Karnataka High Court
The Union Of India vs M/S Rajeev Traders on 25 September, 2023
Author: S.R. Krishna Kumar
Bench: S.R. Krishna Kumar
-1-
NC: 2023:KHC-D:11299-DB
WA No. 100403 of 2022
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
R
DATED THIS THE 25TH DAY OF SEPTEMBER, 2023
PRESENT
THE HON'BLE MR JUSTICE S.R. KRISHNA KUMAR
AND
THE HON'BLE MR JUSTICE G BASAVARAJA
WRIT APPEAL NO. 100403 OF 2022 (T-RES)
BETWEEN:
1. THE UNION OF INDIA
THROUGH ITS SECRETARY
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
ROOM NO. 137, NORTH BLOCK
NEW DELHI 100 001.
2. THE JOINT COMMISSIONER OF CENTRAL
GST AND CENTRAL EXCISE (APPEALS)
NO.71, CLUB ROAD, BELGAVI -590 001.
3. THE DEPUTY COMMISSIONER OF CENTRAL TAX
DHARWAD DIVISION, 2ND FLOOR, C.R.BUILDING
NAVANAGAR, HUBLI, KARNATAKA 580 025.
...PETITIONERS
(BY SRI. GIRISH S HULMANI.,ADVOCATE)
SAROJA AND:
HANGARAKI
Digitally signed by
SAROJA M/S RAJEEV TRADERS
HANGARAKI
Date: 2023.12.07
11:49:19 +0530
ASST. NO.960, VIVEKANANDA NAGAR
BIRURU CHIKKAMANGALURU (CHIKMAGALUR)
KARNATAKA 577116
REPRESENTED BY ITS PROP
SRI RAJEEV RANJAN ...RESPONDENT
(BY SRI.NITIN BALABANDI, ADVOCATE)
THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH COURT ACT,
1961, PRAYING TO A) CALL FOR RECORDS AND B) SET ASIDE THE ORDER
PASSED BY THE LEARNED SINGLE JUDGE IN WP NO. 100849/2022 (T-RES)
DATED 16/08/2022 AND ETC.
THIS APPEAL COMING ON FOR PRELIMINARY HEARING THIS DAY,
S.R.KRISHNA KUMAR J. DELIVERED THE FOLLOWING:
-2-
NC: 2023:KHC-D:11299-DB
WA No. 100403 of 2022
JUDGMENT
This Intra Court appeal by the Revenue is directed against the impugned order dated 16.08.2022 passed in W.P.No.100849/2022, whereby the said petition filed by the respondent was allowed by the learned Single Judge.
2. The brief facts giving rise to the appeal are as follows:-
The respondent - writ petitioner claims to be the owner of the subject goods being carried in the subject vehicles - 7 trucks which were transporting areca nuts on 13.09.2021 at around 5 p.m. at Yamanuru when the same were intercepted by the proper officer under the Central Goods and Services Act, 2017 (for short 'the CGST Act') by invoking Section 129 of the said Act. After interception, the appellant issued Form GST MOV-01, which is a statement of the driver / person in-charge of the goods and conveyance and also an order in MOV-02 for physical verification.
On 16.09.2021, 17.09.2021 and 18.09.2021, a physical verification report in Form GST MOV-04, Mahazar and Valuation report of the sample of the seized goods (areca nut) were obtained and voluntary statement of the respondent was recorded under Section 70 of the CGST Act on 27.09.2021, pursuant to which, an order of -3- NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 detention in Form GST MOV-06 was issued under Section 129(1) of the CGST Act.
2.1 On the very next day, the appellant invoked Section 130 of the CGST Act and issued a notice for confiscation of the subject goods, to which, the respondent submitted a reply dated 27.10.2021, pursuant to which, an order of confiscation under Section 130 of the CGST Act was passed on 24.11.2021 by the appellants who issued Form GST MOV -11 to the respondent.
2.2 Aggrieved by the impugned confiscation order, the respondent having preferred an appeal before the Appellate authority, the same came to be dismissed vide impugned order dated 21.02.2022. The respondent - writ petitioner preferred the instant writ petition against the confiscation order dated 24.11.2021 and order dated 21.02.2022 passed by the Appellate authority inter alia contending that the appellate Tribunal had not been constituted and as such, he was constrained to approach this Court by way of the instant writ petition.
2.3 The instant writ petition was opposed by the appellants, who filed their statement of objections and contested the petition.
