Gujarat High Court
Makwana Enterprise vs State Of Gujarat on 29 October, 2021
Author: Sonia Gokani
Bench: Sonia Gokani
C/SCA/13407/2021 ORDER DATED: 29/10/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 13407 of 2021
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MAKWANA ENTERPRISE
Versus
STATE OF GUJARAT & 1 other(s)
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Appearance:
UCHIT N SHETH(7336) for the Petitioner(s) No. 1
MS MAITHILI MEHTA AGP (5) for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MR. JUSTICE HEMANT M.
PRACHCHHAK
Date : 29/10/2021
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
1. The petitioner before this Court seeking quashment of the detention order in Form GST MOV 6 and the confiscation notice in Form GST MOV 10 with the following prayers.
"A. This Hon'ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order quashing and setting aside impugned detention order in Form GST MOV 6 (annexed at Annexure A) as being wholly without jurisdiction, arbitrary and illegal;
B. This Hon'ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order quashing and setting aside impugned confiscation notice in Form GST MOV 10 (annexed at Annexure B) as being wholly without jurisdiction, arbitrary and illegal;
C. This Hon'ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the 2nd Respondent authority to forthwith release goods along with truck number GJ-10-TX-6465;
D. Without prejudice to the above and in the alternative this Hon'ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any Page 1 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022 C/SCA/13407/2021 ORDER DATED: 29/10/2021 other appropriate writ or order directing the 2nd Respondent authority to forthwith provisionally release of goods along with truck number GJ-10-TX- 6465;
E. Pending notice, admission and final hearing of this petition, this Hon'ble Court may be pleased to direct the 2nd Respondent authority to forthwith release goods along with truck number GJ-10-TX-6465 and further proceedings pursuant to impugned confiscation notice (annexed at Annexure B) may please be stayed.
F. Ex parte ad interim relief in terms of prayer E may kindly be granted;
G. Such further relief(s) as deemed fit in the facts and circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioners shall forever pray.
2. Brief facts of the present case are as follows:-
2.1 The petitioner is engaged in the business of trading in brass scrap and is registered under the Central / Maharashtra Goods and Services Tax Act, 2017 (hereinafter be referred to as "the GST Act").
2.2 On 05.09.2021, when the petitioner was transporting the goods from the State of Maharashtra to the State of Gujarat, according to the petitioner, the goods were accompanied by tax invoice and transport receipt as well as e-way bill.
2.3 On 06.09.2021, there was transit by respondent No.2 and the driver of the vehicle duly produced the invoice as well as e-
way bill of the petitioner and documents in respect of other goods which were being transported.
2.4 On 06.09.2021, the requisite documents were produced, order for physical verification was passed in Form GST MOV 2.
Page 2 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022C/SCA/13407/2021 ORDER DATED: 29/10/2021 Thereafter, physical verification report was issued in Form GST MOV 4 wherein no discrepancy was found in the documents vis- a-vis the goods being transported. The confiscation notice in the Form GST MOV 10 had been issued on 09.09.2021 straightway under Section 130 of the GST Act on the ground that there were discrepancies in respect of some post transactions of the buyer and the buyer had claimed some wrongful input tax credit.
2.5 The petitioner inquired with the buyer through email regarding the allegations made in the confiscation notice, no proceedings whatsoever had been initiated against the buyer under the GST Act on 11.09.2021.
2.6 On 13.09.2021, the petitioner strongly objected to the detention of the goods and confiscation notice. The Circular of CBIT No.41/2018 dated 13.04.2018 has been relied upon by the petitioner wherein the Central Board of Indirect Taxes (CBIT) and Customs clarified that once documents tendered along with the goods, which found to be in order, the authority was bound to allow the conveyance to proceed.
2.7 The reliance is placed on the decision of this Court in the case of Shri Anant Jignesh Shah Vs. Union of India, Special Civil Application No.12712 of 2020 decided on 06.11.2020.
2.8 It is alleged that the illegal action has been taken by the petitioner. Considering the gravity, the Court may interfere.
3. Affidavit-in-reply has been filed by the State Tax Officer. It has denied all allegations. It is the say of the respondent that the goods and conveyance in transit was taken to nearby hotel for physical verification and on the very same day the transporter of the vehicle produced the invoices and e-way bills. The physical Page 3 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022 C/SCA/13407/2021 ORDER DATED: 29/10/2021 verification report was issued by the State Tax Officer in Form of MOV 4, thereafter, an order of detention of goods was passed by the said officer under Section 129 of GST Act in Form of GST MOV
6. 3.1 The main contention in this affidavit is that the transactions of buyer i.e. Mitesh Enterprise, Jamnagar especially for assessment year 2020-2021 wrongly availed input tax credit by producing fake bills in transactions and, therefore, the MOV 10 has been issued on 06.09.2021 under Section 130 of the GST Act. It is alleged that the claim of third party which reveals evasion of tax resulting into wrongful availment of input tax credit.
