2020 (4) TMI 493 - HC - GST

Detention of goods - levy of fine and penalty - case of petitioner is that goods detained under Section 129(1) was only 'promotional materials' consigned by the supplier, not intended for sale, and it will not attract any tax liability as contemplated under Section 7 of the GST Act - principles of natural justice - HELD THAT - Subsection (7) of S.107 provides that where the appellant had paid the amount stipulated under sub-section (6), which in the case at hand is 10% of the remaining amount of tax in dispute, the recovery proceedings for the balance amount shall be deemed to be stayed - merely because the appellant had failed to furnish security, or to get the goods released, by paying the amount of tax and penalty imposed, the confiscation proceedings cannot be proceeded, because he had instituted a statutory appeal after compliance of pre-requisite condition. Release of goods - HELD THAT - The provision under Section 129 is clear and unambiguous that the goods under detention can be released only on compliance with the provisions of sub-section (6) of Section 67 of the Act, which is made applicable with respect to the condition under Section 129, by virtue of Section 129(2) of the Act. The procedure for compliance of the conditions stipulated under Section 67(6) is literally provided under Section 140 of the Central Goods and Services Tax Rules 2017. Therefore, unless the security as contemplated under Section 129(2), read with Section 67(6), is furnished with; or payment of the entire amount of tax and penalty imposed under Section 3 is made, the goods are not liable to be released. Appeal disposed off.

Summary

Issues:
Challenge against Ext.P3 order imposing tax and penalty under Section 129(3) of the Central Goods and Services Tax Act, 2017.
Interpretation of provisions under Section 107 and Section 129 of the Act.
Release of goods detained under Section 129(1) pending disposal of appeal.

Analysis:

The petitioner challenged the Ext.P3 order imposing tax and penalty under Section 129(3) of the Central Goods and Services Tax Act, 2017. The contention was that the goods detained were 'promotional materials' not intended for sale, thus not attracting tax liability under Section 7 of the GST Act. The petitioner had filed a statutory appeal under Section 107 of the Act, paying 10% of the disputed tax and penalty, satisfying the prerequisite condition under Section 107(6)(b). The petitioner argued that the balance amount should be deemed under stay as per Section 107(7), seeking release of the goods without further confiscation steps.

The respondents contended that since the tax and penalty were not paid as per Section 129(3), the goods were liable for confiscation under Section 130. They argued that release pending appeal could only happen if the appellant furnished a Bank Guarantee for the entire tax and penalty determined. The Single Judge found that mere pendency of an appeal did not warrant release without security, directing the appellate authority to dispose of the appeal within three months. The appellant was allowed to seek release by providing a Bank Guarantee for the tax and penalty imposed or wait for confiscation proceedings.

The appellant argued that confiscation proceedings could not proceed due to the deemed stay under Section 107(7) after complying with Section 107(6). The Court agreed, stating that as long as the stay existed, confiscation proceedings under Section 130 could not proceed until appeal disposal. The second contention was about releasing the goods pending appeal, which the Court rejected, stating that compliance with Section 129(2) and Section 67(6) was necessary for release. Without furnishing security or paying the tax and penalty, goods could not be released. The writ appeal was disposed of, granting liberty to the appellant to seek methods for release of the goods as mentioned.