Apart from other contentions, respondent - writ petitioner specifically contended that the detention order under Section 129 -4- NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 of the CGST Act having been passed by the appellants on 28.09.2021, the confiscation proceedings initiated on the very next day i.e., 29.09.2021 were without jurisdiction or authority of law, since the proceedings under Section 129 had not been completed by the appellants as required under Section 129(6) of the CGST Act, which had undisputedly not been exhausted by the appellant, as a result of which, the impugned confiscation proceedings initiated on 29.09.2021 and the impugned confiscation order dated 24.11.2021 deserved to be set aside.
2.4 Per contra, apart from disputing and denying the various contentions / claims of the writ petitioner, the appellants -
Revenue sought to support the impugned confiscation proceedings and order by placing reliance upon the Circular dated 13.04.2018 issued by the Government of India, which according to them, permitted initiation of confiscation proceedings without completing the proceedings under Section 129 of the CGST Act.
2.5 By the impugned order, the learned Single Judge allowed the petition and quashed the impugned confiscation proceedings and order as well as the order of the Appellate authority, aggrieved by which, the appellants - Revenue are before this Court by way of the present appeal.
-5-NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022
3. Heard Sri.Girish Hulimani, learned counsel for the appellants - Revenue and Sri.Nitin Bolabandi, learned counsel for the respondent and perused the material on record.
4. In addition to reiterating the various contentions urged in the appeal and referring to the material on record including the impugned order, learned counsel for the appellants submits that the learned Single Judge committed an error in coming to the conclusion that confiscation proceedings under Section 130 of the CGST Act could not have been initiated by the appellants before completion of detention proceedings in view of Section 129(6) of the CGST Act. In this context, it is contended that Sections 129 and 130 are mutually independent and exclusive from each other and merely because detention order is passed under Section 129 of the CGST Act, the same does not prohibit / bar initiation of confiscation proceedings under Section 130 of the CGST Act, particularly when the respondent - assessee is found to be guilty of evasion of tax and in order to protect the interest of the revenue, it was necessary to pass a confiscation order.
4.1 It was submitted that the procedure for detention proceedings and confiscation proceedings has been clearly -6- NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 explained in the Circular No.41/15/2018-GST dated 13.04.2018 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing, New Delhi, which permits initiation of confiscation proceedings directly before completion of detention proceedings as held by the Hon'ble Division Bench of the Gujarath High Court in the case of Synergy Fertichem Pvt. Ltd. Vs. State of Gujarath -
2020 (33) GSTL 513, which has been followed by a learned Single Judge of this Court in the case of M.S.Meghdoot Logistics vs.Commercial Tax Officer - W.P.No.10832/2020 dated 21.12.2020 and the learned Single Judge committed an error in not referring to the said judgments while passing the impugned order.
4.2 It was also submitted that prior to Sections 129 and 130 being amended vide Finance Act 2021 w.e.f. 01.01.2022, the non-
obstante clause contained in Section 130 makes it clear that it was permissible to initiate confiscation proceedings even before completion of detention proceedings and failure on the part of the learned Single Judge to appreciate this, has resulted in erroneous conclusion. It was therefore submitted that the impugned order passed by the learned Single Judge deserves to be set aside and the writ petition filed by the respondent was liable to be dismissed.
-7-NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 In support of his contentions, learned counsel for the appellants placed reliance upon the following judgments:-
(i) State of Punjab vs. M/s.Shiv Enterprises - (2023) Live Law (SC) 56;
(ii) Synergy Fertichem Pvt. Ltd. Vs. State of Gujarath - 2020 (33) GSTL 513;
(iii) M.S.Meghdoot Logistics vs.Commercial Tax Officer - W..P.No.10832/2020 dated 21.12.2020;
(iv) The South India Corporation (P) Ltd., vs. The Secretary, Board of Revenue - MANU/ SC / 0215/1963; and
(v) Bright Road Logistrics vs. State of Haryana -
MANU/PH/1991/2023.
4.3 Per contra, learned counsel for the respondent would support the impugned order and submits that there is no merit in the petition and that the same is liable to be dismissed.
5. I have given my anxious consideration to the rival submissions and perused the material on record.
6. A perusal of the impugned order will indicate that the learned Single Judge formulated the following point for consideration:-
"Whether the proper officer, while detaining the goods which are in transit in the exercise of his power -8- NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 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?"
