Case-K.M. Trans Logistics (P.) Ltd [2020] 117 taxmann.com 609 (AAAR-RAJASTHAN)

1. Facts:

Appellant is engaged in providing transport services to various manufacturers of motor vehicles for carrying their vehicles from factory to various cities in India where authorised dealers are located. The appellant stated that goods will be transported using its own vehicles/lorries under E-way Bill Rules but there will be no generation of consignment note and therefore, is claiming that the services are out of the purview of GST and will categories as non-taxable service.

2. Brief about the ruling of AAR:

Appellant had filed application Rajasthan Authority for Advance Ruling and sought Advance Ruling on whether Transportation by own vehicles on the basis of Invoice(s) and E-way Bill without issuing consignment note by Appellant Transporter will covered under exempted supply/non-GST supply.

It was held that to issue an E-way bill, it is mandatory to mention transport document number in Part A8 of EWay Bill. Without mentioning the same, e-way bill cannot be issued therefore it is mandatory for GTA to issue transport document and without issuing LR/GR/consignment note, goods cannot be transported. Therefore, contention of applicant of providing service without issuing LR/GR/consignment note is not correct and is not acceptable. In view of facts examined above, we find that applicant is a GTA service provider under GST Act and is not exempted from paying GST and thus liable to pay GST as provided under Notification No. 11/2017- Central Tax (Rate), dated 28.06.2017 (as amended) read with Notification No. 13/2017- Central Tax (Rate), dated 28.06.2017 (as amended).

3. Grounds of Appellant-

E-Way Bill format nowhere requires mandatory mentioning of Consignment Note No./LR/GR. Therefore, there is no requirement of mandatory issuing consignment note or LR/GR by transporter. E-Way Bill can be generated without generating Consignment note/LR/GR. Presently E-Way Bills are generated on GST portal without mentioning of Consignment note/LR/GR. The finding of Advance Ruling that without issuing Consignment note/LR/GR goods cannot be transported or E-Way Bill cannot be issued is wrong as practically on GST portal E-Way Bills are being generated without having consignment note/LR/GR. Since there is no consignment note issued, thus, the services are out of the purview of GST and will categorize as non-taxable service/non-GST supply.

4. Observation by AAAR-

a) Failure of Appellant to mention scope of activity, failure to provide agreement between consignor and consignee, failure to highlight why appellant would not be issuing any consignment note, Thus decision given by AAAR on the basis of whatever information available on record

• Appellant has not mentioned specifically about the exact scope of activities-

Appellant has simply stated that they will be transporting raw material to some exporting units. Except for this bare information, nothing has been mentioned by the appellant in the appeal to describe the exact nature of the activity proposed to be undertaken and the parties involved in the proposed activity. The relevant extract of the judgement is as follows:

“Except for this bare information, nothing has been mentioned by the appellant in the appeal to describe the exact nature of the activity proposed to be undertaken and the parties involved in the proposed activity”.

• Appellant neither specified scope of agreement between consignor and consignee and not they specified why they would not be issuing consignment note-

The proposed agreement containing details of responsibilities and rights of the parties to the agreement have not been submitted by appellant. They have also not explained as to why they will not be issuing the consignment notes especially when they are already in the similar business of transportation, through transportation of motor vehicles. The relevant extract of the judgement is as follows:

“The proposed agreement containing the details of the responsibilities and rights of the parties to the agreement have not been submitted by the appellant. They have also not explained as to why they will not be issuing the consignment notes especially when they are already in the similar business of transportation, through transportation of motor vehicles.”

The above information does not include information as to the consignor or consignee of the goods, whether they are different or the same persons and which of them will be entering into agreement with the appellant.

The peculiar fact mentioned by them is that they will not be issuing consignment note but they have not explained as to why they will not be issuing the consignment notes and what will be the document which will govern the terms of the transaction between the service provider and the service recipient.

• Appellant only emphasized that they would not be issuing consignment note and failed to provide any other document regarding scope of the agreement-

The appellant emphasized upon the fact that they will not be issuing consignment notes. Further, they have not mentioned the details of consignor and consignee of goods; rather they have simply stated that the activity will involve transportation of raw material for the exporting units. The relevant extract of the judgement is as follows:

“The above information does not include information as to the consignor or consignee of the goods, whether they are different or the same persons and which of them will be entering into agreement with the appellant.”

“The peculiar fact mentioned by them is that they will not be issuing consignment note but they have not explained as to why they will not be issuing the consignment notes and what will be the document which will govern the terms of the transaction between the service provider and the service recipient.”

• Appellant although mentioned that they are engaged in transportation of goods by road, but again they have not provided any details of other activities required for completing the main activity-

The main activity involving vehicles of the appellant which will be used for transport of goods by road has been mentioned by appellant in appeal but they have mentioned nothing about any other activities which may be required in connection with the main activity of the appellant. In that case, such other activities will be covered under ‘Supporting services in transport’ mentioned at SL. No. 11 of Notification No. 11/2017-Central Tax (Rate) Date 28-6-2017 (as amended from time to time), as the case may be, as per the exact nature of activities undertaken or services provided by them. The relevant extract of the judgement is as follows:

However, the appellant has emphasized upon the fact that they will not be issuing consignment notes. Further, they have not mentioned the details of consignor and consignee of goods; rather they have simply stated that the activity will involve transportation of raw material for the exporting units.

The main activity involving vehicles of the appellant which will be used for transport of goods by road has been mentioned by the appellant in the appeal but they have mentioned nothing about any other activities which may be required in connection with the main activity of the appellant.

• Decision by given by AAAR on the basis of whatever information available on record since the appellant failed to produce relevant information-

In order to ascertain exact nature of services to be provided by the appellant, examination of the contract/agreements between the appellant and service recipients is necessary. However, since no copy of agreement/contract was produced by the appellant or his authorized representative for examination, the case was decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted. The relevant extract of the judgement is as follows:

“However, we find that since no copy of agreement/contract produced before us by the appellant or his authorized representative for examination, the case is being decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted.”

b) Observation by AAAR from the webportal of Appellant-

It was observed by AAAR that the appellant is claiming on its official website (www kmtrans.in) that they are serving about 90% of car makers viz. Maruti Suzuki, Toyota, Tata, Hyundai, Mahindra etc., and are having Fleet Size of 1250, 35 branch offices, 32 loading stations, 80 service support. From this, it is clear that the appellant transporter is not from unorganized sector of transporters and has a vast network all over India for transportation of goods. They are providing services to various manufacturers of motor vehicles involving transportation of motor vehicles which are carried from the factory to the various cities in India where the authorised dealers are located.

c) Pre-requisites of any activity falling under GTA Services

• Issuance of Consignment Note and transfer of lien on goods from consignor to transporter and transporter of goods becoming responsible for transportation of goods till its safe delivery to the consignee –

It was observed by AAAR that consignment note is a document issued by a GTA against receipt of goods for the purpose of transporting goods by road in a goods carriage. Where a consignment note is issued, it implies that lien on the goods has been transferred and transporter of goods becomes responsible for transportation of goods till its safe delivery to the consignee. In such a situation, consignment note or any other document, by whatever name called, is simply a document showing the responsibility of the transporter and the rights of the persons for whom the goods are transported. By implication, it means that the transporter undertakes the responsibility to transport the goods and promises safe delivery of the goods at the destination. A consignment note is only a document by which the responsibilities and rights are reduced in writing and, therefore, existence or for that matter, absence of the said document cannot have any adverse effect on the responsibilities or rights as agreed between the parties. Further, consignee or consignor of the goods, whom services are provided, gets certain rights which can be exercised against the transporter in respect of transportation of the goods.

• Nomenclature of document is immaterial provided lien on the goods is transferred-

Ideally transporter issues document called consignment note or LR/GR etc. The document may be called anything but the rights and responsibilities of the Parties are governed by such document in the common trade practice. The activities as described by the appellant are those undertaken by a goods transport agency as can be seen from the brief description provided by them

d) Left with no other option, AAAR held the services provided by the appellant may fall under rental services in certain circumstances in case they would not be falling under GTA Services-

It can also be inferred that appellant will be providing their own vehicles either to raw material supplier or to exporting units for use in the transportation of goods which is raw material for the exporting units. In that case, appellant will be carrying out an activity which is in the nature of ‘rental services of transport vehicles with or without operators’, as can be inferred from submissions made by appellant. This conclusion also finds support from vehement argument of the appellant that they will not be issuing consignment notes. The relevant extract of the judgement is as follows:

“However, we find that since no copy of agreement/contract produced before us by the appellant or his authorized representative for examination, the case is being decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted.”

e) Appellant either engaged in GTA Services or Rental Services–

In the process of transportation of goods since appellant coming from organised sector, two types of services either by way of activity described as goods transport agency services or by way of rental services of transport vehicles can be provided. In the instant case of the appellant, if lien of the goods is transferred and the appellant becomes responsible for goods till its safe delivery to the consignee, services will be classifiable as goods transport agency services and issuance of consignment note or its non-issuance does not make any difference so far as the nature of the activity carried out by them is concerned. Mere non-issuance of the consignment note in such cases does not make them entitled for exemption from payment of GST. However, if the vehicles are provided to the client on rental for use as per their requirement, the services will be classifiable as rental services of transport vehicles’.

f) E-Way Bill format has no connection with deciding the liability of the appellant-

It was observed by AAAR that format of E-Way Bill, in whatever manner designed or amended, is not relevant for deciding the classification of the activity carried out by them. The nature of activity carried out by them is independent of format of E-Way Bill rather E-Way Bill format has no connection whatsoever, with the nature of activities undertaken. In any case, mere non-requirement of mentioning of any detail in E-Way Bill does not affect liability of payment of GST on any service unless the service has been exempted through an exemption Notification issued by the Government.

