2020 (2) TMI 1103 - HC - GST

Detention of goods - proceedings initiated based on the report obtained by respondent No.3 from CAMPCO Limited. Petitioners claim to be the owners and consignors of the goods detained by respondent No.3 - HELD THAT - The records indicate that much earlier to the publication of the auction, learned Additional Government Advocate had entered appearance on behalf of respondents and the notice of auction was not brought to the notice of the Court, even though the respondents participated in the proceedings. That apart, there is nothing on record to show that an opportunity was given to the petitioners to get the seized goods released in terms of Section 129 (1) (a) of the Act. Respondents have also failed to comply with Section 130 (7) of the Act. In view of the said provisions, the concerned officer was required to give reasonable time not exceeding three months to pay fine in lieu of confiscation before disposal of the goods or conveyance as stipulated therein. The only order that could be passed is to permit the petitioners to pay the applicable tax and penalty equal to one hundred percent of the tax payable on such goods as per Section 129 of the Act and on such payment, sale proceeds of ₹ 75,33,620/- shall be returned to the petitioners - Petition disposed off.

Summary

Issues:
1. Detention of goods under Section 129 of the Karnataka Goods and Services Tax Act (KGST Act)/Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act).
2. Interpretation of Section 129 of the CGST Act regarding detention, seizure, and release of goods and conveyances in transit.
3. Ownership determination when the invoice or specified document is not accompanying the consignment of goods.
4. Compliance with procedural requirements under Sections 129 and 130 of the Act in detaining and seizing goods.
5. Auction of confiscated goods without providing a reasonable opportunity to the concerned parties.

Analysis:

The High Court of Karnataka addressed the grievances of the petitioners who challenged the detention orders under Section 129 of the KGST/CGST and IGST Acts. The petitioners claimed ownership of the detained goods based on being the owners and consignors. The Court examined Section 129 of the CGST Act, which outlines the detention, seizure, and release of goods and conveyances in transit. The Government of India's circular clarified ownership determination in cases where the invoice or specified document is not accompanying the goods.

The petitioners contended that they accompanied the consignment with necessary documents, entitling them to release the goods upon payment of applicable tax and penalty as per Section 129 of the Act. The petitioners expressed readiness to pay the tax for the goods' release. However, the respondents had already auctioned the seized goods without providing the petitioners with an opportunity to pay the applicable tax and penalty as required under Section 129.

The Court noted the failure of the respondents to comply with the procedural requirements under Sections 129 and 130 of the Act. Specifically, the respondents did not provide a reasonable time for the petitioners to pay the fine in lieu of confiscation before auctioning the goods. Consequently, the Court directed that the petitioners be permitted to pay the applicable tax and penalty to release the goods, with the sale proceeds to be returned to them. Alternatively, the respondents were given the option to collect the applicable tax and return the balance amount to the petitioners, without prejudice to other rights available under the Act. The petitions were disposed of in accordance with the above order.