of the Act and the State Tax Officer demanded tax and penalty of Rs.33,59,056/-.

The explanation offered by the company was rejected but the penalty was reduced by about Rs.3 lakhs.

Aggrieved, the Company and Mohan have filed the Writ Petition.

It is inter alia submitted that -

+ Mohan, as the purchaser, wanted to transport the vehicle to Trivandrum, in his "independent capacity". Because of the distance, Mohan played it safe and requested the very dealer that sold the car to transport it.

+ The company transported the vehicle only as a transporter, but not as a dealer. In other words, with the sale of the vehicle, and its immediate registration in Mohan's favour, the Company's ceased to have anything to do with the vehicle.

+ Had Mohan driven the car down to Trivandrum by himself, the authorities would have had no objection; only because Mohan wanted a safe transport of his vehicle, he has been made to suffer.

+ Mohan, as an individual and without ever trading in cars, was found transporting the vehicle, so the entire GST regime remains inapplicable to him.

+ Mohan was honest in getting the vehicle transported to Trivandrum, rather than have it permanently registered at Pondicherry, by paying less tax.

+ On the Company's paying the IGST on the car sale, it was a generous gesture so that Kerala, too, gets a share in the tax 'pie'.

+ An alternative plea is that the Court take a lenient view of the transaction because of Mohan's bona fides; that the car be released by his providing a personal bond, rather than bank guarantee.

The counsel for the Revenue justified the action by the department and submitted that the statutory mandate is clear and it admits of no adjudicatory discretion -say, to scale down either the tax or penalty, as an interim measure. It is also emphasised that it cannot be said that the car being transported is a 'used' vehicle inasmuch as a "used vehicle" must have had a prior owner.

The High Court, Single Judge considered the submissions and after narrating the grounds of detention, the notice issued u/s 129(3) of the Act and the relevant provisions, extracted the findings of the Division Bench delivered in the case of Indus Towers Ltd. - 2018-TIOL-67-HC-KERALA-GST and inter alia observed -

++ The question is, does the Ext.P3 invoice, coupled with the Ext.P1 Tax Invoice, leads us to conclude that the purchase of the car was, in the first place, a completed intra-state sale and that only the transport was an inter-state event?

++ Venturing into that adjudication is premature, for both the Company and Mohan have the issue pending before the authorities concerned. They have an effective remedial measure of appeal, too.

++ Granted, Mohan could have driven the vehicle to the destination by himself. Then, this tax regime would not have affected him. But that has not happened.

++ Here, Mohan is not a "registered person," nor is he dealing in the cars - he is a consumer.

++ The Division Bench in Indus Towers has held that "if the conditions under the Act and Rules are not complied with, definitely Section 129 operates and confiscation would be attracted. The respondents are entitled to adjudication, but they would have to prove that" the goods being transported stand exempted from the rigours of the GST regime.

As for the petitioner's exposition of the semantic nuances of the term "used" while claiming that no E-way bill would be required to be generated in view of rule 138(14) of the Kerala SGST Rules, 2017, Item 7 of the Annexure [Used personal and household effects] refers, the Single Judge held that no ruling can be passed on this aspect and the authorities would be required to decide on the same besides deciding whether the petitioners could take advantage of rule 55A of the Rules, as well.

Noting that the decision in Indus Towers is a binding one, the Court held that either of the petitioners can get the goods released by complying with section 129 and the relevant rules, and seek an early adjudication of the dispute.

Nonetheless, the High Court remarked - Harsh it may be to hold that the petitioners pay heavily, even interim, for minor lapses. But the law, at times, can be harsh, and the Courts, usually, defer to the legislative wisdom.

The petition was disposed of.

(See 2018-TIOL-2903-HC-KERALA-GST)