7. The learned Single Judge answered the said point in favour of the respondent - writ petitioner and accordingly, allowed the petition by coming to the conclusion that before completing the detention proceedings initiated under Section 129 of the CGST Act, in view of Section 129(6), it was not permissible for the appellants -
Revenue to initiate confiscation proceedings under Section 130 of the CGST Act. For the purpose of arriving at the said conclusion, the learned Single Judge has analysed the relevant provisions as well as the scheme of the CGST Act and also the Circular dated 13.04.2018 and has held that the said Circular would not override the provisions of the CGST Act, in particular, Section 129(6) of the Act. While recording the said findings, the learned Single Judge held as under:-
" 60. What is to be discerned from this statutory framework is that the law showers a certain amount of leniency even if there is a wrongdoing. If the wrongdoing is on account of error and is acknowledged and immediate amends are made by paying the tax even before a show cause notice is served, the person does not suffer a penalty. If the wrongdoing is on account of an immoral conduct, even then, if the -9- NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 wrongdoer acknowledges his error and makes amends before receipt of a show cause notice, he is saddled with a penalty of just 15% and if he chooses not to pay the actual tax payable, he is saddled with a larger penalty of 25%. If he desists further and contests the proceedings and forces a determination of the tax payable, he is saddled with a penalty of 50% of the applicable tax.
61. In both the above-mentioned cases, it is to be observed that the law does not intend to confiscate the goods itself as a penal measure and the law only ensures that the applicable tax with interest and penalty is recovered from the wrongdoer.
64. Section 129 provides for detention, seizure and release of goods and conveyances in transit. This is a provision that is enacted solely to empower the authorities to detain goods and conveyances while they are in transit and thus differs with the power conferred to conduct an inspection, search and seizure under Section 67 of the Act.
77. Thus, under Section 129, the authorities are given the power to seize the goods and conveyances which are used to transport the goods while they are in transit, if the provisions of the Act are contravened. However, if the owner comes forward and pays the applicable tax, interest or penalty equivalent to the tax, the proper officer is bound to realise the goods and the conveyances. If a person other than the owner comes forward and pays the applicable tax and 50% of the value of the goods (reduced by the tax paid), the authorities are bound to release the goods and conveyances.
78. In other words, 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),
- 10 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022
(b) or (c) of Section 129(1).
79. To put it differently, the proper officer does not possess the power to refuse the release of the detained goods and conveyances:
i. if the applicable tax and penalty of 100% of the tax is paid by the owner or ii. if 50% of the value of the goods reduced by the applicable tax, is paid by a person other than the owner or iii. if security equivalent to the aforesaid sums are furnished.
80. 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.
81. 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.
82. 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. Thus, the power of confiscation when goods and conveyances are seized would be available only when the applicable tax and penalty is not paid. 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.
83. It is to be emphasised here that the power available under Section 129 to detain and seize is only when
- 11 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 the goods and conveyances are in transit. In other words, under Section 129, the proper officer would not have the power to detain goods or conveyances which are not in transit i.e., when they are found in the registered place of business of the taxable person.
90. As could be seen from the statutory framework, the power to inspect and seize the goods is granted to the proper officer under Section 67 and under Section 129 of the Act.
93. Thus, in both cases, the proper officer is bound to release the goods or conveyances if the applicable tax and penalty prescribed is paid. The statutory framework, thus, indicates that the power to detain and seize is only designed to ensure that the applicable tax and penalty is collected and on such payment being made, the goods or conveyances cannot be detained or seized and they are required to be released.
96. 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 power to confiscate, given the statutory framework, is a distinct and independent power conferred under the Act which can be exercised only in cases where the power to detain and seize has not been invoked. Once the power to inspect, seize or detain the goods and conveyances is invoked either under Section 67 of the Act or under Section 129 of the Act, the power to confiscate under Section 130 would not be available. 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.
97. Thus, the procedure adopted by the proper
- 12 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 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.
98. However, the Learned Counsel for respondents contends that a Circular has been issued on 13.04.2018 by the Commissioner in exercise of the powers conferred under Section 168 of the Act and as per Instruction No.2(l) of the said Circular, if the proper officer is of the opinion that the movement of the goods is being effected to evade payment of tax, he could directly invoke confiscation proceedings under Section 130. This argument cannot be accepted for more than one reason.
99. Firstly, the statutory framework, as explained above does not permit confiscation proceedings merely because it is found by the proper officer that applicable tax has not been paid on the goods and he exercises his power to detain the goods and conveyances. If, the owner of the goods or a person other than the owner comes forward to abide by the stipulations contained in Section 129, he is bound to release the goods and the conveyances. Thus, the positive obligation to release the detained goods cannot be bypassed or overridden by permitting the proper officer to invoke confiscatory proceedings under Section 130 of the Act. It is also to be kept in mind that on goods and conveyances being detained under Section 129, there is a right vested in the owner of the goods and the owner of the conveyances to get the goods and the conveyances released subject to the fulfilment of the conditions prescribed in Section 129 and this vested right cannot be nullified by invoking confiscation proceedings under Section 130 of the Act.