5. Held:

It was held by AAAR that services provided by appellant will be liable to payment of GST as specified under Notification No. 11/2017- Central Tax (Rate) dated 28-6-2017 (as amended) read with exemption Notifications, under the services relating to transportation of goods or rental services of transport vehicle including supporting service, depending upon the exact nature of activity to be carried out by them.

6. Comment

There are three significant things coming out of the above decision of AAAR and which at a point relief to the assessee but at the same time indicates something critical about the entire process of AAR/AAAR. The three critical pointers coming from the decision are as follows

1. A Major relief that E-Way Bill format has no connection with deciding the liability-

This is one of the major reliefs coming from judgement that E-Way Bill, in whatever manner designed or amended, is not relevant for deciding the classification of the activity carried out by them. There was an apprehension subsequent to the judgement of AAR that huge liability on assessee might be fixed treating the E-Way bills as consignment note. However, judgement comes as a relief and holds forth that the actual liability depends on the nature of transaction i.e. “substance” prevails over the “form”.

2. Purpose of issuing consignment note indicates lien on goods has been transferred to the transporter and transporter becomes responsible for goods till its safe delivery to the consignee-

The observation of AAAR regarding taxability of GTA Services was in line with the E-Flyer issued in respect of GTA Services and judgement in the matter of Balasubramanyam Saravana Perumal [2019] 111 taxmann.com 507 (AAR – ANDHRA PRADESH) wherein it was provided that  If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee. It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. As a corollary, the services provided by such individual transporters who do not issue a consignment note will be covered by the entry at s.no.18 of notification no.12/2017-Central Tax (Rate), which is exempt from GST.

3. Basic Purpose of AAR/AAAR gets defeated if the relevant information is not produced and authorities have to give decision on half-baked information and also become a major headache for other players in the same field and recipients to the services of that sector-

Its prominent to note that AAAR has multiple times observed that appellant did not mention about scope of activity, failed to provide agreement between consignor and consignee, failed to specify why appellant would not be issuing any consignment note. Therefore, AAAR had to specifically mention in their judgement that

“However, we find that since no copy of agreement/contract produced before us by the appellant or his authorized representative for examination, the case is being decided on the basis of whatever information has been provided and the nature of services i.e. Goods transport services Rental services of transport vehicles, Supporting services in transport etc. will be decided based on the information submitted.”

It would be apt to highlight that decision was given on whatever information was available on record. Although, its not clear that whether AAAR had to visit webportal of appellant due to insufficient information or otherwise, but inability to provide documents by applicant forces one to ponder that why at all application was filed before AAR/AAAR when applicant did not intend to provide complete information.

Forcing the authorities to given decision on half-baked information not only works against appellant but also against other players of sector and also against all recipients to services of that sector. The matter is not about high tax burden or lower tax burden because either way, it goes against the basic intention of legislature. Authorities in such cases are left with no option since it was an appeal against the decision of AAR and they had to give a decision on the appeal filed.

Further, since assessment proceedings have not yet started in GST till date and Tribunal has not been constituted, decisions of AAR/AAAR set the benchmark for common tax payers to decide about their liability and decisions based upon incomplete information provided is the last thing one needs to see in those decisions.

Case-Uttarakhand Forest Development Corporation-[2020] 117 taxmann.com 949 (AAR- UTTARAKHAND)

1. Facts:

Applicant was a Govt, body constituted under Act of State Assembly of Uttarakhand State. They are the sole agency for removal and sale of forest produce from entire forest area in Uttarakhand. Applicant after felling trees gets timber transported to its sale depots. For completion of such process, the transporter use their own trucks and sometimes the transporter hire the trucks for intended purpose. The applicant makes payment of transportation charges to one person who accepted the transport of goods on pre-decided rates by applicant.

The Modus Operandi adopted by the applicant is as follows:

a) Hiring of Truck Transporters by Applicant-Applicant hire truck transporter from open market accordingly as per availability of vehicles and get transported to its sales depot from road head.

b) Filling document called “Ravana” by the Applicant-Since the goods are unqiue in nature, therefore applicant itself fills Form 2.1 for transportation of goods which is called “Ravana”.

c) Characteristics of “Ravana”-

i) Form 2.1 is printed format of applicant to transport timber from one place to another.

ii) The said form carries details of material, vehicle no., name of driver & signature & other details.

d) Goods handed over to Transporter for transportation- The goods are handed over to transporter with signed Form 2.1.

e) Liability of Transporter to transport the goods safely- Transporter has liability to transport goods safely to the destination sales depot of applicant. The truck transporter after delivering the goods receives Form 3.3 from depot officer of applicant which proves that he has delivered the goods.

f) Verification of goods by Depot Officer and handed over to Logging Officer-The depot officer verifies the goods as per Form 2.1 and return the same to Logging officer who dispatched the goods to sale depots.

g) Final Payment to Transporter after verifying Form 2.1- Once verified Form 2.1 is received, Logging officer makes final payment to the transporter.

2. Query:

Following Questions were raised in terms of Notification no. 13/2017-Central Tax (Rate) dated 28-6-2017:

a) Whether a person, unregistered with GST, providing road transport services by his own truck as GTA for RCM under GST;

b) Will issuance of E-way bill, Form 2.1 & 3.3 by or to road transporter who is unregistered with GST, providing road transport services by his own truck, be treated as consignment note for GST-RCM purposes;

c) Whether a person, unregistered with GST providing road transport services by hiring trucks from third party, to applicant, will be treated as GTA for RCM under GST;

d) Will issuance of E-way bill, Form 2.1 & 3.3 by or to road transporter who is unregistered with GST providing road transport services by hiring trucks from third party be treated as consignment note for GST-RCM purposes.

3. Observation by AAR-

a) Term Consignment Note not defined- The term consignment note’ has not been defined in the Act or in the Notification either. In this context we take the help of Explanation to Rule 4B of Service Tax Rules, 1994 wherein the “consignment note” has been defined as a document provided by a goods transport agency against the receipt of goods for the transport of goods by roadways in a goods carriage. The document contains the details like serial number, name of the consigner and consignee, registration number of the goods carriage in which the goods are transported, details of goods being transported, details of the place of origin and destination, and the person who will be liable for the service tax payable from the consignor, consignee or the goods transport agency.

b) Document issued is having all details required for consignment note- It was observed by AAR that in the given case, it can be treated that applicant has made an arrangement in place of consignment note by issuing Form 2.1 in the style of bilty which they handover to the transporters and after delivery of the goods, the transporters receives Form 3.3 from depot officer which proves that he has delivered the goods. After verification of the goods as per Form 2.1, the payment is released to the transporters. We also find that Form 2.1 issued by the applicant contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, etc. Thus, we observe that the said Form is a consignment note in terms of Explanation to the Rule 4B of the Rules. Further the transporter is liable for safe delivery of goods to the destination.

c) Lien on the Goods transferred during the movement by the Applicant to the Transporter- It was observed by AAR that purpose of issuing consignment note indicates that lien on the goods has been transferred to the transporter and the transporter becomes responsible for the goods till its safe delivery to the consignee. In the present case also, by issuing Form 2.1 by applicant, goods are handed over to the transporter and transporter becomes responsible for the goods till its safe delivery to the destination.

d) Consignment Note can be in any Form but must have particulars as provided in the Rules-For the sake of argument that for being treated as goods transport agency issuance of consignment note is must. If such argument is accepted than there will be no need to pay GST by a person providing service of goods transport merely on a ground that he is not issuing consignment note. And this will open an avenue for evasion by the service providers. This must not have been the intention of the legislature to not tax the service providers who were not issuing consignment notes.

4. Held:

Services received from the unregistered transporters ‘by the applicant falls under the definition of “GTA’ services in terms of Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017 and the same are covered under ‘RCM’ in terms of Notification No. 13/2017-Central Tax (Rate) dated 28-6-2017. Form 2.1 issued by the applicant can be considered as a consignment note.

5. Comment

Nomenclature of document issued for transportation of goods is irrelevant for deciding service provided by Transporter as GTA but it’s the nature which holds the key.

It might sound to be a bit exaggerated but it is nothing but what we call “substance prevails over form”. Firstly, neither term consignment note has been defined and nor format has been prescribed in GST Act but only particulars have been provided under Rule 54 of CGST Rules, 2017 and secondly intention of legislature is to ascertain whether lien on goods for safe delivery of goods has been transferred from person handing over goods to transporter and whether agency function exists between the two. As has been explained in the E-Flyer issued in respect of GTA Services-

“If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee. It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. As a corollary, the services provided by such individual transporters who do not issue a consignment note will be covered by the entry at s.no.18 of notification no.12/2017-Central Tax (Rate), which is exempt from GST.”

                                                                                                                                                Emphasis Supplied

Similar principle has been held in the matter of Balasubramanyam Saravana Perumal [2019] 111 taxmann.com 507 (AAR – ANDHRA PRADESH) wherein it was observed that issuance of consignment note is sine-qua-non for supplier of service to be considered as a Goods Transport Agency. If such a consignment note is not issued by transporter, service provider will not come within the ambit of goods transport agency. If a consignment note is issued, it indicates that lien on goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till it’s safe delivery to the consignee. It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. (https://gst-online.com/gstcase-168-taxability-of-gta-on-reverse-charge-or-forward-charge-whether-tax-to-be-paid-on-actual-amount-of-commission-retained-by-him-for-arranging-transport-facility-to-their-customers-or-on-enti/)

Therefore, assuming that Bilty/Lorry Receipt is only consignment note and no one other document would be fatal to ascertainment of correct tax liability of a person.

