2019 (2) TMI 124 - HC - GST

Jurisdiction to detain the goods - classification of goods in dispute - power of Assistant state tax officer to call upon the person in charge of the conveyance to produce the documents in question for verification - Held that - there cannot be any doubt that the fourth respondent is the notified Proper Officer in this case. - Similar issue came up for consideration before the Hon'ble Kerala High Court in N.V.K. Mohammed Sulthan Rawther and Sons and Willson Vs. Union of India 2018 (11) TMI 1503 - KERALA HIGH COURT - The Hon'ble Kerala High Court held that in such cases at best the inspecting authority can alert the assessing authority to initiate the proceedings for assessment of any alleged sale, at which the petitioner will have all his opportunities to put forward his pleas on law and on fact - the squad officer can intercept the goods, detain them for the purpose of preparing the relevant papers for effective transmission to the jurisdictional assessing officer. The squad officer can intercept the goods, detain them for the purpose of preparing the relevant papers for effective transmission to the jurisdictional assessing officer. It is not open to the squad officer to detain the goods beyond a reasonable period. The process can at best take a few hours. The Commissioner of Commercial Taxes, Chennai is directed to issue a circular to all the inspecting squad officers in Tamil Nadu not to detain goods or vehicles where there is a bonafide dispute as regards the exigibility of tax or rate of tax. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Classification dispute between petitioner and fourth respondent regarding dried chick peas transportation; Jurisdiction of assessing officer vs. squad officer in determining classification; Authority of proper officer under Tamil Nadu Goods and Services Tax Act, 2017; Applicability of detention and seizure provisions under Section 129 of the Act; Legal validity of detention notice and tax levied by fourth respondent.

Classification Dispute:
The petitioner, a manufacturer of dried chick peas, gram flour, pulses, and grams, claimed that their product falls under Chapter 0713 of HSN. However, the fourth respondent, seizing the goods during transportation, classified the product as roasted grams under Chapter 2106 of HSN, leading to detention and tax penalty. The petitioner challenged this classification, arguing that only the jurisdictional assessing officer should determine the classification in case of a bona fide dispute.

Jurisdictional Dispute:
The main contention was whether the squad officer, in this case, the fourth respondent, had the authority to rule on the classification of goods during transportation. The petitioner emphasized that the inspecting squad officer should only alert the assessing authority for proper classification determination, as per the decision of the Hon'ble Kerala High Court in a similar case.

Authority of Proper Officer:
The fourth respondent claimed statutory empowerment under Section 68 r/w Section 129 of the Tamil Nadu Goods and Services Tax Act, 2017, allowing for interception of goods and verification of documents during transportation. The Commissioner of Commercial Taxes, Chennai, had designated the fourth respondent as the Proper Officer for exercising powers under Section 129 regarding detention, seizure, and release of goods and conveyances in transit.

Detention and Seizure Provisions:
Section 129(1) of the Act outlined the conditions for detention or seizure of goods transported in contravention of the Act, specifying tax and penalty amounts for release based on the owner's compliance. The petitioner contended that the squad officer's role was limited to detaining goods temporarily for classification verification by the assessing officer.

Legal Validity of Detention Notice:
The Court, in agreement with the Hon'ble Kerala High Court's decision, held that a bona fide dispute on classification warranted detention only for preparing necessary papers for the jurisdictional assessing officer. The petitioner, not seeking a refund but awaiting the third respondent's decision, led to quashing the impugned proceedings and directing the Commissioner of Commercial Taxes, Chennai, to issue a circular preventing unwarranted detentions in tax disputes.

In conclusion, the judgment resolved the classification dispute by emphasizing the role of the jurisdictional assessing officer in determining the classification of goods during transportation. It clarified the limited authority of squad officers in detaining goods temporarily for proper classification verification and directed the tax authorities to issue directives to prevent unnecessary detentions in tax disputes.