The Karnataka High Court in its recent ruling in the case of M/s Meghdoot Logistics has deliberated upon the interplay between Section 129 of the CGST Act viz Detention, seizure and release of goods and conveyances in transit and Section 130 of the CGST Act viz Confiscation of goods or conveyances and levy of penalty.
Facts of the Case:
- The petitioner is a transporter and operates under a GST registration.
- The petitioner’s case is that it was approached by M/s MK Enterprises, Delhi (the Consignor) for
transportation of certain tobacco products (the Goods) to M/s SKB Trading, Salem (the Consignee). The petitioner arranged for transportation of the Goods from Delhi to Salem with appropriate Tax Invoices/ e-Way Bills.
- The petitioner’s vehicle bearing No. RJ-14-G-F-9449 (the Conveyance) was intercepted, and the driver/person-in-charge of the Conveyance furnished Lorry receipt, e-Way Bills and Tax Invoices.
- The respondent (Commercial Tax Officer, Bengaluru) passed an order for physical verification of the Goods, Conveyance and documents. The respondent conducted the physical verification of the Goods/Conveyance/ Documents and drew up a Physical Verification Report. The respondent also passed the Order of detention under section 129(1) of the Act and Section 20 of IGST Act/ Section 11 of the Compensation to States Act.
- The respondent, who had issued a notice under sub-clause (4) of Section 129 of the Act subsequently issued a notice under sub-clause (4) of Section 130 of the CGST Act.
Contention of the Petitioner:
The Petitioner, Meghdoot Logistics contended that there cannot be independent or simultaneous confiscation proceedings under Section 130 of the Act with the detention and seizure proceedings underway in accordance with the provisions of Section 129 of the Act in the case of contravention of the provisions of the Act/Rules when the goods are being transported, or goods are stored in transit.
Issue raised before Karnataka High Court:
The issue raised was in respect of scope, objective, and ambit of Section 129 and 130 of CGST Act, Detention, Seizure, and Confiscation of Goods or Conveyance in Transit, whether there can be simultaneous confiscation proceedings under Section 130 of the CGST Act with the detention and seizure proceedings under the provisions of Section 129 of the CGST Act, in the case of contravention of the provisions of the Act/Rules when the goods are being transported, or goods are stored in transit.
Order of Karnataka High Court: Deliberation and Ruling
- The object of the provisions of Section 130 of the CGST Act, when seen with the object of the provisions of section 129 of the Act, are wider – The provisions of Section 129 and Section 130 of the CGST Act are carved with specific objectives and contemplate different procedures insofar detaining the conveyance and seizing goods and taking and holding possession of the things confiscated.
- If after interception of conveyance with goods in transit and detention of the conveyance and seizure of the Goods with issuance of notice under section 129(3) of the Act, and when there is information about the intent to evade payment of tax, it is not open to the proper officer to treat the notice under section 129(3) of Act as having abated or truncate such proceedings and initiate proceedings under 130 of the Act for confiscation with the issuance of notice thereunder.
- The proper officer, who has detained the conveyance and seized the goods, when he is able to form opinion that there is an attempt to evade payment of tax, will have to determine the applicable tax and penalty under Section 129 of the Act while simultaneously initiating proceedings for adjudging confiscation under Section 130 of the Act. If during the pendency of these proceedings, a request for provisional release as contemplated under sub-clause (3) of Section 129 of the Act, is submitted, the same will have to be considered in the light of the provisions of Section 129 read with sub-clause (6) of Section 67 of the Act.
- If after adjudging confiscation, the option to pay Fine in addition to the tax payable, penalty and other charges is not exercised despite opportunity under section 130(7) of the Act, the Proper officer will have to take and hold possession of the things confiscated subject to consequences as contemplated thereunder.
In view of above deliberations the Single Judge Bench of Justice M. Shyam Prasad held that the writ petition is disposed of restoring the Show Cause Notice issued under Section 129 and directing the respondent to decide, in accordance with law, on the proposed levy of tax, penalty and cess as proposed therein with reasonable opportunity of hearing to the petitioner, who shall have the liberty to seek provisional release of goods/conveyance as provided for under sub-clause
(2) of Section 129 of the Act.
The Court also directed the Revenue to contemporaneously decide on the impugned Show Cause
Notice in accordance with the provisions of Section 130 of the Act.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