4. We have heard Mr.Uchit Sheth, learned advocate for the petitioner and Ms.Maithili Mehta, learned Assistant Government Pleader for the respondent - State.
5. Mr.Uchit Sheth, learned advocate for the petitioner has, while relying upon the decision in the case of Insha Trading Company Vs. State of Gujarat, [2019] 71 GSTR 337 (Guj), urged that there was no authority with the respondents to seize the vehicles and the goods and there was no discrepancy in the documents furnished. He has also relied upon the decision in the case of Mahadev Enterprise Vs. State of Gujarat and another, [2016] 92 VST 360 (Guj).
6. The otherside has urged that the buyer has wrongly availed the input tax credit. It was necessary for the authority to intervene the vehicle as the delivery was to be made to buyer, who had taken advantage of the provisions of the law and that needed check.
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7. Reliance is placed in the case of Majid Bilalbhai Akbani Vs. State of Gujarat, [2021] 124 taxmann.com 524 (Gujarat). It was a case where the goods were in transit and the driver had produced e-way bills and tax invoices. The concerned authority had found that the transaction was suspicious for obtaining bogus bills and thus, the goods were intercepted and a show-cause notice had been issued upon the applicant. Considering the fact that when the vehicle was intercepted, driver was able to produce a valid e-way bill and the invoices, goods and conveyance were ordered to be released till the final outcome of confiscation. The relevant paragraphs of the said decision in the case of Majid Bilalbhai Akbani (supra) are profitably reproduced hereunder:
14. Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that we should not interfere at this stage of show cause notice as the inquiry is in progress.
However, considering the fact that when the vehicle was intercepted, the driver wasable to produce a valid E-way bill and also the invoice, at least, the goods and the conveyance should be ordered to be released subject to the final outcome of the confiscation.
15. We do not propose to observe anything further as the same may cause prejudice to either of the parties. We dispose of this writ application with a direction to the respondent No.2 to release the vehicle and the goods after obtaining a bond of Rs.11,73,480/- from the writ applicant. The inquiry with respect to Form GST MOV-10 shall proceed further in accordance with law.
8. In the case of Insha Trading Company (supra), the Court ha held that the detention order having issued without verification / inception of the goods and conveyance. The Court noticed that there was no mention of any discrepancy of bilty after verification and, therefore, no valid ground for detention of vehicle and hence, had quashed the order of levying tax and Page 5 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022 C/SCA/13407/2021 ORDER DATED: 29/10/2021 penalty and order of confiscation having been imposed by the authority.. The findings and observations of the said decision are as under:-
7.1 The facts have been noted hereinabove. The conveyance in question was transporting the goods being brass electrical parts from Jamnagar to Delhi. The consignor, viz. the petitioner, and the consignee are duly registered under the relevant GST Acts. On 14.01.2019, when the conveyance came to be intercepted, the driver of the conveyance had duly produced the e-way bill as well as the invoice in connection with the goods that were transported. On behalf of the respondents, nothing has been pointed out to show that there was any discrepancy in the e-way bill or the tax invoice. Under the circumstances, in the light of the instructions issued by the Board in the Circular dated 13.04.2018, since, upon verification of the documents no discrepancies were found, the conveyance was required to be allowed to move further. However, in case the third respondent desired to carry out physical verification of conveyance, goods and the documents, it was still permissible for him to detain the conveyance, and accordingly, the third respondent issued an order in Form GST MOV-02 for physical verification/inspection of the conveyance, goods and the documents. The said order passed on the ground that the genuineness of the goods in transit (its quantity etc.) and/or tendered documents requires further verification.