100. Secondly, by virtue of Section 129(6), the power available to initiate confiscation proceedings would be
- 13 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 available to the proper officer only if the owner of the goods or the conveyances fail to pay the applicable tax and penalty within 14 days. In the light of this provision, it would simply not be open for the proper officer to invoke the distinct power under Section 130 after he has invoked the power to detain the goods and conveyances under Section 129.
101. Thirdly, the proper officer cannot be given the discretion to choose the manner in which he would penalise the wrongdoer when the statutory framework has been designed in such a way that even a wrongdoer is treated leniently, if he chooses to acknowledge his wrongdoing by paying the applicable tax and the penalty even in the event he is found transporting the goods in contravention of the provisions of the Act. If the proper officer is given the option of imposing the extreme measure of confiscation for transporting the goods in contravention of the provisions of the Act, the true intent of the law which is only to collect the tax with penalty would be defeated and the proper officer would basically ensure that the entire goods vest in the Government apart from the imposition of the liability to pay the applicable tax and penalty.
102. Fourthly, the power conferred under Section 168 on the Commissioner to issue a Circular is to basically ensure that there are clear instructions laid out for the uniform implementation of the provisions of the Act. 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. The instructions in the Circular 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
- 14 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 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. If this argument were to be accepted, it would essentially mean that the Commissioner can issue instructions which virtually amount to amending the statutory provisions or at least enable the officers to distort and defeat the statutory framework.
103. It is to be stated that 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. The power to detain is only to stop the transit of the goods and thereby prevent its movement till the tax and penalty is paid. However, the power to confiscate is the process of divesting the owner of the goods of all title to the goods for a contravention of the provisions of the Act and Rules. The intent behind conferring power to detain the goods under Section 129 is fundamentally to ensure that the applicable tax and penalty is recovered whereas the intent behind confiscation under Section 130 is to divest the owner of the goods itself and also impose liability of payment of the applicable tax and penalty.
104. As noticed above, even in cases where proceedings are initiated for determination of tax against a person who had a fraudulent intent of evading payment of tax under Section 74, the provisions permit the person who had exhibited the fraudulent intent to pay a maximum penalty of 50% and be absolved of his wrongdoing. Given this statutory framework, it would not be proper for the Commissioner to permit the proper officer to initiate confiscation proceedings under Section 130 after the power of detention had already been invoked under Section 129 of the Act.
- 15 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022
105. In the scheme of the statute, when goods are detained under Section 129, the proper officer would be obliged to release the goods upon fulfillment of the conditions laid down therein by the owner of the goods or the owner of the conveyance. It is however to be stated here that merely because he has released the goods, that would not come in the way of proceedings being initiated under Section 73 or Section 74 of the Act for determination of tax.
106. However, it is to be stated here that when goods are detained while in transit, the proper officer cannot embark on an enquiry which is contemplated under Section 73 or Section 74 or Section 130. It is to be kept in mind when a specific provision is enacted for dealing with a specified situation such as the goods being in transit and that very provision demarcates the extent of the power that the proper officer can exercise, that provision cannot be sidestepped and resort be had to some other provision which enables the very confiscation of the goods.
107. It is also to be kept in mind that the power of confiscation, under the scheme of the statute, would only be the power conferred on the proper officer in situations other than when the goods are in transit. This is simply because the statute has specifically provided for the power that is available to a proper officer when the goods are in transit and obviously when the goods in transit are detained, only that procedure prescribed can be applied and not any other provision. The Commissioner by issuing a circular has basically devised a new procedure contrary to the one provided under the statute, which is impermissible. Thus, the reliance placed on the Circular can be of no avail and the power to switch over to the confiscatory proceedings midway when the goods are detained in transit would not be available to the proper officer.
- 16 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022
108. In this case, the goods were intercepted while in transit on 13.09.2021 and the proper officer also passed an order of detention on 28.09.2021 (MOV-6) and on the passing of this order, the owner of the goods or the owner of the conveyance secured a right under Section 129 to get the goods released. However, the proper officer, thereafter proceeded to issue a notice of confiscation (MOV-10). Thus, the proper officer basically nullified the statutory right of the owner of the goods or the non-owner to get the goods released on compliance with the conditions specified in Section 129(1)
(a) to (c), which would render the entire confiscatory proceedings illegal.
122. 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. The power of confiscation being the ultimate and the most extreme punishment can only be invoked in extraordinary circumstances, and definitely not when the goods are detained in transit, given the design of the statutory framework. It is to be noticed here that the statute consciously leans towards giving an opportunity to the wrongdoer to rectify his wrongs voluntarily.