Every Document which has prescribed particulars and more importantly which establishes that transporter had assumed agency function and lien on goods was transferred (to the transporter) and transporter became responsible for goods till its safe delivery to the consignee will be the document which would clearly establish the services of GTA and tax liability thereon. So next time we don’t have to see name of the document but nature of transaction for Tax under Reverse Charge on GTA Services.

Agarwal Timber Suppliers v. State of Uttarakhand[2020] 114 taxmann.com 602 (Uttarakhand)

Single Eway Bill generated instead of Two Eway Bills due to error of the Consignor

Facts: Petitioner purchased timber from Uttarakhand Forest Development Corporation, a statutory Corporation created under section 3 of the Uttar Pradesh Forest Corporation Act, 1974. Uttarakhand Forest Development Corporation raised tax invoice on appellant-writ petitioner charging CGST and SGST on sale price of the goods. Petitioner paid said amount to Corporation even before goods were transported. The Corporation which, instead of raising two separate e-way bills for two separate consignments, had raised one e-way bill for the total amount on both the consignments.While goods were in transit, they were seized and, on ground that only one e-way bill was issued instead of two, a penalty of Rs. 1,70,688/- was sought to be levied on the appellant-writ petitioner. It was contended by Petitioner that penalty, if at all, should have been paid by Corporation, since error in issuing one e-way bill instead of two was on their part and not on part of appellant-writ petitioner.Jurisdiction of High Court was invoked under article 226 of Constitution of India. The learned Single Judge, however, dismissed writ petition at the stage of admission relegating the appellant-writ petitioner to the remedy under section 107 of the Central Goods and Services Tax Act, 2017 (for short “the CGST Act”). Aggrieved thereby, Special Appeal was presented.

Held-: Hon’ble Court modified order of Single Judge and, directed appellant-writ petitioner to deposit entire amount of penalty i.e. for a sum of Rs. 1,70,688/- with concerned authorities, and furnish proof of deposit of said amount along with Appeal to be preferred under Section 107(1) of the CGST Act.

VE Commercial Vehcles Ltd. v. Union of India[2019] 110 taxmann.com 141 (Kerala)

Direction to the department to not to encash bank Guarantee furnished by appellant, if ultimately adjudication goes against them and if penalty is imposed in such proceedings, until the expiry of 14 days from the date of service of order on such adjudication

Appellant sought for an interim relief in writ petition to direct respondents not to encash Bank Guarantee furnished by petitioner at the time of release of the intercepted goods. The writ petition was preferred against order of Single Judge which was passed by observing that, appellant can work out their remedies under law against any order which may be passed and will be entitled to obtain orders from the appropriate forum. The learned Judge further observed that, putting any restrainment on encashment of bank Guarantee may result in deviating the conditions under which the release was already ordered.

Held: It was noticed by Hon’ble Court that writ petition was filed at a stage after release of the goods on the appellant furnishing the bank Guarantee with respect to the security deposit demanded. As observed by learned Single Judge, release of goods was effected on the basis of bank Guarantee furnished, in compliance with the requirement under Section 129 of the CGST Act. The interim relief sought for in the writ petition is to restrain encashment of the Bank Guarantee. If it is granted, it will amount to an order in anticipation that adjudication will culminate in imposition of penalty. If such an anticipatory restrainment is put on the respondents, as observed by learned Single Judge, that will be in a manner defeating the interest of respondents who ordered release of goods by securing probable amount which may be due after adjudication, in accordance with the provisions contained in Section 129 of the Act. Therefore,Court did not find not find any illegality, error or impropriety in the judgment of the learned Single Judge. Hon’ble Court directed that interest of justice on equitable basis can be achieved by issuing a direction to respondents not to encash bank Guarantee furnished by appellant, if ultimately adjudication goes against them and if penalty is imposed in such proceedings, until the expiry of 14 days from the date of service of order on such adjudication.

RS Development And Constructions India (P.) Ltd. v. Assistant State Tax Officer Squad No. VIII, Palakkad, Kerala[2019] 110 taxmann.com 142 (Kerala); Grace International Logistics v. Assistant State Tax Officer[2019] 108 taxmann.com 284 (Kerala); [2019] 108 taxmann.com 288 (Kerala); Sanskruti Motorsv.Assistant State Tax Officer, Wayanad; Rajasthan Marbles v. Assistant State Tax Officer, Kochi [2019] 108 taxmann.com 98 (Kerala)

Issues raised are at preliminary stage and Court not convinced to entertain writ petition and adjudicate upon merits

Facts-The petitioner challenges notices issued as illegal and without jurisdiction The petitioner has contended that subject matter of notices and detention order is fully compliant with all requirements of the Act and petitioner was in a position to demonstrate within the time given by the authorities that Part B/E-Way Bill was also generated and produced for inspection.

Contention of Respondent- The learned Government Pleader objects to maintainability of the writ petition. Firstly, it is contended that from admission has been made by petitioner that there is an omission or illegality in transportation of goods. The omission is that admittedly at the time of inspection or detention of goods the transporter could not produce all the documents required for establishing that the goods is under valid transit.

Held-It was observed by the Hon’ble Court that issues raised are at preliminary stage and Court was not convinced to entertain writ petition and adjudicate upon merits at this stage. As an interim relief, The petitioner was directed to submit bank guarantee for tax and penalty and apply for release of goods. The respondent was directed to release goods detained and subjected to enquiry within twelve hours from the date and time of receipt of bank guarantee.

Swastik Traders v. State of U.P.[2019] 108 taxmann.com 568 (Allahabad)

Matter Remanded Back to Appellate Authority as principle of Natural Justice not followed

Facts:- The Assistant Commissioner, State Tax, Mobile Squad Unit, Faizabad not BEING satisfied with explanation made by petitioner and goods as well as vehicle were seized under Section 129 (1) of the UPGST Act vide Seizure Memo No.14 dated 19.12.2017 merely on the ground that Tax Invoice discloses the sale of Aluminium Section only whereas Aluminium Section and Aluminium Composite Sheets were found in the vehicle in question.Apart from seizing the goods and vehicle, Mobile Squad Officer issued a show cause notice being No.014 dated 19.12.2017 under Section 129 (3) of UPGST Act proposing to levy demand tax @ 18% on the total valuation of goods of Rs. 6,66,665/- i.e. amounting to Rs. 1,20,000/- and equivalent amount of penalty of Rs. 1,20,000/- (cumulatively Rs. 2,40,000/-) which was deposited by the petitioner by the Demand Draft.The petitioner was not satisfied with the levy of demand of tax and penalty to the tune of Rs. 2,40,000/- as the relevant documents were duly produced at the time of interception of the vehicle by the Mobile Squad Officer. As such, the petitioner preferred First Appeal before the Additional Commissioner, Grade-II (Appeals) Ist, Commercial Tax, Ayodhya. By order dated 12.03.2019 served on 18.04.2019, the appeal was dismissed and the order dated 19.12.2017 passed under Section 129 (3) of the UPGST Act was upheld.

Held: It was observed by the Hon’ble Court that from perusal of record, position which emerges was that judgment and order dated 12.03.2019 had been passed without hearing to petitioner, as such, same was in violation of principles of natural justice. The writ petition was allowed and impugned order dated 12.03.2019 passed by opposite party was set aside. The matter was remanded back to Appellate Authority.

Shiv Enterprises v. State of U.P. [2019] 108 taxmann.com 329 (Allahabad)

Writ petition dismissed on account of availability of Alternative Remedy

Facts: Petitioners have challenged detention order dated 06.06.2019 and penalty notice dated 06.06.2019 broadly on the ground of jurisdictionCommissioner of State Tax, U.P., Lucknow under GST in seizing consignment of goods, which were coming from Panipat (Haryana) to Lucknow.

Held-The fact pertaining to passing of final order has not been disputed by the counsel petitioners. In view of the fact that the final order has been passed against which petitioners have got a statutory remedy of appeal, High Court was not inclined to entertain the present writ petition. For the foregoing reasons, the writ petition was dismissed.

FS Enterprise v. State of Gujarat [2019] 111 taxmann.com 179 (Gujarat)

Issue: Instructions issued by Board are binding in Nature; No FORM GST MOV-02 issued, No Part A of Form GST EWB-03 uploaded on common portal, No FORM GST MOV-04 issued and No Part B of Form GST EWB-03 uploaded on the common portal; Fresh grounds subsequent to passing of the order cannot be raised by the officer; No Requirement to incorporate details of goods being dealt in the Registration Certificate and thus no detention can be made on such ground

1. Facts: The truck along with the goods came were detained by State Tax Officer. The driver of the truck duly produced all documents relating to the goods including invoice, transport receipt and e-way bill. However, despite the fact that petitioner had complied with the procedure for movement of goods as stipulated under the GST Acts, by the impugned order, the truck with the goods came to be detained/seized under section 129 of the GST Acts on the ground that the transport receipt was a photocopy and the details filled in the transport receipt were handwritten. Further new grounds were raised in affidavit in reply filed on behalf of respondents, namely, that petitioner had not obtained GST registration for commodities which were being transported and that driver of one of the vehicles had given a statement that goods were being transported from Sihor to Aurangabad.

