GST - Process of detention cannot be resorted to when dispute is bona fide, especially, concerning exigibility of tax and, more particularly, rate of that tax: High Court
By TIOL News Service
ERNAKULAM, NOV 26, 2018: A consignment of "Ground Betel Nuts (Arecanuts)" with the brand name "Roja" was consigned by the manufacturer, registered in Tamil Nadu, through a tax invoice and by employing the transporter ABT Parcel service.The commodity was described with "HSN 0802" and tax was paid at 5%.
On 26.09.2018, the Assistant State Tax Officer (ASTO)intercepted the lorry (carrying other goods too) when it reached Palakkad. The ASTO detained the goods, alleging that the manufacturer had been trying to evade tax by mis-describing the goods inasmuch as the product fits the description under "HSN 2106" and attracts 18% tax-not 5%.
Aggrieved, the petitioners filed a Writ petition before the Kerala High Court and seek a declaration by the Court that (a) "Arecanut Ground" with HSN 0802 attracts GST only at 5%, as in item falling under Serial No. 28 of Schedule I of G.O.(P) No. 62/2017/TAXES, as amended; (b) the authority not to detain the petitioners' commodity en route alleging that the rate of tax is 18% and not 5% as shown in the invoices; (c) the ASTO to release the lorry and goods (arecanut) forth with.
The petitioner submits that the consignment carried all the valid documents; that the petitioners cannot be accused of evading tax; that the worst that can be attributed to them is about the correct rate of tax; that the dispute about the rate of taxis not a matter for adjudication in a proceeding under Section 68 or 129 of the GST Act.
Further,the adjudication of the rate-issue is a matter to be undertaken by the assessing officer alone, but not by the inspecting officials exercising powers under Sections 67, 68, 69 or 129 of the CGST Act/KGST Act, 2017. To support this proposition, reliance is placed on the decision in Rams v. Sales Tax Officer [1993(91)STC216].
It is further submitted that the ASTO had indulged in sheer speculation; that the ''arecanut ground'' carries HSN 2106 and attracts 18% tax but the samedoes not have any statutory base. In this context, the petitioner relies on the apex court decision in M/s. Crane Betel Nut Powder Works [2007-TIOL-37-SC-CX ]. It is also contended that ASTO's detaining the consignment is arbitrary, unjust, and without jurisdiction.
The counsel for the Revenue justified the action taken by the ASTO by emphasizing that the ASTO has plenary powers under Section 129 to intercept any goods and detain them on any ground enumerated in that Section. It is also submitted that the decision in Crane Betel Nut Powder Works (supra) involves the interpretation of the Central Excise Tariff Act and the Rules and would not apply under GST as the product description/classification has suffered changes in the new GST regime, compared to what it was under the KVAT Act.
The High Court considered the submissions and at the outset noted that the Writ's province is restricted; that - "the classification or the alleged misbranding of the product-even the alleged tax variation, not evasion though-cannot be considered here. It is, indeed, for the assessing authorities to adjudicate on the issue."
It is further inter alia observed -
++ Can the State Tax Officer invoke Section 129 of the Act and detain goods on the ground the tax paid on the product is less? Here, the documents are in order and the product description accords with what the first petitioner has already declared, say, in his returns before the assessing authority. Then, can the ASTO still hold up the consignment because the declaration already made does not suit his notion of what the product is?
++ Chapter XVI of the Combined Acts deals with inspection, search, and seizure. Section 129 under Chapter XIX provides the mechanism for detention, seizure, and release of goods and conveyances in transit. It begins with a non-obstante clause and goes on to lay down the procedure. If any person transports or stores any goods "contravening this Act" or its rules, all those goods and means of transport and documents relating to those goods and conveyance will be detained or seized.
++ Under the erstwhile Kerala Value Added Tax Act, the first petitioner and those trading in the same product 'betel nut' have had many rounds of litigation. Eventually, this Court and the Revenue accepted that the product is not supari and it attracts lesser tax.
++ On how to interpret Tax Statutes, the Supreme Court has held that charging provisions must be construed strictly, but not the machinery provisions, "which should be construed like any other statute". It has also held that "the power to levy and collect interest is substantive law though part of machinery provision". [ J.K. Synthetics Limited v. Commercial Taxes Officer 2002-TIOL-736-SC-CT-CB refers.]
++ The Supreme Court (supra) has emphatically held that if the dealer furnishes all particulars about his business, assesses the tax as he honestly believes to be correct, and pays it; his conduct cannot be faulted as mala fide or as an effort to evade tax. Here, the Exts.P8 and P8(a) are the returns for two recent months (of June and August). The first petitioner declared the HSN Code he has felt his product would attract and paid the tax accordingly. The returns are very much on record before the assessing officer. Therefore, to that extent the first petitioner's conduct cannot be faulted, nor can he be accused of evading the tax.
++ In somewhat an analogous situation as we face here, Rams (supra) held that the inspecting authority may entertain a suspicion that there is an attempt to evade tax. But if the records he seizes truly reflect the transaction and the assessee's explanation accords with his past conduct, for example, the returns he has filed earlier, the detention is not the answer.
++ In the words of Rams, at best the inspecting authority can alert the assessing authority to initiate the proceedings "for assessment of any alleged sale, at which the petitioner will have all his opportunities to put forward his pleas on law and on fact." Indeed, emphatic is the enunciation of law in Rams that the process of detention of the goods cannot be resorted to when the dispute is bona fide, especially, concerning the exigibility of tax and, more particularly, the rate of that tax.
Concluding that the order of detention is arbitrary and unsustainable, the same was set aside and the Assistant State Tax Officer was directed to release the goods forthwith.
(See 2018-TIOL-2910-HC-KERALA-GST)