129. In my view, 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
- 17 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 has dismissed the appeal without examining the statutory scheme of the Act. I am therefore of the view that impugned orders cannot be sustained and the same are quashed. The question that is framed is accordingly answered in the negative."
8. As can be seen from the impugned order, the learned Single Judge has held that the entire procedure adopted by the appellants to convert detention proceedings into confiscation proceedings leading to the impugned confiscation order was wholly illegal and contrary to the statutory scheme of the CGST Act, which had been mechanically accepted by the Appellate authority which dismissed the appeal and consequently, the learned Single Judge quashed the impugned confiscation order and the order of the Appellate authority and allowed the writ petition.
9. Before adverting to the rival contentions, it would be necessary to extract Sections 129 and 130 of the CGST Act, which were in force during the relevant period from 13.09.2021 to 31.12.2021; as stated supra, Sections 129 and 130 were amended vide Finance Act 2021 w.e.f. 01.01.2022.
" 129. Detention, seizure and release of goods and conveyances in transit.
- 18 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 (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 a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,-
-
(a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;
(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;
(C )upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:
Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
- 19 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 (2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).
(4) No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.
(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub- section (3) shall be deemed to be concluded. (6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:
Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fourteen days may be reduced by the proper officer.
130. Confiscation of goods or conveyances and levy of penalty.
(1) Notwithstanding anything contained in this Act, if any person--
- 20 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022
(i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(ii) does not account for any goods on which he is liable to pay tax under this Act; or
(iii) supplies any goods liable to tax under this Act without having applied for registration; or
(iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(v) uses any conveyance as a means of tansport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.
(2) Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit:
Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon:
Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129:
- 21 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon.
(3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.
(4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard.
(5) Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government.
(6) The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession.
(7) The proper officer may, after satisfying himself that the confiscated goods or conveyance are not required in any other proceedings under this Act and after giving reasonable time not exceeding three months to pay fine in lieu of confiscation, dispose of such goods or
- 22 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 conveyance and deposit the sale proceeds thereof with the Government. "
10. In this context, it is relevant to state Rule 138 to Rule 141 of the CGST Rules, 2017 prescribe the procedure for movement of goods, detention, seizure etc. The appellants have also issued Forms GST MOV - 1 to GST MOV - 11 in this regard.
11. In the instant case, it is an undisputed fact that on 13.09.2021, the subject vehicle and goods were intercepted and Form GST MOV-01 recording the statement of the concerned person in-charge of the goods and conveyance was issued.
Pursuant to which, the appellants passed an order in Form GST MOV-02 directing physical verification / inspection of the subject conveyance, goods and documents, which was followed by a physical verification report in Form GST MOV-04 on 17.09.2021.
12. On 27.09.2021, the statement of the respondent was recorded, pursuant to which, the detention order in Form GST MOV-06 was issued by the appellants on 28.09.2021. In this context, the procedure prescribed under Section 129(3) of the CGST Act would require a Notice to be issued by the appellants in Form GST MOV-07 calling upon the respondent to show cause as
- 23 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 to why the proposed tax and penalty should not be payable by the respondent, failing which, further proceedings under the Act and the Rules shall be initiated against him; Section 129(4) contemplates an opportunity of being heard to the respondents before issuing the notice determining tax, interest and penalty under Section 129(3). Pursuant to the same, the appellants can proceed to pass an order for payment of tax and penalty under clauses (a) (b) or (c) of Section 129(1) of the CGST Act by passing an order in terms of Form GST MOV-09 calling upon the respondent to make payment; Section 129(5) contemplated that upon such payment, the respondent would be entitled to seek release of the goods and conveyance in terms of Section 129(1) and all proceedings in respect of the Notice under Section 129(3) shall be deemed to be concluded.
13. Section 129(2) of the CGST Act contemplated that after passing detention order under Section 129(1) of the CGST Act, in addition to the procedure prescribed under Section 129(3), (4) and (5), it was permissible for the respondent to seek provisional release of the goods in terms of Section 67(6) of the CGST Act as contemplated under Section 129(2) by submitting a Bond as per
- 24 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 Form GST MOV - 08; in other words, apart from participating in the proceedings initiated pursuant to detention order under Section 129(1) culminating in payment of tax, interest and penalty and obtaining release of the goods and vehicle and conclusion of proceedings under Section 129(5), it was also open for the respondent - assessee to seek provisional release under Section 129(2) r/w Section 67(6) of the CGST Act.
