2018 (7) TMI 758 - HC - GST

Payment of tax and penalty for release of detained goods - the 1st respondent insisted that the petitioner ought to have paid the amount shown in Ext.P4 either in cash or through demand draft to the 1st respondent - Held that - The Court declares that the 1st respondent s insistence that the petitioner should pay the amount either in cash or through demand draft cannot be sustained. As is further evident from Ext.P7, the petitioner is a dealer registered under the CGST - the petitioner s paying the penalty under Ext.P5 receipt to the portal of GST is eminently sustainable. The 1st respondent authority is directed release the goods, after receiving Ext.P5 receipt - petition disposed off.

Summary

Issues:
1. Interpretation of Section 129 and Section 49 of the GST Act regarding payment of tax and penalty for detained goods.
2. Discrepancy in the application of Section 17(5) of the Act concerning input tax credit.
3. Whether the petitioner's payment through the electronic portal fulfills the obligation under Section 129 and warrants the release of the detained goods.

Analysis:
1. The petitioner, a Marble and Granite dealer under the Kerala Value Added Tax Act, faced detention proceedings under Section 129 of the GST Act when supplying goods to another dealer. The respondent demanded tax and penalty through Ext.P4 notice. The petitioner paid the penalty via the GST portal under Section 49, which allows payments by various modes. The petitioner argued that Section 129 does not specify the payment method, invoking Section 49 as a residual provision. The Circular No.41/15/2018-GST by the Government of India was also cited to support this stance.

2. The Government Pleader contended that payment under Section 129 does not entitle input tax credit as per Section 17(5). However, the petitioner's counsel argued that once the payment is made through the portal, the dealer is discharged from obligations under Section 129 and can use the amount as per discretion. Section 17(5)(i) clarifies that input tax credit is not available for payments under Section 129, 130, or 74.

3. The Court analyzed Section 49, Section 129, and the Circular, emphasizing that the detained goods' owner can pay the tax and penalty as required. The distinction between Sections 129 (detention) and 130 (confiscation) was highlighted, noting that confiscation was not at issue. The Court ruled in favor of the petitioner, stating that the respondent's demand for cash or demand draft payment was unsustainable. The petitioner's payment through the GST portal was deemed valid, leading to a direction for the release of the goods upon receipt of the payment proof (Ext.P5).

This judgment clarifies the payment mechanisms under the GST Act, the applicability of input tax credit, and the obligations of dealers in cases of detained goods, providing a comprehensive legal interpretation and resolution of the issues raised in the case.