2. Observation-

• Documents required to be kept by the Driver- It was observed by the court thatOn a plain reading of Rule 138A, it is evident that documents which are required to be kept by person in charge of a conveyance while transporting goods are (i) invoice or bill of supply or delivery challan, as the case may be; and (ii) copy of e-way bill. In the present case, admittedly when the trucks in question came to be intercepted, the concerned driver had produced the invoice as well as the e-way bill in respect of the goods which were being transported.
• Documents as required under Rule 138A were provided by the Driver- On a perusal of FORM GST MOV-01, it is abundantly clear that both the documents prescribed under rule 138A of the CGST Rules, viz. the invoice and the e-way bill, were produced by the person in-charge of the conveyance. The proper officer, upon verification of these two documents has not found any discrepancies therein. Hence, in terms of the instructions contained in paragraph 2(b) of circular no. 41/2018 Dated 13^th April 2018, proper officer was required to allow the conveyance to move further. However, the proper officer has issued an order of detention under section 129(1) of the CGST Act on the ground that the lorry receipt was a photocopy and did not bear a computerised serial number or contact number details. Thus, the impugned order has been passed contrary to the statutory requirements which do not require production of a lorry receipt by the person in-charge of a conveyance as well as contrary to the instructions issued by the Board in the above referred circular.
• Instructions issued by Board are binding in Nature-Following the rationale laid down in the decision of the Supreme Court in the case of Commissioner of Customs, Calcutta v. Indian Oil Corporation Ltd. [2004] 3 SCC 488, it was observed by the Court that Circulars are binding upon the authorities.
• No EWB-02, EWB-03 prepared by the Officer- In the present case, since no FORM GST MOV-02 has been issued, no Part A of Form GST EWB-03 has been uploaded on the common portal, no FORM GST MOV-04 has been issued and no Part B of Form GST EWB-03 has been uploaded on the common portal, it is clear that the conveyance has been intercepted for verification of documents and not for physical verification inasmuch as, if the officer intended to undertake an inspection he was required to issue an order for physical verification/inspection of the conveyance, goods and documents in FORM GST MOV-02 and thereafter upload Part A of Form GST EWB-03 on the common portal, prepare a report in FORM GST MOV-04 and furnish the same to the petitioner and to upload the final report of the inspection in Part B of Form GST EWB-03 on the common portal.
• Fresh Grounds subsequent to passing of order cannot be raised by the officer- Insofar as the additional grounds raised in the affidavit-in-reply are concerned, it is settled legal position as held by the Supreme Court in Mohinder Singh’s, case (supra) that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise an order bad in the beginning may, by the time it comes to court on account of challenge, get validated by additional grounds later brought out. Thus, it is not permissible for the respondents to try to supplement the grounds set out in the order under section 129(1) of the CGST Act in the affidavit-in-reply filed on their behalf. Nonetheless for the purpose of clarifying the legal position, the said grounds may also be dealt with.
• Goods being taken to different destination than the ones provided in documents- The second ground based on a subsequent so-called statement of driver of one of the conveyances bearing No.GJ-04-AT-9302, which was said to have been recorded on 2.4.2019, wherein the driver has stated that he had loaded the goods at Sihor in Bhavnagar and was to unload them at Aurangabad. FORM GST MOV-01 was issued by proper officer on 2.4.2019, wherein against column 4, it was recorded thus:

“4. I am transporting the goods from Bhavnagar (GJ) to Virar, Thane (MH).”

Therefore, in statutory form, statement of driver was recorded stating that goods were being transported from Bhavnagar to Virar, Thane, however subsequently they sought to place reliance upon some unverified statement produced on record with affidavit-in-reply, which is not permissible in law. Further, destination of goods will have no bearing on tax liability of petitioner, provided destination is outside State of Gujarat and, therefore, no mala fide intention can be imputed to petitioner as petitioner as well as recipient of goods, are registered under the GST Acts and both invoice and e-way bill are found to be in order.

• No Requirement to incorporate details of goods being dealt in the Registration Certificate and thus no detention can be made on such ground- Under sub-rule (4) of rule 8 of the CGST Rules, the person seeking registration is to give details of top five goods with description of the goods and corresponding HSN Code (four digits). Thus, a person is required to specify the top five goods which he wants to supply, but is not prohibited from supplying goods other than those mentioned in the form. Therefore, merely because the petitioner had specified goods like waste, parings and scrap of plastic (HSN Code 3915 taxable at 5%) and the vehicle was carrying TMT Bars and MS Angles, round bars and square bars (HSN Code 7214 taxable at 18%) is no ground to detain such goods, more so, when the goods are correctly described in the invoice and GST payable is computed at 18%.

It would have been a different matter if the above goods were shown in the invoice to be waste, parings and plastic scrap taxable at 5%, but when the goods are correctly described at the appropriate taxable rate, there is no violation of any provision of law merely because such goods are not specified in Part B of FORM GST REG-01, inasmuch as the person who seeks registration is required to specify only the top five goods and not all the goods which he seeks to supply. Indubitably, many suppliers would be dealing with more than five goods; however, in terms of column 18 of the prescribed form, a supplier is required to specify only the top five goods with description of the goods and corresponding HSN Code, therefore, the contention that as the petitioner was not registered qua the goods which were being transported there was breach of any provision of law, does not merit acceptance. Moreover, the learned Assistant Government Pleader is not in a position to pinpoint the provision which has been contravened by the petitioner by transporting goods other than those specified in the registration form.

Besides, the petitioner has immediately thereafter, amended the registration and specified the goods in question. The change in specification of goods is a non-core field and, therefore, does not require the approval of the proper officer while making amendment in the registration form. The respondents in the affidavit-in-reply rely upon the fact that on 8.4.2019, the petitioner, by way of an amendment, added the commodity which was being transported, to submit that disclosure of commodity in registration was mandatory on the ground that had it not been mandatory, the petitioner was not required to carry out the amendment. Such submission on the part of the respondents who are responsible officers of the State Government is quite perturbing, inasmuch as, the officers under the Act are required to make submissions based upon the legal provisions and not on the conduct of the party. Merely because petitioner subsequently amended registration cannot be a ground to submit that reflecting such goods in registration was mandatory, without referring to the statutory provision which mandates such requirement.

3. Held- It was held by the Court that the person in-charge of the conveyance carrying the goods in question had in his possession, the invoice as well as the e-way bill in respect thereof, and both such documents were produced before the proper officer when the conveyance in question came to be intercepted. It is not the case of the respondents that any discrepancy was found in the aforesaid two documents. Under the circumstances, in the light of the instructions contained in Circular dated 13.4.2018 issued by the Board, it was incumbent upon the second respondent to issue a release form in FORM GST MOV-05 and allow the conveyance to move further. However, the conveyance in question has been detained on the ground of discrepancy in transport certificate which is not a requirement prescribed under the statute. Under the circumstances, the second respondent was not justified in passing the order of detention under section 129(1) of the CGST Act. Insofar as the two additional grounds raised in the affidavit-in-reply are concerned, as discussed hereinabove, apart from the fact that it was not permissible for the respondents to supplement the original order by additional reasons in the affidavit-in-reply, even otherwise such reasons have no statutory basis. Under the circumstances, the impugned orders of detention passed by the second respondent under section 129(1) of the CGST Act and other connected statutes as well as the notices issued under section 129(3) of the CGST Act and other connected statutes cannot be sustained.

Siddhbali Stone Gallery v. State of Gujarat [2020] 113 taxmann.com 68 (Gujarat)

Issue: Confiscation Proceedings under Section 130 subsequent to payment of tax and penalty

Facts: Due to inadvertence out of three vehicles, in case of one vehicle e-way bill was not generated. The goods in question viz. marble, were imported from Italy and at the time of import thereof, the integrated goods and services tax payable thereon was already paid.

Contention of Petitioner-  It was submitted that having regard to facts of case wherein all documents except the e-way bill were tendered to the authority and even the e-way bill was thereafter immediately generated, there was no reason for respondent authority to issue a notice for confiscation of the goods in question under section 130 of the GGST Act. It was urged that having regard to the fact that the tax and penalty has already been paid, the conveyance together with the goods in question be ordered to be released.

Held: It was held by the court that considering documents placed on record which reveal that petitioner had paid integrated goods and services tax on goods in question at the time of import thereof as well as the fact that after the conveyance came to be intercepted, petitioner has paid tax and penalty on such goods as computed by respondent authorities, by way of ad-interim relief the respondents were directed to forthwith release conveyance being truck number GJ-12- AZ-5184 along with the goods contained therein, subject to the final outcome of the petition.

Tikendra Singh Rithal v. State of Kerala [2019] 111 taxmann.com 319 (Kerala)

Issue: Release of Goods against security furnished by the Petitioner

Facts: Petitioner approached the Court aggrieved by notices of detention under Section 129(1) of CGST Act, in respect of two consignments that were consigned by him to M/s Ceeyen Stone Crusher, Mundathadam, Parappa P.O., Kasaragod. The prayer of the petitioner is for a direction to the respondents to release the consignments against a security to be furnished by the petitioner.

Held: The detention was on account of irregularities in e-way bills that were submitted at the time of transportation. State Tax Officer was directed to release consignment of goods covered by detention notices on the petitioner furnishing a bank guarantee for the tax and penalty amounts in respect of the said consignments. The writ petition is disposed as above.

Valimohammed Jusab & Co. v. State of Gujarat [2019] 110 taxmann.com 488 (Gujarat)

Issue: Detention of Goods sent for Repair on the ground that e-way bill not tendered for goods in movement

Facts: Petitioner submitted that they had a work order in respect of some job-work for which a Winch Machine was transported to Nirma Ltd., Kala Talav. However, on account of some defect in the machinery, the same was taken back to the premises of the petitioner directly to Yadav Trading Co., namely, dealer from whom machinery was purchased for the purpose of repairs on 20.8.2019. Gate pass had been issued by Nirma Ltd. with regard to removal of the Winch Machine from its premises. However, when machine in question was being transported back to the premises of Nirma Ltd., vehicle in question being GJ-04-V-4335 was intercepted and the same has been seized under section 130 of the Gujarat Goods and Service Tax Act, 2017 (hereinafter referred to as ‘GGST Act, 2017’) read with the relevant provisions of other statutes, mainly on ground that e-way bill was not tendered for goods in movement.