14. As stated supra, the detention order issued under Section 129(1) of the CGST Act in Form GST MOV-06 would have the effect of initiation of proceedings under Section 129 and the said proceedings would necessarily have to continue till the same culminate / conclude as per Section 129(5) of the Act. In this context, it is necessary to re-iterate Section 129(6) of the CGST Act during the relevant period, which reads as under:-
"Section 129(6) - Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within 14 days of such detention / seizure, further proceedings shall be initiated in accordance with the provisions of Section 130:
Provided, that where the detained or seized goods are perishable or hazardous in nature or likely to depreciate in
- 25 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 value with passage of time, the said period of 14 days may be reduced by the proper officer".
15. A harmonious construction / interpretation of Section 129(6) read with the remaining provisions of Section 129 of the CGST Act will lead to the unmistakable conclusion that it is only after expiry of the period of 14 days from the date of detention or seizure that the appellants would be entitled to initiate confiscation proceedings under Section 130 of the CGST Act; in the instant case, it is an undisputed fact that the detention order under Section 129(1) in Form GST MOV-06 was passed on 28.09.2021 and on the very next day i.e., 29.09.2021 without waiting for the prescribed period of 14 days as contemplated under Section 129(6) of the CGST Act referred to supra, the appellants have proceeded to initiate confiscation proceedings which are clearly illegal, arbitrary and without jurisdiction or authority of law and contrary to the aforesaid provisions and the same have been rightly quashed by the learned Single Judge.
16. The procedure prescribed under Section 129 of the CGST Act read with the relevant Forms in relation to interception of conveyances and goods, their seizure / detention and their release
- 26 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 prior to amendment vide Finance Act 2021 w.e.f. 01.01.2022 can be summarized as under:-
• The appellants were entitled to intercept any conveyance and goods in transit and record the statement of their owner / driver / person in-charge by issuing Form GST MOV-01.
• The appellants could pass an order for physical verification / inspection of the conveyance, goods and documents by issuing Form GST MOV-02 within a period of three working days.
• Further, the proper officer of the appellants was entitled to seek extension of time by issuing an order in Form GST MOV-03.
• After physical verification of the goods and conveyance, the appellants would issue a report in Form GST MOV-04 .
• Thereafter, the appellants were entitled to invoke Section 129(1) of the CGST Act and pass an order of detention by issuing Form GST MOV-06.
- 27 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 • After passing an order of detention by issuing Form GST MOV-06, the appellants had to provide an opportunity to the respondents of being heard before determination of tax, interest or penalty in terms of Section 129(4); needless to state that the requirement of providing an opportunity of being heard would include notifying the respondent and hearing him before proceeding further.
• After following the procedure provided under Section 129(4) and hearing the respondent and determining the tax, interest or penalty, the appellant had to invoke Section 129(3) and issue a show cause notice in Form GST MOV-07 to the respondent calling upon him to show cause as to why he should not pay the determined amount and / or to furnish a reply in this regard.
• After compliance of the procedure under Section 129(3) referred to supra and providing an opportunity to the respondent, the appellants had to pass an order of demand of tax and penalty to the respondent by issuing Form GST MOV-09.
• Upon issuance of an order in Form GST MOV-09, the respondent was entitled to seek release of goods after
- 28 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 compliance of the requirements contained in Section 129(1)
(a), (b) or (c), pursuant to which, a release order could be passed by the appellants releasing the conveyance and goods by issuing Form GST MOV-05.
• In addition to the procedure prescribed above, the respondent was also entitled to seek provisional release in terms of Section 129(2) r/w Section 67(6) of the CGST Act by submitting a Bond in Form GST MOV-08, pursuant to which, he would be entitled to provisional release of the goods and conveyance.
• As stated earlier, Section 129(6) provided a period of 14 days for conclusion of detention proceedings initiated under Section 129(1) which come to an end upon payment of the amount as is clear from Section 129(5) of the CGST Act;
to put it differently, detention proceedings commence under Section 129(1) by passing a detention order in Form GST MOV-06 and come to a conclusion by virtue of Section 129(5) upon release of the goods and conveyance by issuance of release order in Form GST MOV-05 and a period of 14 days was prescribed for the said procedure / process at the relevant point in time.
- 29 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 • The statutory scheme referred to above clearly indicates that the proceedings initiated under Section 129(1) would commence from the date of detention and expire only after 14 days as contemplated under Section 129(6) of the CGST Act; consequently, the appellants would be entitled to invoke and resort to confiscation proceedings under Section 130 of the CGST Act only after 14 days from the date of the detention order and not earlier.
