2020 (4) TMI 303 - HC - GST

Detention of goods - Section 129(3) of the CGST Act - stock transfer - allegation that the consignor and consignee are two different entity with different GSTINs - HELD THAT - Learned counsel for the petitioner/appellant contended that the detention itself is without jurisdiction and authority. We are not persuaded to accept such a contention, because the officer had mentioned sufficient reason in Ext.P5 for detention of the transport. Whether those reasons mentioned in Ext.P5 will amount to a transit made in contravention of the provisions of the CGST Act or the Rules, is a matter which need to be adjudicated by the 1st respondent before passing an order for payment of tax and penalty as contemplated under Section (3) of Section 129. It will suffice if the appellant is given an opportunity to participate in the adjudication process, if necessary after filing objections with supporting documents to Ext.P7 notice - order directing release of the transit, on furnishing Bank Guarantee is not interfered with - Appeal disposed off.

Summary

Issues:
Challenge against detention of transport and notice under CGST Act.

Analysis:
The appellant challenged the detention of transport and notice under the Central Goods and Services Tax Act, 2019. The detention order mentioned that the consignor and consignee were different entities with different GSTINs, and a stock transfer between them was made against the provisions of the Kerala GST/CGST Act. The appellant contended that the transaction was not a supply of goods attracting tax liability and was permissible under the CGST Act. However, the Single Judge found that the appellant failed to establish that the transaction was not a sale and that the ownership of goods was not transferred to the consignee. The definition of supply under Section 7 of the Act was noted to include transfers for purposes other than sale, leading to the detention being deemed justified. The appellant was allowed to release the goods upon furnishing a Bank Guarantee for the specified amounts, with directions for adjudication under the KSGST Act and Rules.

The scheme of Sections 129 and 130 of the CGST Act allows for the detention of goods and conveyance if found to be in contravention of the Act or Rules. The detention must be followed by a notice specifying the tax and penalty payable, with an opportunity for a hearing before determining the tax and penalty. In this case, after the detention order, a notice was issued for the appellant to show cause, and a personal hearing was provided. The appellant's contention that the detention was without jurisdiction was rejected, emphasizing the need for adjudication by the authority to determine if the transit was in contravention of the Act or Rules.

The High Court held that the appellant should be given an opportunity to participate in the adjudication process by filing objections to the show cause notice and appearing for a personal hearing before the authority. The Court directed that the authority should conduct an independent adjudication, disregarding the observations in the impugned judgment. The appellant was granted a further opportunity to present their case, and any Bank Guarantee furnished for release of the transit would not be encashed until the authority's decision was communicated.

In conclusion, the writ appeal was disposed of with terms including maintaining the order for release of the transit upon furnishing a Bank Guarantee, filing objections to the show cause notice, conducting a personal hearing, and ensuring the authority's decision is based on the appellant's contentions during the adjudication process.