Contention of Petitioner- The vehicle came to be intercepted at 18:15 hours on 20.8.2019 and immediately thereafter, at 7.49 p.m., e-way bill came to be generated. attention of the court was invited to the provisions of section 2(108) of the GGST Act, 2017 to submit that taxable supply means a supply of goods or services or both which is leviable to tax under the Act. It was submitted that in present case, goods were merely being transported back to the premises of Nirma Ltd. for job-work and that no goods or services were leviable to tax in respect thereof. Reference was also made to provisions of section 122 of the GGST Act, 2017 and more particularly, clause (xiv) thereof to submit that same provides that where a taxable person who transports any taxable goods without the cover of documents as may be specified in this behalf, he shall be liable to pay a penalty of Rs. 10,000/- or an amount equivalent to the tax evaded or the tax not deducted under section 51 etc. It was submitted that in this case, the petitioner is not liable to pay any tax and hence, at the most, the petitioner could be made liable to pay penalty of Rs. 10,000/-.

Held: It was held by the Court that documents produced on record, prima facie indicate that old and used Winch Machine was being transported from premises of Yadav Trading Co. where it had been sent for repairs and was being transported back to Nirma Ltd. and there is substance in submissions made by learned advocate for the petitioner that at best, the petitioner would be liable to pay fine of Rs. 10,000/- as contemplated under clause (xiv) of section 122 of the GGST Act, 2017. By way ad-interim relief, the respondents were directed to forthwith release Truck No.GJ-04-V-4335 along with goods contained therein subject to the petitioner depositing a sum of Rs. 10,000/- with the respondent authorities.

Sakul Nazar Mohmd v. State of Gujarat [2020] 113 taxmann.com 394 (Gujarat)

Issue: Goods detained on account of Undervaluation of Goods

Contention of Petitioner-Order under section 129(1) of CGST Act is invalid since requirements of section 68 of the CGST Act are duly satisfied inasmuch as, the person in-charge of the conveyance, carrying the consignment of goods, was carrying with him the documents and invoice as described under rule 138(A) of the Central Goods and Services Tax Rules, 2017.

Referring to provisions of section 129 of the CGST Act, it was submitted that the same do not contemplate detention of goods on any ground other than the grounds stated therein and that, undervaluation of an invoice cannot be a ground for detention of goods under section 129 of the CGST Act. The attention of the court was further invited to the report of valuation of stock of the petitioner as prepared by Value Team Professional (Government registered Valuer) prepared for Additional Commissioner of Commercial Tax to point out the basis on which, the market value has been computed by him. It was submitted that based upon such a valuation report, the respondents seek to confiscate the goods of the petitioner.

Held: It was held by the Court that valuation report dated 30.08.2019 does not inspire any confidence and by way ad-interim relief, respondent-authorities were directed to forthwith release truck No. HR-73-7266 along with the goods contained therein.

1. Pact Machines (P.) Ltd.v. Assistant State Tax Officer (Intelligence) [2020] 113 taxmann.com 221 (Kerala)

Opportunity of Hearing to be provided before passing order confirming demand of tax and penalty

Facts: The challenge in the writ petition is against order of detention, and adjudication order that followed, imposing a liability to tax and penalty on the petitioner under the CGST and SGST Acts. The detention was made on the ground that incharge of the goods had failed to produce e-Way Bill as per Rule 138 of the CGST and SGST Rules, 2017, at the time when the vehicle was intercepted by the authorities, and further it was found that the vehicle was plying in a wrong direction when compared with the destination shown in the invoice.

Contention of Petitioner-E-Way Bill was actually available with the driver of the vehicle and the findings in the detention notice are contrary to facts. Simultaneous with issuance of detention notice, order confirming demand of tax and penalty was also passed, without affording petitioner an opportunity of being heard.

Held: It was held by the Court that at the time of detention, driver of vehicle did not produce any e-Way Bill, either manual or electronic, corresponding to goods that were carried on in vehicle. It was further pointed out that a statement was given by the driver before the authorities wherein he had stated that there was no e-Way Bill with him. Therefore, prima facie there appeared to be a justification to the Court for detention of the vehicle.

However, there was no opportunity granted to petitioner to rebut inferences drawn by authorities while detaining goods, through a hearing afforded to petitioner before passing order confirming demand of tax and penalty on petitioner. Therefore, order was quashed and respondent was directed to pass fresh orders.

2. Smeara Enterprises v. State Tax Officer [2019] 111 taxmann.com 511 (Kerala)

Deposit of 10% of disputed tax as a condition for maintaining appeal cannot be a basis for direction to release goods without any security

Facts: An appeal had been preferred by the petitioner against the order of penalty stating that 10% of disputed tax was paid as a condition for maintaining appeal. It was further prayed, for release of goods pending disposal of appeal.

Held: It was held by the Court that mere pendency of an appeal cannot be basis for a direction to release goods without any security, since non-payment of security in respect of the goods can independently lead to a confiscation of goods under Section 130 of CGST Act. Accordingly, writ petition was disposed of by directing to consider and pass orders on appeal within a period of three months, after hearing the petitioner. The petitioner may seek a release of goods by furnishing the necessary Bank guarantee for the tax and penalty amounts confirmed against him, pending disposal of the appeal or in the alternative, await the outcome of the confiscation proceedings under the Act.

3. Kesar Farm v. Additional Commissioner of Commercial Taxes (Enforcement Bengaluru) [2019] 112 taxmann.com 374 (Karnataka)

Order passed for detention of goods and vehicle under section 129 is appealable under Section 107

Facts: The petitioner assailed order of demand of tax and penalty under section 129(1)(b) of CGST Act and, KGST Act read with section 20 of IGST Act as well as detention order dated 23.09.2019 passed under section 129(1) of CGST Act read with section 20 of IGST Act and the demand notices inter alia seeking for other consequential reliefs.

Held: An attempt was made by petitioner to contend that order impugned is not appealable under provisions of the Act bur the same was  negated by the Court for reason that section 107 of Act explicitly makes it clear that, any person aggrieved by any decision or order passed under the Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person. It was further clarified by section 121 which deals with non-appealable decisions and orders. In terms of Section 121, no appeal shall lie against any decision taken or order passed by an officer of central tax if such decision taken or order passed relates to any one or more of the following matters, namely:—

• an order of the Commissioner or other authority empowered to direct transfer of proceedings from one officer to another officer; or
• an order pertaining to the seizure or retention of books of account, register and other documents; or
• an order sanctioning prosecution under this Act; or
• an order passed under section 80.

It is not in dispute that the case on hand would not fall in any of the aforesaid clauses mentioned in section 121 of the Act. Hence, without going into merits or demerits of the case, court relegated the petitioner to the Appellate Authority to avail the alternative remedy of appeal.

4. Insha Trading Company v. State of Gujarat [2019] 112 taxmann.com 175 (Gujarat)

Preparation of Reports in Part A of Form GST EWB-03, Form GST MOV-04 or Part B of Form EWB-03 imperative to prove physical inspection being carried out, No confiscation under section 130 of CGST Act be carried out on reasons which are not in any way connected with the transportation of goods and independent actions can be taken in other provisions

Facts: The petitioner was registered under GST and Ramgarhia Trading Company, which was located at New Delhi and was registered under GST Act, placed an order for brass electrical parts through Jay Gujarat Goods Carrier. Truck was intercepted by State Tax Officer on 14.01.2019 at 00:30 a.m. at Soyal Toll Gate. The driver of the truck had produced documents relating to goods which were being transported; however, State Tax Officer detained truck on the ground that genuineness of goods in transit (its quantity etc.) and/or tendered documents requires further verification. Accordingly, on 14.01.2019, the State Tax Officer issued an order in Form GST MOV-01 recording statement of driver as well as an order for physical verification/inspection of conveyance and goods and documents in Form GST MOV-02. Thereafter, by an order dated 14.01.2019, passed under section 129(1) of CGST Act, the truck as well as goods contained therein was ordered to be detained. The ground stated in order of detention as translated into English reads thus: “On a perusal of the details in bilty No.15615, it prima facie being disproportionate, vehicle has been detained for verification of the same”. Order of physical verification in Form GST MOV-02 and the order under section 129(1) of the CGST Act have been passed on the same day, that is, on 14.01.2019.

Thereafter, by an order dated 29.01.2019, passed in Form GST MOV-09; the petitioner was called upon to pay the tax and penalty as computed therein. Thereafter, a notice came to be issued in Form GST MOV-10 under section 130 of the CGST Act for confiscation of the conveyance and goods in question on the grounds that on a perusal of the details in bilty No.15615, it prima facie being disproportionate, the same required verification; and that upon primary examination of the dealer online, it is found that in December 2018, he has generated 42 e-way bills wherein IGST of Rs. 3,64,30,800/- is shown, and that it appears that either the dealer has not paid such amount or the purchases are not genuine. Thereafter, by the impugned order dated 08.04.2019, the goods and conveyance are ordered to be confiscated in exercise of powers under section 130 of the CGST Act.