17. Under these circumstances, we are of the considered opinion that the learned Single Judge was fully justified in coming to the conclusion that in the face of the undisputed fact that the detention order was passed on 28.09.2021, the impugned confiscation order which was passed on the very next day i.e., on 29.09.2021 before expiry of the prescribed period of 14 days was clearly illegal and unsustainable in law.
18. A perusal of Section 130 will indicate that confiscation proceedings could be initiated by issuing a Notice for confiscation of goods or conveyance and levy of penalty in Form GST MOV-10 to the respondent; for ease of reference, the same is extracted hereunder:-
- 30 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 "GOVERNMENT OF INDIA FORM GST MOV - 10 NOTICE FOR CONFISCATION OF GOODS OR CONVEYANCES AND LEVY OF PENALTY UNDER SECTION 130 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 READ WITH THE RELEVANT PROVISIONS OF STATE/UNION TERRITORY GOODS AND SERVICES TAX ACT, 2017 / THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017 AND GOODS AND SERVICES TAX (COMPENSATION TO STATES) ACT, 2017 The conveyance bearing No. was intercepted by (Designation of the proper officer) on (date) at ( time ) at (place). The statement of the driver/person in chargeof the vehicle was recorded on (date).
2. T he goods in movement was inspected under the provisions of subsection (3) of section 68 of the Central Goods and Services Tax Act, 2017 read with subsection (3) of section 68 of the State Goods and Services Tax Act / Section 21 of the Union Territory Goods and Services Tax Act or under section 20 of the Integrated Goods and Services Tax Act read with subsection (3) of section 68 of the Central Goods and Services Tax Act on
3. ( date) and the following discrepancies were noticed.
(i)
(ii)
(iii)
4. n view of the above, the goods and conveyances used for the movement of goods were detained under sub- section (1) of section 129 of the Central Goods and Services Tax Act, 2017 read with subsection (3) of section 68 of the State/ Union Territory Goods and Services Tax Act or under section 20 of the Integrated Goods and Services Tax Act read with subsection (3) of section 68 of the Central Goods and Services Tax Act by issuing an order of detention in FORM GST MOV 06 and the same was served on the person in charge of the conveyance on (date). Along with the order of detention in FORM GST MOV 06, a notice was issued in FORM GST MOV 07 under the provisions of sub-section (3) of section 129 of the Central Goods and Services Tax Act, 2017, specifying the tax and penalty payable in respect of the goods in question.
5. Subsequently, after observing the principles of natural justice, an order demanding the applicable tax and penalty was issued in FORM GST MOV-09 on (Date) and the same was served on the person in charge of the conveyance. However, neither the owner of the goods nor the person in charge of the conveyance came forward to make the payment of applicable tax and penalty within the time allowed in the order passed supra.
6. In view of this, the undersigned proposes to confiscate the above goods and the conveyance used to transportsuch goods under the provisions of section 130 of the Central Goods and Services Tax Act, 2017 read with State Goods and Services Tax Act / section 21 of the Union Territory Goods and Services Tax Act or section 20 of the Integrated Goods and Services Tax Act, 2017/Goods and
- 31 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 Services Tax (Compensation to States) Act, 2017. In addition, you are liable to pay the tax, penalty and other charges payable in respect of such goods and the conveyance.
OR As the goods were transported without any valid documents, it is presumed that the goods were being transported for the purposes of evading the taxes. In view of this, the undersigned proposes to confiscate the above goods and the conveyance used to transport such goods under the provisions of section 130 of the Central Goods and Services TaxAct, 2017 read with the relevant provisions of the State Goods and Services Tax/Union Territory Goods and Services Tax Act, the Integrated Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, 2017. In addition, you are liable to pay the tax, penalty and other charges payable in respect of such goods and the conveyance.
7. The calculation of proposed tax and penalty is as under:
1) CALCULATION OF TAX XXXXXXXXXXXX
2) CALCULATION OF PENALTY xxxxxxxxxxxx
3) DETERMINATION OF FINE IN LIEU OF CONFISCATION OF GOODS xxxxxxxxxxxxxxx
4) CALCULATION OF FINE IN LIEU OF CONFISCATION OF CONVEYANCE
8. You are hereby directed to show cause, within seven days from the receipt of this notice, as to why the goods in question and the conveyance used to transport such goods shall not be confiscated under the provisions of section 130 of the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, 2017 and why the tax, penalty and other charges payable in respect of such goods and the conveyance shall not be payable by you.
