2022-TIOL-1184-HC-KAR-GST
Rajeev Traders Vs UoI
GST - Seven trucks were intercepted while they were in transit and transporting Areca nuts on behalf of the petitioner - It was stated that the E-Way bill had not been tendered for the goods in movement - On 14.09.2021, the physical verification of the goods and conveyance was conducted in the presence of the person in-charge of the goods vehicle and it was stated that the conveyance was carrying Areca nuts and there was a difference in the quantity mentioned in the invoice and the quantity found upon physical verification - An order of detention u/s 129 in Form GST MOV-06 was passed and on the following day, i.e., on 29.09.2021, the Deputy Director, DGGI, Zonal Unit, Belagavi, proceeded to issue a notice for confiscation of goods, conveyances and levy of penalty under Section 130 of the CGST Act, in Form GST MOV-10 – After granting personal hearing, Deputy Director proceeded to pass an order of confiscation under Section 130 of the CGST Act on 24.11.2021 by issuing Form GST MOV-11 - Being aggrieved, the petitioner preferred an appeal to the Joint Commissioner who concurred with the view taken by the Deputy Director and proceeded to dismiss the appeal - Since the Appellate Tribunal has not been constituted, the petitioner is before this Court - It is submitted that once proceedings for the detention of the goods was initiated u/s 129, the same could not be transformed into a proceeding u/s 130; that the power of detaining the goods u/s 129 is only for a limited period and if the owner of the goods or the person in-charge of the goods comes forward to pay the tax and penalty, the proper officer was bound to release the detained goods and conveyance.
Held:
+ The question that arises for consideration is:
"Whether the Proper officer, while detaining the goods which are in transit in the exercise of his power under Section 129 of the Act, possess the power to initiate proceedings to confiscate under Section 130 of the Act and thereafter conduct an enquiry and proceed to order confiscation of the goods?"
+ The owner of the goods or a person other than the owner gets a statutory right to obtain the release of the goods and conveyances detained under Section 129 if they comply with the conditions specified in clauses (a), (b) or (c) of Section 129(1). [para 78]
+ This indicates that the true intent to detain the goods or the conveyances is to ultimately facilitate the recovery of the applicable tax and if the same is paid along with the penalty, the goods and conveyances are bound to be released. [para 79, 80]
+ In fact, by virtue of sub-section (5) of Section 129, if the owner or any other person complies with the order passed by the officer by paying the applicable tax, interest and penalty, the entire detention and seizure proceedings are deemed to have been concluded. [para 81]
+ It is only if the order is not complied within 14 days, do the authorities secure a right to initiate confiscation proceedings under Section 130 of the Act. This once again establishes that the primary intent of the law is to recover the applicable tax and penalty and only if this is not achieved, the power of confiscation is required to come into play. [para 82]
+ Viewed from this background, it becomes clear that the power to confiscate is the ultimate penal measure provided under the Act and is, therefore, to be exercised with great care and caution and as a last measure. This is evident from Section 129 (6) which states that proceedings under Section 130 can be invoked only if the applicable tax and penalty are not paid despite an order being passed in that regard.[para 96]
+ Thus, the procedure adopted by the proper officer, in this case, to embark on confiscation proceedings after invoking his power under Section 129 to detain and seize the goods is contrary to the statutory scheme. [para 97]
+ The instructions in the Circular 41/15/2018-GST [Instruction No.2(l) dated 13.04.2018] empowering the proper officer to invoke the power of confiscation under Section 130 of the Act after he has invoked the power of detention under Section 129 amounts to nullifying the right available to the owner of the goods or the owner of the conveyances to get the goods and conveyances released and such a power is not available to the Commissioner under Section 168. This power to issue instructions for the uniform implementation of the Act cannot vest the Commissioner to prescribe a set of instructions which go against the grain of the statutory provisions.[para 102]
+ The power to detain under Section 129 cannot be converted to a proceeding under Section 130 of the Act since both these provisions operate independently of each other and in completely different contexts. [para 103]
+ The goods were accompanied by a tax invoice, which indicated payment of tax but an E-way bill had not been generated. Thus, the proper officer could have only imposed a penalty of ten thousand rupees or the amount equivalent to the tax evaded. [para 117]
+ However, the proper officer, has proceeded to state that the goods appear to be undervalued and the weight of the goods were mis-declared and the grade and quality of the areca nuts were not mentioned. Rule 46 does not mandate the market value of the goods or a prescribed value of the goods is required to be mentioned in the Tax invoice and the Rule also does not state the grade or quality of the goods are required to be mentioned. [para 119]
+ It is to be kept in mind the predominant principle under the Act is to ensure that the registered person is given a chance to rectify his wrongdoing whenever the wrongdoing is noticed and pay the applicable tax and penalty or interest as the case may be. The proper officer cannot snatch away that right conferred on the registered person by invoking proceedings to confiscate the goods itself. It is to be noticed here that the statute consciously leans towards giving an opportunity to the wrongdoer to rectify his wrongs voluntarily. [para 122]
+ It is also to be stated here that in the notification which notified the rates of tax, the description of the goods was only stated as 'areca nuts'. The notification did not specify different rates of tax for different kinds of areca nuts and the Rules also did not require the grade or quality of the areca nuts to be mentioned in the invoice. [para 126]
+ Therefore, the entire basis that there was under-valuation was completely incorrect and the consequential conclusion that there was under-valuation with an intent to evade payment of tax, cannot also be accepted. [para 127]
+ The entire procedure adopted by the proper officer from converting the detention proceedings into a confiscatory proceeding, ultimately leading to the order of confiscation is wholly illegal and contrary to the statutory scheme of the Act.
+ The Appellate Authority has mechanically accepted the reasoning of the order of the proper officer and has dismissed the appeal without examining the statutory scheme of the Act. Impugned orders cannot be sustained and the same are quashed. The question that is framed is accordingly answered in the negative. [para 129]
+ Since the confiscated goods are already sold in a public auction, the respondents are directed to pay the petitioners the sale proceeds of the auction after deducting the penalty prescribed under Section 129(1)(a) of the Act, within a period of four weeks. As a consequence, the proper officer shall also release the conveyance, if it is not already released. [para 130, 131]
- Petition allowed: KARNATAKA HIGH COURT