Contention by Respondent- After conveyance in question was intercepted, State Tax Officer had conducted search at business premises of the petitioner on 21.01.2019 as well as on 22.01.2019 and found that the petitioner did not maintain any stock or books of accounts at his business premises. It was further submitted that the petitioner and the transporter – Jay Gujarat Goods Carrier are working in collusion with each other and that, the petitioner is stated to have purchased the goods which were being transported from parties located at Kolkata, West Bengal; however, upon verification by the GST Department, it was found that such parties are not in existence. It was submitted that, therefore, it appears that the petitioner has purchased the goods from the local market without paying any local tax and is selling the same to the dealers in New Delhi mentioning State tax in the invoice and thereby, claiming input tax credit. It was submitted that the authority under the GST Act had issued DRC-1 under section 74 of the GST Act on 25.04.2019 and the petitioner is facing prosecution for wrongfully availing the benefit of input tax credit and a charge-sheet has been filed against the petitioner on 05.10.2019 for the offence punishable under sections 132(1)(c) as well as 132(1)(d) of the GST Act. It was submitted that in the light of what has been unearthed during the course of investigation, the order of confiscation is justified. It was submitted that the petitioner has no other property except residential premises, the value whereof, is not commensurate with the amount involved in the entire fraud that has been committed by the petitioner in collusion with Jay Gujarat Goods Carrier. It was submitted that, therefore, the respondents are wholly justified in confiscating the conveyance with the goods contained therein and that, the petition being devoid of any merits, deserves to be dismissed.

Held:

1. No Discrepancy in the Documents carried along with the Vehicle-It was held by the Court that conveyance in question was transporting 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.

2. Even though No discrepancy found in Documents, but still officer can detain the vehicle for physical verification- If the officer desired to carry out physical verification of conveyance, goods and documents, it was still permissible for him to detain the conveyance, and accordingly, 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.

However, when conveyance was detained for the purpose of inspection, it was incumbent upon the officer 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.

3. No Compliance by Officer of procedure laid down for EWB-03, MOV-04, Part B of EWB-03- It was observed by the Court thatin facts of 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, court observed that though 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. In facts of 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, State Tax Officer 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.

4. Affidavit submitted by Respondent does not in any way contain details about the discrepancy observed after verification-The Court observed that in affidavit-in-reply, there was not even a whisper regarding any discrepancy having been found in bilty No.15615 after verification, despite the fact that conveyance had been detained for that purpose.

Thus, Court held that there was no valid ground for detention of vehicle in question on the part of respondents. Under the circumstances, question of calling upon petitioner to pay 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.

5. Reason to Confiscate the Goods has nothing to do with the Transportation of Goods-It was observed by Court thatreason for passing order for confiscation has got nothing to do with reasons for which, 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. The Court observed that if that was the case, nothing prevented respondents from taking appropriate action against petitioner in accordance with law under the relevant provisions of the CGST Act. However, when conveyance in question was carrying goods which were duly accompanied by documents and no discrepancy was found in connection therewith, there was no reason for the officer 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.

For the forgoing reasons, the petition was held to be succeeded and therefore allowed.

5. Livguard Energy Technologies (P.) Ltd. v. State of Uttarakhand [2019] 112 taxmann.com 176 (Uttarakhand)

When provisions of CGST 2017 provide for release of goods only on furnishing a bank guarantee, it would be wholly inappropriate to issue any direction contrary thereto

Facts: The appeal under Chapter VIII Rule 5 of Allahabad High Court Rules, was preferred against order passed by Single Judge in Livguard Energy Technologies (P.) Ltd. v. State of Uttarakhand [Writ Petition (MS) No.3178 of 2019, dated 15-10-2019] whereby it was held that invoking jurisdiction of Writ Petition by the appellant-writ petitioner against show-cause notice was premature and appellant should give a reply to show-cause notice to concerned authorities furnishing valid reasons as to why delay had been caused.

Held: The respondents were directed to consider the original reply, and additional reply submitted by the petitioner, and pass a reasoned order. Further, when the court asked whether the writ petitioner is willing to deposit an unconditional bank guarantee, from a nationalized Bank, for the said amount; it was submitted that such a condition is stipulated in the provisions of the 2017 Act itself, and it is only because the appellant-writ petitioner is not in a position to do so, has he invoked the jurisdiction of this Court seeking its indulgence to direct release of the detained vehicle and stock on the appellant-writ petitioner furnishing an indemnity bond.

It was further held by the Court that since it is admitted that GST 2017 provides for release of goods only on furnishing a bank guarantee, it would be wholly inappropriate for them to issue any direction contrary thereto. Therefore, appellant-writ petitioner’s request for release of the vehicle and the goods on merely furnishing an indemnity bond was not acceded by the Court. It was further observed that interference in an intra-court appeal would be justified only if order under appeal suffers from a patent illegality and there was no such infirmity in order under appeal.

Mahavir Enterprise v. Assistant Commissioner of State Tax [2020] 117 taxmann.com 471 (Gujarat)

1. Question before the Court for Consideration-

Question 1: Whether the impugned show cause notice deserves to be quashed and set aside as prayed for by the writ applicant?

Question 2: Whether Rule 142(1)(a) of the Rules 2017 is in any manner ultra vires the provisions of the parent Act i.e. the GST Act, 2017?

2. Facts: Petitioner has challenged legality and validity of show cause notice dated 30th November 2019 issued under section 122(1) of CGST Act calling upon the writ applicant to show cause why an amount of Rs. 6,87,68,821/- (Rupees Six Crore Eighty Seven Lac Sixty Eight Thousand Eight Hundred Twenty One only) should not be recovered for the alleged contravention of the provisions of the Act and the Rules. Show Cause Notice was issued to the writ applicant as department has sought to make out the case that applicant is involved in bogus billing transactions without any physical movement of the goods.

3. Contention by Petitioner-

Section 122 does not provides for issuance of Show Cause Notice and Rule 142 travels beyond the law by providing issuance of Show Cause Notice for levy of Penalty under Section 122-

The impugned show cause is invalid as Section 122 of the Act, 2017 does not contemplate issue of any show cause notice. According to the learned counsel, if it is the case of the department that the writ applicant is guilty of fraud or suppression, then a show cause notice under section 74 of the Act, 2017 is contemplated for the purpose of determination of the tax liability.

Rule 142(1)(a) of CGST Rules contemplates for issuance of summary notice electronically along with the notice issued under section 52 or Section 73 or Section 74 or Section 76 or Section 122 or Section 123 or Section 124 or Section 125 or Section 127 or Section 129 or Section 130 of the GST Act, 2017. Section 122 of the Act, 2017 does not contemplate issue of any show cause notice, Rule 142(1)(a) travels beyond the provisions of the Act. In such circumstances, according to the learned counsel, Rule 142(1)(a) deserves to be declared as ultra vires being in excessive delegation of the powers.

4. Contention by Respondent-

Challenge to constitutional validity of Rule 142(1)(a) of the Rules is without any foundation. Section 164 confers powers upon Government on recommendations of the council by a notification to make rules for carrying out the provisions of the Act, 2017. Rule 142(1)(a) of the Rules is valid and does not travel beyond the provisions of the Act, 2017.

5. Observation by the Court

Ordinarily Courts should be reluctant to interfere with Show Cause Notice unless Show Cause Notice issued without any authority of Law:

Case-1: Standard Chartered Bank and others v. Directorate of Enforcement and others reported in AIR 2006 SC 1301- “As indicated by this Court in State of Uttar Pradesh v. Brahm Datt Sharma [(1987) 2 SCC 179] when a show cause notice is issued under statutory provision calling upon the person concerned to show cause, ordinarily that person must place his case before the Authority concerned by showing cause and the courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued palpably without any authority of law. On the facts of this case, it cannot be said that these notices are palpably without authority of law. In that situation, the appellants cannot successfully challenge the refusal by the High Court of the writs of prohibition prayed for by them.”

Case-2- Commissioner of Customs And Central Excise, Madurai v. Charminar Nonwovens Limited reported in 2004 (167) E.L.T. 372- Dispute involved was a classification dispute and challenge was made to a show cause notice wherein it was held that High Court should remit the matter to the concerned authority for adjudication.

Case-3- State of Uttar Pradesh and another v. Anil Kumar Ramesh Kumar Chandra Glass Works and another reported in (2005) SCC 451- Apex Court carved out an exception that if the facts, narrated in the show cause notice, are not accepted to be correct; if it can be demonstrated that offence is not disclosed; or the show cause notice is without jurisdiction, the Court should not entertain the writ petition under Article 226 of the Constitution of India in the following words:

“6. In our view, the High Court proceeded on an incorrect basis. Hence, the decision cannot stand. In any event, this Court had repeatedly held that Article 226 should not be permitted to be invoked in order to challenge show-cause notices unless accepting the fact in the show-cause notices to be correct, either no offence is disclosed or the show-cause notices are ex facie without jurisdiction. That could not be said as far as the eight show-cause notices in question are concerned. The High court, therefore, should not have interfered and should have left the respondents to pursue their remedy by way of an appeal under section 9 of the Act from the order of assessment which, according to the High Court, had admittedly been passed before the writ petition had been filed by the respondent.”

Case-4- Indian Cardboard Industries Limited v. Collector of Central Excise reported in 1992 (58) E.L.T. 508(Cal.)-“On the basis of the decisions cited it appears that the court in exercise of its jurisdiction under Art. 226 of the Constitution will interfere with a show cause notice in the following circumstances:

1. When the show cause notice ex facie or on the basis of admitted facts does not disclose the offence alleged to be to be committed;
2. When the show cause notice is otherwise without jurisdiction;
3. When the show cause notice suffers from an incurable infirmity;
4. When the show cause notice is contrary to judicial decisions or decisions of the Tribunal;
5. When there is no material justifying the issuance of the show cause notice.”