9. You are hereby directed to appear before the undersigned on DD/MM/YYYY at HH/MM.
10. If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex- parte on the basis of available records and on merits.
Signature Name and Designation of theProper Officer To, Shri Driver/Person in charge Vehicle/Conveyance No:
Address:
- 32 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022
19. A perusal of the aforesaid Form GST MOV-10 will clearly indicate that before initiating confiscation proceedings, it was incumbent upon the appellants to follow the procedure prescribed under Section 129 of the CGST Act referred to supra and only after exhausting the said process, the appellants were entitled to initiate confiscation proceedings under Section 130 by issuing Form GST MOV-10. However, in the instant case, a perusal of the confiscation Notice in Form GST MOV-10 dated 29.09.2021 clearly indicates that the procedure under Section 129 by issuing Form GST MOV-06, Form GST MOV-07 and Form GST MOV-09 had evidently not been followed by the appellants before issuing Form GST MOV - 10; further, the said confiscation notice does not even refer to the detention order in Form GST MOV-06 dated 28.09.2021, the day immediately prior to issuance of the confiscation notice on 29.09.2021. It is therefore clear that the procedure and period of 14 days prescribed under Section 129(1) to (6) of the CGST Act was a mandatory requirement / sine qua non prior to initiation of confiscation proceedings under Section 130 by issuing Form GST MOV - 10. Viewed from this angle also, we are of the considered opinion that the learned Single Judge came to the correct conclusion that without exhausting / completing
- 33 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 / following the mandatory requirements of detention proceedings under Section 129 of the CGST Act for a period of 14 days, the impugned confiscation notice dated 29.09.2021 issued the very next day after issuance of the detention order dated 28.09.2021 was clearly illegal, arbitrary and without jurisdiction or authority of law and has been rightly quashed by the learned Single Judge.
20. The learned Single Judge has also recorded a finding that the Circular dated 13.04.2018 issued by the appellants would not override the statutory requirements and procedure under Section 129 of the CGST Act and if there was a conflict between the statutory provisions and the said Circular, the provisions would necessary have to prevail and consequently, the learned Single Judge held that no reliance could have been placed upon the said Circular by the appellants in support of their claim. In our considered opinion, in the facts of the instant case, having regard to the amendment to Sections 129 and 130 of the CGST Act vide Finance Act 2021 w.e.f. 01.01.2022, the said issue / question with regard to conflict between the Circular and Section 129 / 130 and as to which would prevail has been rendered academic and we
- 34 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 deem it just and appropriate to leave open the said question which is not germane for adjudication of the present appeal.
21. At any rate, a perusal of the said Circular dated 13.04.2018 would also indicate that the same does not confer absolute or unfettered powers upon the appellants to bypass the procedure and requirements of Section 129 and directly initiate confiscation proceedings under Section 130 of the CGST Act. In the present case, the undisputed fact that the detention order was passed on 28.09.2021 and the confiscation proceedings were sought to be initiated on the very next day, i.e., 29.09.2021 and the material on record which does not indicate formation of any opinion by the appellants that the movement of the subject goods by the respondent was being effected to evade payment of tax so as to justify confiscation leads to the sole inference that the appellants were not entitled to initiate confiscation proceedings in a hurried manner and without there being sufficient or valid grounds or change the circumstances within the short gap / period of one day between 28.09.2021 and 29.09.2021.
22. Under these circumstances, we leave open the said issue / question as regards the prevailing provisions of Section 129
- 35 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 and 130 as on 28-29.09.2021 and the Circular dated 13.04.2018 to be decided in an appropriate case.
23. Insofar as reliance placed on the judgment of the Gujarath High Court in Synergy's case supra, which was followed by a learned Single Judge of this Court in Meghdoot Logistics case supra, with due respect to the learned Judges, having regard to our analysis and findings recorded above, we are unable to agree with the said view; at any rate, having regard to the fact that Section 129 and 130 has been substantially amended vide Finance Act 2021 w.e.f. 01.01.2022, findings recorded in the present order as well as the findings recorded by the learned Single Judge in the impugned order and also the aforesaid judgments would obviously relate to and stand restricted only to the period prior to 01.01.2022 and not subsequently and as such, the same does not need further elaboration and is neither relevant nor germane for adjudication of the present appeal and accordingly, the said contention urged by the appellants cannot be accepted.
24. In view of the aforesaid facts and circumstances and for the reasons stated hereinbefore, we do not find any infirmity or illegality with the impugned order nor can the same be said to be
- 36 -
NC: 2023:KHC-D:11299-DB WA No. 100403 of 2022 capricious or perverse warranting interference by this Court in the present appeal.
25. Accordingly, the appeal is hereby dismissed. The appellants - Revenue are directed to comply with the directions issued in the impugned order as expeditiously as possible and at any rate within a period of four weeks from the date of receipt of a copy of this order.
Sd/-
JUDGE Sd/-
JUDGE Srl.