7.2 In terms of the Circular dated 13.04.2018, when the proper officer issues an order for physical verification, he is within twenty four hours of the issuance of Form GST MOV-
02, required to prepare a report in Part A of Form GST EWB-03 and upload the same on the common portal. It is further provided that within a period of three working days from the date of issue of the order in Form GST MOV-02, the proper officer shall conclude the inspection proceedings, either by himself or through any other proper officer authorized in this behalf and that, where the circumstances warrant such time to be extended, he shall obtain a written permission in Form GST MOV-03 from the Commissioner or an officer authorized by him for extension of time beyond three working days and a copy of the order of extension is required to be served on the person in charge of the conveyance. The circular further provides that on completion of physical verification/inspection of the conveyance and goods in movement, the proper officer Page 6 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022 C/SCA/13407/2021 ORDER DATED: 29/10/2021 shall prepare a report of such physical verification in Form GST MOV-04 and serve a copy of the said report to the person in charge of the goods and conveyance. The proper officer shall also record, on the common portal, the final report of the inspection in Part B of Form GST EWB-03 within three days of such physical verification/inspection. Thus, when the conveyance was detained for the purpose of inspection, it was incumbent upon the third respondent to prepare a report in Form GST EWB-03 and upload the same on the common portal within twenty four hours from issuance of Form GST MOV-02 and upon completion of physical verification, he was further required to prepare a report in Form GST MOV-04 and serve a copy of the said report to the person in charge of the goods and conveyance and thereafter record the final report of the inspection in Part B of Form GST EWB-03 within three days of such physical verification. However, in the facts of the present case, no such reports in Part A of Form GST EWB- 03, Form GST MOV-04 or Part B of Form EWB-03 have been prepared. Thus, it appears that though the vehicle was detained for the purpose of carrying out inspection, no such inspection was carried out or that upon physical verification no discrepancy was found in the conveyance/goods or documents. Clause (g) of the above referred circular requires that where no discrepancies are found after the inspection of the goods and conveyance, the proper officer shall issue forthwith a release order in Form GST MOV-05 and allow the conveyance to move further. The clause further provides that when the proper officer is of the opinion that the goods and conveyance need to be detained under section 129 of the CGST Act, he shall issue an order of detention in Form GST MOV-06 and a notice in Form GST MOV-07 in accordance with the provisions of subsection (3) of section 129 of the CGST Act, specifying the tax and penalty payable and such notice is required to be served on the person in charge of the conveyance. In the facts of the case, despite the fact that no discrepancy appears to have been found after the inspection of the goods and conveyance, the proper officer has not issued a release order in Form GST MOV-05. Further, despite the fact that Form GST MOV-02 was issued, without verification/inspection of the goods and conveyance, the third respondent has issued an order of detention in Form GST MOV-06 on the same day, that is, on 14.01.2019, on the ground that upon a perusal of the details in bilty No.15615, the same being disproportionate, the vehicle is required to be detained for verification of the same.
Page 7 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022C/SCA/13407/2021 ORDER DATED: 29/10/2021 7.3 In the affidavit-in-reply, there is not even a whisper regarding any discrepancy having been found in bilty No.15615 after verification, despite the fact that the conveyance has been detained for that purpose. Thus, it appears that, there is no valid ground for detention of the vehicle in question on the part of the respondents. Under the circumstances, the question of calling upon the petitioner to pay the tax, penalty and fine, as computed by the respondent in the order of demand of tax and penalty in Form GST MOV-09 dated 29.01.2019 does not arise.
7.4 Despite the aforesaid position, the third respondent has proceeded further and issued a notice under section 130 of the CGST Act in Form GST MOV 10, and has thereafter, passed an order of confiscation under section 130 of the Act in Form GST MOV-11. The reason for passing such an order has got nothing to do with the reasons for which, the goods and conveyance were initially detained. The reasons for issuance of the notice for confiscation under section 130 of the CGST Act in Form GST MOV-10 are that upon preliminary verification of the dealer online, 42 e-way bills have been generated in December 2018, wherein, IGST has been shown to Rs.3,64,30,800/- and it appears that, dealers has not paid the same or that the purchases are not genuine. If that be so, nothing prevents the respondents from taking appropriate action against petitioner in accordance with law under the relevant provisions of the CGST Act. However, when the conveyance in question was carrying the goods which were duly accompanied by documents and no discrepancy was found in connection therewith, there was no reason for the third respondent to confiscate the same. The impugned order of confiscation passed by the third respondent under section 130 of the CGST Act, therefore, cannot be sustained.
The Court is emphasized that when there are no anomalous documents having discrepancies noticed in the documents which had been carried by the vehicle while carrying the goods, there is no reason for the respondent to confiscate the same and, therefore, the order of confiscation was not sustained.
9. In the case of Mahadev Enterprise (supra), the Court has held that each matter has to be decided on its own facts and the Page 8 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022 C/SCA/13407/2021 ORDER DATED: 29/10/2021 Tribunal while deciding the case of one party cannot place reliance upon the facts which have come to its knowledge only in another proceeding and apply them to a third party who has no connection with those proceedings. The Court found that there was a complete absence of any materials on record establishing the transaction made being non-genuine. There was also no material to show that the dealer, at any point of time, had been called upon to establish the genuineness of such transactions or to produce any documentary evidence. In this background, the Court had allowed the petition. The relevant findings are as follows:
15. As discussed hereinabove, input tax credit cannot be denied to a party in the absence of the Department having established that the transactions in question are not genuine or that they are bogus etc. In the facts of the present case as emerging from the record, no such material has been brought on record by the respondent. In the facts of the present case, the revisional authority had initiated the revision proceedings by calling upon the petitioner to show-cause as to why the input tax credit on the purchases made by it from M/s. Om Incorporation for the period after 1st January, 2007 should not be disallowed. The petitioner, at no point of time, was called upon to establish the genuineness of such transactions or to produce any documentary evidence in support of such transactions. The revisional authority, without calling upon the petitioner to produce any such documents, had recorded a finding that the petitioner had not produced any documents in the nature of sale bills, L.R., weigh bridge chits, entry gate pass etc. to establish transfer of goods to it from M/s. Om Incorporation. The Tribunal has gone a step further and has placed reliance upon material produced by the respondent directly before it, that too, regarding M/s. Om Incorporation, and has recorded a finding that the transactions are not genuine and that the petitioner has acted in collusion with M/s. Om Incorporation for evasion of tax. In the opinion of this court, there was no justification for the Tribunal to record such findings of fact which were not based upon material forming part of the record of the order of the subordinate authority, but upon material produced by the respondent directly before the Page 9 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022 C/SCA/13407/2021 ORDER DATED: 29/10/2021 Tribunal.