Case-5- Union of India v. Vicco Laboratories, reported in 2007 (13) S.C.C. 270- “Normally, the writ court should not interfere at the stage of issuance of show-cause notice by the authorities. In such a case, the parties get ample opportunity to put forth their contentions before the authorities concerned and to satisfy the authorities concerned about the absence of case for proceeding against the person against whom the show-cause notices have been issued. Abstinence from interference at the stage of issuance of show-cause notice in order to relegate the parties to the proceedings before the authorities concerned is the normal rule. However, the said rule is not without exceptions. Where a show-cause notice is issued either without jurisdiction or in an abuse of process of law, certainly in that case, the writ court would not hesitate to interfere even at the stage of issuance of show-cause notice. The interference at the show-cause notice stage should be rare and not in a routine manner. Mere assertion by the writ petitioner that notice was without jurisdiction and/or abuse of process of law would not suffice. It should be prima facie established to be so. Where factual adjudication would be necessary, interference is ruled out.”

6. Concluding Observation by Court following above decisions- High Court can interfere under Article 226 of the Constitution of India against a show cause notice where the same is issued by an authority in exercise of the power which is absent; the facts does not lead to commission of any offence; the show cause notice is otherwise without jurisdiction; it suffers from incurable infirmity; against the settled judicial decisions or the decisions of the Tribunal and bereft of material particulars justifying commission of offence.

• When does a legislation suffers from Excessive delegation- A rule under delegated legislation can be held to be ultra vires the statutory provisions of the Act if it is shown :
• that it is beyond the scope of or in excess of the rule-making power of the delegate conferred under the Act, or
• that it is in conflict with or repugnant to any enactment in the Act.

7. Cases Referred-

Case-1-Registrar, Co-operative Societies v. K. Kunjabmu, AIR 1980 SC 350 and State of Nagaland v. Ratan Singh, AIR 1967 SC 212-The question whether any particular legislation suffers from excessive delegation has to be decided having regard to the subject matter, the scheme, the provisions of the Statutes including its preamble and the facts and circumstances in the background of which the Statute is enacted.

Case-2-St. Johns Teachers Training Institute v. Regional Director, National Council for Teacher Education reported in AIR 2003 SC 1522-It is also well settled that in considering the vires of subordinate legislation one should start with the presumption that it is intra vires and if it is open to two constructions, one of which would make it valid and other invalid, the Courts must adopt that construction which makes it valid and the legislation can also be read down to avoid its being declared ultra vires

Case-3-Ajay Canu v. Union of India, AIR 1988 SC 2027- Supreme Court has held that it was well established proposition of law that where a specific power is conferred without prejudice to the generality of the power already specified, the particular power is only illustrative and it did not in any way restrict the general power.

Section 164 confers wide power to make rules to the Government- The Court referred Section 164 of CGST Act which confers power on Central Government to frame the rules. Under Section 164 of the Act, the Central Government has the power to make rules generally to carry out all or any of the purposes of the Act.

8. Held: 

Therefore in the opinion of the Court, Rule 142(1)(a) of the Rules, 2017 is valid and is no manner conflict with any of the provisions of the Act.

9. Comment

Section 164 of CGST Act, 2017 is now being referred in decisions wherein validity of a particular rule is challenged under excessive delegation. Other decisions wherein Section 164 has been referred to upholding the power of the Government to make Rules are as follows:

M/s. P.R.Mani Electronics Vs Union of India (Madras HC) Decision dated 13^th July 2020-Section 164 is widely worded and provides rule making powers for Rule 117 prior to retrospective amendment to Section 140.

Nelco Limited v. Union of India [2020 SCC Online Bom 437] (Nelco)- The case was decided before Section 140 was amended. Even so, Court concluded that Section 164 of the CGST Act is wide enough to enable the framing of rules fixing a time limit to claim Transitional ITC.

Section 164 has been held to be widely worded and imposes no fetters on rule making powers except that such rules should be for the purpose of giving effect to the provisions of the CGST Act.

Shameer Chinganam Poyil v. Assistant State Tax Officer [2020] 114 taxmann.com 475 (Kerala)

Detention of Goods in absence of Original Invoice valid even though invoice shown in electronic format at the check post

The goods transported by petitioner were detained as at the time of detention, original invoice was not produced by driver of vehicle. It is stated that the original of the invoice was shown to the check post authorities in the electronic format, and therefore, there was no justification for the detention.

Contention of Respondent- In terms of Rule 138A of the SGST Rules, transporter of goods is obliged to produce a copy of invoice and a copy of e-way bill. While the latter document can be produced either as a document or in electronic format, the invoice has necessarily to be produced in documentary format. In the instant case, it is stated that the invoice was not produced, and this was why the goods were detained.

Held: It was held thatthe absence of an invoice can be a valid ground for detention under section 129 of the GST Act. Accordingly, detention order is justified. However, if petitioner furnishes bank guarantee for tax and penalty amount determined, then respondent shall release consignment and vehicle to petitioner, and thereafter proceed for adjudication in terms of section 138 of GST Act, after hearing petitioner.

Kannangayathu Metals v. Assistant State Tax Officer [2020] 113 taxmann.com 176 (Kerala)

There cannot be a mechanical detention of a consignment solely because driver of vehicle had opted for a different route, other than what is normally taken by other transporters of goods covered by similar e-Way bills.

Facts: Detention notice was issued to petitioner detaining goods and vehicle at a place called Vazhayila. The reason shown in notice for detention is that e-Way Bill in respect of consignment showed that it was to cover a transportation from Pazhoor-Peppathi to Vettoor road- Kaniyapuram whereas the vehicle was detained at Vazhayila which was not on that route.

Contention of Petitioner- Since the driver of vehicle had taken an alternate route through MC Road, vehicle had to reach Vazhayila before turning to Kaniyapuram and it was therefore that the vehicle was intercepted at Vazhayila by the respondents. There is no mandate under section 129 of the GST Act for detaining goods that were covered by a valid e-Way Bill merely because the driver of the vehicle took an alternate route to reach the same destination.

Held- It was held that there cannot be a mechanical detention of a consignment solely because driver of vehicle had opted for a different route, other than what is normally taken by other transporters of goods covered by similar e-Way bills. No doubt, if vehicle is detained at a place that is located on an entirely different stretch of road and plying in a direction other than towards destination shown in the e-Way bill, then a presumption could be drawn that there was an attempt at transportation contrary to the e-Way Bill. In the instant case, there is no such indication. The writ petition was allowed by directing respondent to forthwith release goods and consignment to petitioner.

Relcon Foundations (P.) Ltd. v. Assistant State Tax Officer [2019] 112 taxmann.com 255 (Kerala)

Non-filing of GSTR-3B and GSTR-1 cannot be a valid ground for detention of grounds under Section 129 or issuing notice under Section 130

Facts: Vehicle carrying goods was detained on the ground that GSTR 3B returns had not been filed from June 2018 and GSTR I had not been filed from March 2019.

Contention of Petitioner-It is submitted by the learned counsel for the petitioner that the said grounds cannot be justified for detention of the vehicle under Section 129 of the KGST Act.

Held: It was held that the non-filing of returns cannot be a justification for detaining goods in terms of Section 129 of the KGST Act. Similarly, the said ground cannot form the basis notice proposing confiscation of the goods detained inasmuch as the ingredients of the offence covered by Section 130 are not satisfied in the instant case. The writ petition was disposed of by directing the respondent to forthwith release the goods and the vehicle to the petitioner.

National Steel Agencies v. Assistant State Tax Officer [2020] 115 taxmann.com 36 (Kerala)

Detention made on account of validity of e-way bill expired cannot be held to be unjustified

Facts: The detention was on ground that validity period of e-way bill that accompanied transportation had already expired at the time of detention.

Held: It was held that under the said circumstances, I find that the detention cannot be said to be unjustified. It was directed that if petitioner furnishes a bank guarantee for tax and penalty for the amount quantified in order, then respondents shall release consignment and vehicle to petitioner. Respondents shall, thereafter, proceed to adjudicate the issue after notice to petitioner and in accordance with procedure prescribed under section 130 of the GST Act.

Alfa Group v. Assistant State Tax Officer [2020] 113 taxmann.com 222 (Kerala)

Issue-Detention on ground that value quoted in E-Way bill is less than MRP is not valid since no provision in GST mandates that goods cannot be sold on a value less than MRP

Facts of the Case- Goods belonging to petitioner were detained in a parcel godown, on the ground that value quoted in invoice that accompanied goods was low when compared to Maximum Retail Price (MRP) of goods. There was a further averment therein that HSN code of goods was wrongly entered.

Held: None of the reasons justify detention of goods. There is no provision under GST Act which mandates that goods shall not be sold at prices below the MRP declared thereon.  There is nothing that shows that, on account of alleged wrong classification of the goods there was any difference in rate of tax that was adopted by the assessee.

In the view of Court, statutory scheme of GST Act is such as to facilitate a free movement of goods, after self-assessment by assessee concerned. Respondents cannot resort to an arbitrary and statutorily unwarranted detention of goods in the course of transportation. Such action on the part of department officers can erode public confidence in the system of tax administration in our country and, as a consequence, the country’s economy itself.

Detention order was quashed and respondents were directed to forthwith release goods belonging to petitioner. Commissioner, Kerala State Taxes Department, Thiruvananthapuram was directed to issue suitable instructions to field formations so that such unwarranted detentions are not resorted to in future.

V. Muhammed Rasheed v. Assistant State Tax Officer [2020] 114 taxmann.com 472 (Kerala)

Issue-Goods to be released on furnishing bank guarantee of tax and penalty

The goods were detained as during transportation of goods, they were not accompanied by valid documents as prescribed under the GST Act.

