2020 (8) TMI 517 - HC - GST

Seizure of consignments alongwith vehicle - perishable goods in transit - cancellation of registration of the supplier - Section 67 of the CGST Act - whether the department is entitled to seize a consignment of perishable goods in transit more particularly when it is accompanied by a lawful e-way bill, invoice and when it has paid the applicable IGST? HELD THAT - Under Section 83 of the CGST Act, during the pendency of any proceedings under Section 67 or 74, the Commissioner in order to secure the interest of the revenue can provisionally attach any property. However, such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the Order. Rule 140 of the CGST Rules provide that the seized goods may be released on a provisional basis upon the execution of a bond for the value of the goods in Form INS-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable - Under Rule 141 of the CGST Rules, any perishable goods seized shall be released forthwith by an Order in Form GST INS-05 if the taxable person pays an amount equivalent to the market price of such goods or things or the amount of tax, interest and penalty that is or may become payable whichever is lower. Thus, having regard to the scheme of the CGST Act and the rules, whenever perishable goods are seized, it is the duty of the seizing authorities to obtain a bond and or security or require the payment of the market price of the goods or the amount of tax, interest and penalty whichever is lower. This is precisely the reason that whenever such perishable goods are intercepted and detained under Section 129 of the CGST Act, the period for payment of tax and penalty in respect of perishable goods can be reduced to seven days. If the supplier has made outward movement of goods worth ₹ 73,00,00,000-00, then the recipients must have availed the tax credit and this could not have gone unnoticed by the department. This could be attributed to the lackadaisical attitude of the department and the case of the supplier in the instant case should be an eye opener for the State authorities under the Act to ascertain whether the registered establishments are doing business at the registered places and also to take pro active steps for the installation of Radio Frequency Identification devices as this would help the easy tracking of the movement of goods and for verification of e-way bills and the payment of tax etc. Thus, the revenue has to put its house in order and strive to achieve the lofty targets set by the CGST Act by effectively using the tools of audit, inspection, seizure, prosecution, recovery etc. In a proceeding under Section 67 of the CGST Act against the supplier, the respondent was not justified in seizing the perishable goods in transit, moreso when the goods had suffered tax and penalty - the respondent is directed to forthwith release the lorry bearing registration number HR-55-AF-7882 and the goods carried by it which is covered by the E-Way bill 181110112217 - Petition allowed.

Summary

Issues Involved:
1. Legality of the second detention of the vehicle and goods.
2. Locus standi of the petitioner to file the writ petition.
3. Availability and efficacy of an alternative remedy.
4. Compliance with the procedural requirements under the CGST Act and Rules.
5. Justification for the seizure of perishable goods in transit.
6. Continuation of proceedings under Section 67 of the CGST Act.

Detailed Analysis:

1. Legality of the Second Detention of the Vehicle and Goods:
The petitioner, a transporter registered under the CGST and IGST Acts, was engaged to transport 300 bags of arecanut. The consignment was intercepted, and the vehicle was detained due to a mismatch in the e-way bill and invoice. The petitioner paid the applicable tax and penalty, and the vehicle was released. However, the vehicle was again seized on 10.03.2019 at Bijapur based on a "prima facie" defect in the documents. The court held that the second detention was illegal as the earlier proceedings had concluded under Section 129(3) of the CGST Act.

2. Locus Standi of the Petitioner:
The petitioner, being a registered transporter and bailee of the goods, has the locus standi to file the writ petition. The CGST Act recognizes the role of a transporter in generating e-way bills and furnishing documents during transit. The petitioner is entitled to recover demurrage charges and ensure the delivery of consigned goods, thereby justifying its right to challenge the detention.

3. Availability and Efficacy of an Alternative Remedy:
While Section 107 of the CGST Act provides for an appeal against any order, the court noted that there was no formal seizure order in GST Form INS-01 or INS-02. The court emphasized that an alternative remedy is not an absolute bar for maintaining a writ petition, especially when the authorities act arbitrarily or in violation of natural justice. The court exercised its jurisdiction to address the illegal proceedings.

4. Compliance with Procedural Requirements:
The court observed that the second detention was not in compliance with Section 67 of the CGST Act, which requires authorization by a proper officer and seizure in specified forms. The subsequent actions by the authorities, including letters and inspections, were part of an investigation into the fraudulent issue of invoices by the supplier. However, the court found that the procedural requirements for seizure were not met.

5. Justification for the Seizure of Perishable Goods in Transit:
The court held that the department was not justified in seizing perishable goods in transit, especially when the goods were accompanied by a lawful e-way bill and invoice, and the applicable tax had been paid. The CGST Rules require the release of perishable goods upon payment of the market price or applicable tax, interest, and penalty. The court directed the release of the vehicle and goods.

6. Continuation of Proceedings under Section 67 of the CGST Act:
The court allowed the continuation of proceedings under Section 67 against the supplier to determine the fraudulent availing of input tax credit. The authorities were directed to proceed with the investigation and take necessary action under Sections 74 and 132 of the CGST Act against the supplier and registered recipients for any wrongful activities.

Conclusion:
The writ petition was allowed, and the respondent was directed to release the vehicle and goods. The court reserved the right for the proper authority to continue proceedings under Section 67 and take appropriate action against the supplier and recipients. The application for the release of goods was rejected as it became redundant with the disposal of the writ petition.