10. Adverting to the facts on hands, it is not in dispute that the goods along with the vehicle, when were in transit, was stopped by respondent No.2 and the driver had produced the invoice and e-way bill and other documents as required by the authority concerned. There was also an order for physical verification passed in Form GST MOV 2 and the report was issued in the form of GST MOV 4. It is not in dispute that there was absence of discrepancies and anomalies in the documents when compared with the goods which were being transported. The only ground was the vehicle and goods had been seized, was because of the credential of the buyer to whom were goods being sent. In this case, it is alleged that the buyer, in the past, had taken wrong credit. The buyer also responded to the email sent by the petitioner that no proceedings had been initiated against him under the GST Act in relation to the claim of input tax credit in respect of the past transactions and yet, that is the ground for initiation of action.
11. Section 68 of the GST Act which empowers the authority concerned to intercept the vehicle and the goods. The said provision of Section 68 is required to be reproduced.
"68. Inspection of goods in movement.
(1) The Government may require the person in charge of a conveyance carrying any consignment of goods of value exceeding such amount as may be specified to carry with him such documents and such devices as may be prescribed.
(2) The details of documents required to be carried under sub-section (1) shall be validated in such manner as may be prescribed.
(3) Where any conveyance referred to in sub-section (1) Page 10 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022 C/SCA/13407/2021 ORDER DATED: 29/10/2021 is intercepted by the proper officer at any place, he may require the person in charge of the said conveyance to produce the documents prescribed under the said sub-
section and devices for verification, and the said person shall be liable to produce the documents and devices and also allow the inspection of goods."
12. As can also be seen from the materials placed on record that the documents of the goods produced are in order. We could also notice that as per Circular No.41/2018 dated 13.04.2018 and the provisions of the GST Act, a request was made to release the goods and vehicle and in absence of any discrepancies. It is a case of confiscation of the goods and the vehicle on the basis of the past transaction with the buyer, this Court in the case of Shri Anant Jignesh Shah Vs. Union of India, Special Civil Application No.12712 of 2020 addressed the similar issue where the authority proposed to confiscate the goods and the vehicle which was not held tenable under the law. The show-cause notice was issued on assumption that the driver of the vehicle might have indulged in the past in contravention of the provision of the Act and Rules. The Court has held that confiscation would not be permitted on such grounds.
13. Considering the e-way as well as invoices produced by the driver, since, are in order, the goods and the conveyance are ordered to be released. Resultantly, this petition is allowed directing release of goods and conveyance. However, the show-cause notice of inquiry against the purchaser which has been initiated, there shall be no interference. Without opining anything on merits and without intervening show-cause notice that may be contemplated against the said buyer as well as qua the present petitioner in that regard (if any), this petition is allowed.
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14. There has been insistence on the part of the learned Assistant Government Pleader Ms.Maithili Mehta for taking bond from the present petitioner, as according to her, once the vehicle and the goods are released, there is hardly be cooperation on the part of the petitioner which has been expected. She is also agreeable to the process in the case of Majid Bilalbhai Akbani (supra) where against the petitioner, the show-cause notice has been issued and he was before this Court for release of the vehicle. It was also the case where the petitioner had entered into numerous bogus transactions in earlier for which the inquiry was in progress and, therefore also, writ applicant was directed to cooperate in the inquiry.
In Such circumstances, the Court had directed for bond from the writ applicant.
15. We could notice that in the case of Majid Bilalbhai Akbani and Shri Anant Jignesh Shah, the release of the vehicle and the goods has been without a bond. The petitioner has, in the past, transacted with the purchaser, who is alleged to have availed wrongly input tax credit. That inquiry is pending where support of the present petitioner would be necessary. However, to insist upon, such bond, at this stage, when otherwise in relation to the present petitioner there is nothing contrary, the request is not found sustainable.
16. The petition stands disposed of accordingly.
(SONIA GOKANI, J) (HEMANT M. PRACHCHHAK,J) V.R. PANCHAL Page 12 of 12 Downloaded on : Mon Jan 17 05:04:50 IST 2022