It was held by the Court that detention was prima facie justified and therefore writ petition was disposed, by directing respondent to release goods and vehicle to petitioner on petitioner furnishing bank guarantee for tax and penalty amount determined by the respondent and the respondent shall, thereafter, proceed to adjudicate the matter in terms of section 130 of the GST Act, after hearing the petitioner.

Sanjaybhai Laxmanbhai Gogara v. State of Gujarat [2020] 114 taxmann.com 371 (Gujarat); Raj Chamunda Roadlines v. State of Gujarat [2020] 115 taxmann.com 35 (Gujarat)

Facts and Contention of Petitioner-The vehicle in question together with goods came to be detained for the purpose of verification. By an order made in Form GST-MOV-03, time for inspection came to be extended for a further period of three days. It was pointed out that accordingly physical verification of the goods came to be carried and Form GST-MOV-04 came to be issued wherein no discrepancy was found in respect of the goods in question. Despite the aforesaid position, respondents proceeded under section 130 of “CGST Act” by issuing notice in Form GST-MOV-10 on the ground that after checking the dealers record according to the GST system, dealer appears to be involved in bogus billing practice or making false claim of ITC for the period of August, 2019 and September, 2019. It was submitted that thereafter, on the same ground an order has been passed under section 130 of the CGST Act confiscating the goods and the vehicle in question. It was submitted that in the absence of any discrepancy in the documents and the goods, it is not permissible for the respondents to confiscate either the vehicle or the goods.

Held: Having regard to the submissions advanced by the learned advocate for the petitioner, issue notice.

Vivan Steel (P.) Ltd. v. State of Gujarat [2020] 113 taxmann.com 346 (Gujarat)

Issue-Goods to be released on payment of tax and penalty

It was stated by counsel to the petitioner that petitioner was ready and willing to pay amount of tax and penalty in terms of impugned notice issued under section 130 of the Central Goods and Services Tax Act, 2017. Therefore, respondents were directed to forthwith release Truck number GJ-02-Y-6566 together with goods contained therein upon petitioner paying the tax and penalty as reflected in the column number 4(1) (2) of the impugned notice issued under section 130 of the CGST Act.

Bright Road Logistics v. Commercial Tax Officer (Enforcement – 09) [2020] 113 taxmann.com 204 (Karnataka)

Issue-Once a Notice has been issued to transporter to file objections then proper officer cannot turn around and take a decision that transporter has no locus standi either to file objections or to put forth dispute on behalf of the consignor/consignee or owner of conveyance

Petitioner a transporter, registered under provisions of GST Act was engaged in business of transportation of goods. It was submitted that petitioner was approached by M/s. Bhima Trading Company for transporting certain scrap goods to consignee, M/s. Rajendra Traders. Thus, role of petitioner was only a transporter to transport goods from Salem to New Delhi. Accordingly, petitioner used its conveyance to transport and during the transit from Salem to New Delhi. Respondent intercepted said conveyance for verifying genuiness of transaction and veracity of accompanied documents. Driver of conveyance furnished lorry receipts, E-way Bill and Tax Invoice. A show-cause notice dated 11.10.2019 was issued to the petitioner under Section 129(1)(b) of the GST Act on the premise that the consignor is non-existent. Respondent proceeded to pass the order under Section 129(1)(b) of the Act holding that petitioner has no locus to dispute or raise issue either on behalf of the consignor/consignee or the person in charge of the conveyance.

Contention of the Petitioner– Respondent having issued show-cause notice to petitioner, in arriving at a decision that petitioner has no locus standi to either file objections or raise dispute on behalf of consignor/consignee or person in charge of the conveyance is wholly illegal.

Contention of Respondent- Petitioner is neither consignor nor consignee for release of the goods. Proceedings under Section 130(2)(iii) and the proviso thereof is applicable to the release of the conveyance. It is not mandatory for the petitioner to make the payment towards penalty determined under Section 129(1)(b) of the Act.Held: The Court was of considered opinion that order impugned cannot be held to be justifiable for reason that respondent having issued show-cause notice calling upon petitioner to file objections, cannot turn around and take a decision that petitioner has no locus standi either to file objections or to put forth dispute on behalf of the consignor/consignee or owner of conveyance. The order impugned was held to be against principles of natural justice which is the fundamental parameter required to be observed by the quasi- judicial authority. The impugned order dated 22.10.2019 was quashed and proceedings were restored to the file of respondent. The respondent were directed to provide a reasonable opportunity of hearing to petitioner and after considering the objections filed/to be filed by the petitioner shall decide the matter in accordance with law in an expedite manner.

Sawariya Traders v. State of Gujarat [2020] 114 taxmann.com 497 (Gujarat)

Issue-Discrepancies in the notice issued under Section 130 of CGST Act

Petitioner brought to notice of Court about order of detention made under section 129(1) of CGST Act that same is totally silent as regards discrepancy noticed after physical verification of goods and conveyance. Referring to notice issued under section 130 of CGST Act in Form GST MOV-10, it was pointed out that

a) Grounds set out in notice have got nothing to do with goods which were in transit.

b) There is no allegation as regards any contravention in respect of the goods in transit. Reference was made to section 130 of the CGST Act to point out that the same contemplates five contingencies in which the action can be taken thereunder. It was submitted that, in the impugned notice, it has not been specified as to which of the five clauses of sub-section (1) of section 130 of the CGST Act has been infringed in the present case.

c) Notice under section 130 of the CGST Act has to be issued to the person who contravenes the provisions of the CGST Act whereas, in the facts of the present case, such notice has been issued to the driver, who would not be the proper person to answer such show-cause notice.

Held-Having regard to the submissions advanced by the learned advocate for the petitioners, issue Notice.

Kalpana Stores v. State of Tripura [2020] 113 taxmann.com 616 (TRIPURA)

Issue- Order U/sec 129 without giving proper opportunity of Hearing

Facts of the Case- The petitioner in the course of his business, purchased 3(three) bars of different measurements weighing approximately 25.990 Metric Tons for a sale consideration of Rs. 10.59 lakhs (rounded off). On such purchase according to the petitioner IGST of Rs. 1.90 lakhs (rounded off) was paid. Tax invoice to this effect was also generated. The seller had also generated e-Way bill dated 06.10.2018 for transport of the goods. According to the petitioner, along with all legal documents the consignment was being transported on 15.10.2018 when respondents intercepted transport vehicle, detained vehicle and seized goods. On 25.10.2018 the official respondents raised a demand of sum of Rs. 5,10,066 lakhs comprising of basic tax with penalty. The petitioner was under compulsion to deposit the said amount since failing which the State respondents would not release the goods or the vehicle. The petitioner made the payment and got the same released on 26.10.2018 after which the present petition came to be filed.

Contention of Petitioner- Action of State authorities are totally illegal and unlawful. Goods in question were fully covered by necessary documents of payment requisite taxes. The respondents raised an unlawful demand of tax with penalty without affording any opportunity of hearing to the petitioner.

Contention of Respondent- Order dated 25.10.2018 is an appealable order. The petitioner has directly approached the Court without availing such appeal.

Held: The determination of payable tax and interest in terms of clause (a) or (b) of sub-section (1) of section 129 upon payment of which goods or transport vehicle would be released or upon furnishing security in terms of clause (c), has to be after a notice to the person concerned and granting an opportunity of being heard in this respect as provided in sub-sections (3) and (4) of Section 129 of the said Act. In the present case, no such steps were taken. The State authority straightway passed the order dated 25.10.2018 which is titled as “Order of Demand of Tax and Penalty”. This order thus clearly breaches the requirement of sub-sections (3) and (4) of Section 129 of the said Act. In view of such facts despite availability of appellate remedy, present petition should be entertained. The said order is, therefore, quashed.

Since petitioner has already deposited amount indicated in said order dated 25.10.2018 and goods along with the transport vehicle are already released, High Court moulded the relief as under:

a) The respondents shall give a notice of hearing to the petitioner why the said tax with penalty demand should not be confirmed giving clear 4(four) weeks time to respond;

b) The petitioner will file written opposition to such demand with documents as may be found necessary within the said stipulated period;

c) The competent authority shall thereafter pass a speaking order within a period of 4(four) months from today;

d) The amount of Rs. 5,10,066 which is already deposited by the petitioner shall be adjusted towards the final crystallized tax/penalty if any as per such order. If the demand is dropped partially or fully, refund shall be made with statutory interest.

Anil Bapulal Patil v. State of Gujarat [2020] 114 taxmann.com 473 (Gujarat)

Issue: Release of Conveyance on payment of fine levied in lieu of confiscation of conveyance

Petitioner had sought direction to respondent department to release conveyance bearing No.MH-18-M-8155 on payment of fine of Rs.60,795/- in lieu of confiscation of conveyance. Respondents were directed to release Truck No.MH-18-M-8155 belonging to the applicant petitioner upon the petitioner depositing a sum of Rs.60,795/- proposed to be levied by way of fine in lieu of confiscation of conveyance in the notice issued by the respondents under section 130 of the CGST Act. Rule is made absolute accordingly with no order as to costs.

Suleman Valji Dayma V. State of Gujarat [2020] 114 taxmann.com 327 (Gujarat)

Issue: Release of Conveyance on payment of fine levied in lieu of confiscation of conveyance

Petitioner had sought direction to respondent department to release conveyance bearing No. GJ-01-DZ-8549 on payment of fine of Rs. 17,962/- in lieu of confiscation of conveyance. Respondents were directed to release Truck No. GJ-01-DZ-8549 belonging to the applicant petitioner upon the petitioner depositing a sum of Rs. 35,924/- proposed to be levied by way of fine in lieu of confiscation of conveyance in the notice issued by the respondents under section 130 of the CGST Act.