2020 (3) TMI 565 - HC - GST

Detention of consignment alongwith vehicle - inter-state sale - Section 129(1) of the CGST Act, 2017 - principles of natural justice - HELD THAT - Admittedly, it was mentioned in the order of detention of the vehicle and the consignment carried thereon from Karnataka to Hyderabad issued under Section 129(1) of the CGST Act, 2017 that the reason for such detention is wrong destination . Under the Act, this is not a ground to detain the vehicle carrying the goods or levy tax or penalty - Though it is stated that tax and penalty were levied and collected because it was presumed that at Jeedimetla, there was possibility of a local sale, a mere possibility cannot clothe the 1st respondent to take the impugned action. There is no material placed on record by the 1st respondent to show that any attempt was made by the petitioner to deliver the goods at a different place and sell in the local market evading CGST and SGST, because it was found at Jeedimetla. It is not as if the detention was affected by the 1st respondent after noticing any such attempt to sell the goods in the local market by the petitioner. There was no warrant to detain the vehicle along with goods, demand payment of ₹ 4,16,447/- as tax and penalty under the CGST and SGST Act, 2017 - Since petitioner could not contest it owing to the wedding ceremony in his family at that point of time in order to be able to secure the release of the vehicle carrying the goods at the instance of the driver of the vehicle, such payment has to be presumed as one made due to economic duress and the petitioner cannot be blamed for paying the same without protest, when he had no choice but to pay it. There were no good and sufficient reasons for detention by the 1st respondent of the vehicle and the goods which it was carrying when the transaction causing movement of the goods was inter-State in nature and the provisions of the SGST were not shown to have been violated. Also, there is no warrant to levy any penalty since it cannot be said that there is any willfulness in the conduct of the dealer - the impugned action of the respondents in collecting the amount of ₹ 4,16,447/- from the petitioner towards tax and penalty under the CGST and SGST Act, 2017 under threat of detention of the vehicle carrying the said goods for an absurd reason ( wrong destination ) when the vehicle in question carried all the proper documents evidencing that it was an inter-State sale transaction is clearly arbitrary, violative of Articles 14, 265 and 300-A of the Constitution of India. Petition allowed.

Summary

Issues:
Detention of goods for alleged wrong destination, levy of tax and penalty under CGST and SGST Acts, compliance with principles of natural justice, coercion in payment, validity of detention, authority to collect tax and penalty, willfulness of dealer's conduct, refund of amount, constitutional validity of actions, refund with interest, disciplinary action against respondent.

Analysis:

1. Detention of Goods and Levy of Tax and Penalty:
The petitioner, engaged in the business of Iron and Steel, faced detention of goods and imposition of tax and penalty under the CGST and SGST Acts due to an alleged "wrong destination" issue. The petitioner contended that the detention and collection of taxes were arbitrary and without jurisdiction. The court found that the reason for detention was not valid under the Act, and there was no evidence to support the claim that the goods were intended for local sale to evade taxes. The court held that the imposition of tax and penalty was unwarranted, especially since IGST had already been paid.

2. Compliance with Principles of Natural Justice and Coercion in Payment:
The respondent argued that there was no coercion in payment, and the petitioner had the opportunity to file objections. However, the petitioner claimed that payment was made under economic duress due to a family event and pressure from the driver of the vehicle. The court considered the circumstances and concluded that the payment was made without choice, attributing it to economic duress. It emphasized the importance of natural justice principles in such matters.

3. Validity of Detention and Authority to Collect Tax and Penalty:
The court analyzed the respondent's contentions regarding the validity of detention and the authority to collect taxes and penalties. It found that the detention lacked proper justification, and the respondent did not have the authorization to detain the vehicle and goods. The court highlighted the need for lawful authority in tax collection processes, emphasizing that no tax should be levied or collected except by the authority of law.

4. Willfulness of Dealer's Conduct and Refund of Amount:
The petitioner argued that penalty cannot be levied without willfulness in conduct, seeking a refund of the amount collected under both Central and State Tax Acts. The court agreed that there was no willfulness in the dealer's conduct and directed the respondent to refund the amount with interest. It cited legal precedents to support the position that coercive actions by the government for tax payments are impermissible.

5. Constitutional Validity of Actions and Disciplinary Action:
In assessing the constitutional validity of the actions taken by the respondents, the court found them to be arbitrary and violative of constitutional provisions. It directed the refund of the amount with interest and recommended initiating disciplinary action against the respondent for their conduct. The court emphasized the importance of upholding constitutional principles and protecting citizens from coercive government actions.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the court's reasoning leading to the final decision in favor of the petitioner.