JULY 03, 2024

By Vijay Kumar

GST is seven years old but this column is not about the route map of GST, which is any way very perplexing. I am on the road for goods covered under GST.

In 1215 AD, the Magna Carta articulated travel rights for personal liberties and unfettered commerce in assuring merchants are safe and secure in travelling in England.

The Laws of England identified freedom of movement as a natural liberty inherent by birth.

In 1770, Thomas Jefferson argued that freedom of movement is a personal liberty by birth. "Under the law of nature, all men are born free, everyone comes into the world with a right to his own person, which includes the liberty of moving and using it at his own will. This is what is called a personal liberty."

In 1871, Charles Darwin offered an explanation in his book 'The Descent of Man': "…Hominids needed to walk on two legs to free up their hands… "

Right to movement whether by foot, cart, boat, aircraft or on a horseback, is constitutionally guaranteed to the citizens as a Fundamental Right under Article 19(1)(d) and ordinarily that avails to the merchants too when they carry goods for trade. Production of goods but not distributing them would not serve interest of the community, is the underlying principle of Article 301 of the Constitution:

301. Freedom of trade, commerce and intercourse: Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.

Even this freedom implies right to movement. Of course, the said guarantee is not absolute; law can regulate it and restrict too. Scope of right to movement is not the same always; it is variable depending upon the circumstances and conditions. For example, right to move becomes restrictive when a person moves with a firearm or when he uses vehicle for movement. It is because, the firearm and the vehicle are regulated by law in certain aspects and that affects the scope of right to movement otherwise vastly availing to citizens. That is how Article 19(5) i.e., restriction by law is conceived. Thus, a trader cannot claim unfettered right of movement whilst carrying goods that are regulated by law. However, in the absence of such law being shown, fetter cannot be imposed.

You wonder where I am driving to? Most of the above words are extracted from a judgement of the Karnataka High Court last week. - 2024-TIOL-1115-HC-KAR-GST

Picture this: a truck driver, a vigilant GST officer, and a wrong turn under the cloak of night. It's a recipe for a comedy of errors, with documents pointing in all directions like a confusing treasure map. As the GST officer pounces on the wayward truck, accusing it of being on a joyride of tax evasion, you can almost hear the truck driver's dramatic gasp in the dark.

A truck driver lost his way in the darkness of the night and drove in a direction that was not leading to his declared destination. The eagle eyes of a sharp GST officer befell on the errant truck that was on its wrong route. The GST officer was convinced that the goods in the truck were on an evasion trip and he promptly seized the truck along with the goods inside.

The GST officer vide order dated 13.12.2021 observed:

1 As per the documents the delivery places of the goods are different places of Bengaluru, other than Bommasandra Industrial Area. Therefore, it proves beyond doubt that the goods are to be delivered to other than the places mentioned in the documents and is in contravention of the provisions of the GST Act, 2017.

2 The conveyance has passed the Electronic City Toll Plaza on 02-12-2021 at 10.37 PM, which also proves that the goods conveyance was not moving toward the destination points as mentioned in the documents.

3 So, movement of goods and the conveyance are to be considered as moving without proper documents or with defective documents as prescribed under the provisions of the GST Act and Rules, 2017.

4 Both non-production of the required documents for the goods in transit or production of defective documents for verification at the time of check, leads to a clear contravention of the provisions of the GST Act and Rules, which attracts the levy of tax and penalty as provided under the provisions of sub-section (1) of Section 129 of the GST Act, 2017.

The GST officer passed an order confirming the tax liability of Rs. 3,25,423/- coupled with a penalty of Rs. 21,41,239/-. The assessee appealed at the departmental level without any success - as usual. Against the appellate order, they filed a writ petition before the Karnataka High Court. A single judge of the High Court observed:

Admittedly, the driver of the vehicle was carrying required E-way bills and tax invoices to deliver goods. The driver instead of taking a right turn at Hebbal junction and move towards Peenya Industrial area, has taken a left turn and has moved towards Bommasandra Industrial area. The incident has happened at late night. There may be chances of diversion that might have taken place due to human error and it cannot be definitely concluded that diversion was deliberate more so when the driver of the vehicle has filed an affidavit explaining the reasons and the intended purchasers have also confirmed that they were supposed to receive the said goods.

He set aside the impugned order and directed to release the vehicle and the goods detained.

The highly aggrieved State took the matter in appeal to a Division Bench of the High Court, which observed:

This case involves also the fundamental right to trade and business guaranteed under Article 19(1)(g) read with Article 301 of the Constitution. It is open to a trader to take goods to the destination point in whichever route he opts, unless the law otherwise requires, destination point being intact. Such a right needs to be recognized as of necessity to trade or business.

The above being not an absolute right, can certainly be regulated by law as provided u/a 19(6).

Despite vehement submission, learned AGA could not locate any rule or ruling that regulates the movement of conveyor of goods while choosing his route. As the law now stands, a merchant or his convoy is free to choose the route for the movement of goods from the point of origin to the point of destination and that he has specified a particular route in the consignment documents, would not come in the way of that route being altered, although destination cannot be. In the absence of law, he cannot be faltered if he chooses a circuitous route in preference to linear one in variance with the impression given to the authorities in the said documents as long as travel time and destination point remain intact. If that be so, the impugned orders of authorities that were structured on a contra premise could not stand the test of law.

The question is whether law mandates conveyance in a particular route and prohibits alteration of travel route.

We have not been shown any such law, rule or ruling.

What is required by law is the furnishing of consignment documents and specified particulars of consignor, consignee, goods, route maps & destinations. Requirement of furnishing particulars of route map, etc., is one thing, compulsive adherence to the impressed route is another.

There is law with regard to the former, is true; but latter is non liquet i.e., an area where there is no binding rule. When law does not require giving of reasons for changing the direction or route, whether the reason offered by the driver for opting another route is true or false, pales into insignificance.

And the Karnataka High Court dismissed the State Appeal.

The High Court referred to a decision of the Gujarat High Court in a nearly comparable case in Karnataka Traders Vs State of Gujarat - 2022-TIOL-43-HC-AHM-GST, in which the discrepancy noticed by the GST officer was:

Vehicle was intercepted while it was travelling to the different direction than the direction of destination or way to the destination. So, it is clear that the goods was not moving to the place destined for. Hence it appears that the goods is being transported with intention to evade tax.

The Gujarat High Court held that, merely because the direction was changed, an inference cannot be drawn regarding the intention of the petitioners to evade tax.

If your sleepy driver misses the road while carrying the G in GST (goods), you have to drive straight to the High Court.

So, there I was, diving deep into the age-old tales of rights and liberties, only to find myself on a journey with a truck driver who took a wrong turn in the dark, much to the dismay of a vigilant GST officer with eyes like an eagle on a mission. With documents pointing in different directions like a confused GPS, the officer laid down the law faster than you can say "tax and penalty," leaving the poor driver singing the blues.

Amidst legal jargon and constitutional rights, the High Court pondered: Can a trader choose his own road trip adventure, or must he seek the GST officer's blessing at each junction? In the end, the High Court declared that a missed turn doesn't always mean foul play, much to the relief of drivers everywhere.

Should I take the GST officer's permission to choose the road I want to drive in? In the days of the infamous check-posts, truck drivers used to take a detour to avoid the check posts, more to escape the harassment and delay at check posts than to evade taxes. Now specifically located check posts have gone, not the harassment, because every inch of the road is now a check-post.

GST at seven should be less severe.

Until next week