2020 (11) TMI 421 - HC - GST

Detention of goods and vehicle - detention was for the reason that the vehicle was apprehended at a place that was not on the normal route between Kanyakumari and Maharashtra - HELD THAT - It is now settled through a catena of decisions of this Court as well as the other High Courts that Sections 129 and 130 are independent provisions, and that, while a detention of goods and vehicle under Section 129 could entail proceedings under Section 130, in situations where the detained goods/vehicle are not cleared by the owners thereof within a period of 14 days from the date of passing of the order under Section 129, it does not follow that in all cases where Section 130 of the GST Act is invoked, they have to be preceded by a detention of the goods/vehicle while in transit. As already noted, the proceedings under Section 130 can be invoked independent of any detention, and under the circumstances enumerated in the said Section, with the only rider that a precondition for the invocation of the provision is that there has to be material to suggest that the actions/omissions of the person were with an intention to evade payment of tax. In the instant case, while the material collected by the respondents, no doubt justify the detention of the goods and the vehicle, inasmuch as there was evidence to suggest that the transportation did not originate from Tamil Nadu, as was declared in the invoice/e-way bill that accompanied the transportation of the goods, and therefore, the said documents could be seen as invalid documents for the purposes of transportation of the goods, the respondents have not been able to establish an intention to evade tax which is a necessary pre- condition for invoking the provisions of Section 130 of the GST Act. In other words, while in the instant cases, the detention under Section 129 can be said to be justified, the further invocation of Section 130, in the absence of any material to suggest that there was an evasion of tax by the petitioners, cannot be said to be justified. While it may be true that the invocation of Section 130 of the GST Act in these cases was not justified, the irregularity in the documents that accompanied the transportation surely make it out to be a case that justified a detention of the goods under Section 129 of the GST Act. In proceedings under Section 129 of the GST Act, there is no requirement for establishing mens rea, and hence, merely on detecting an irregularity in the documents that are to accompany the transportation of goods, the respondents would be justified in detaining the goods and passing the necessary order under Section 129(3) of the GST Act - The proceedings under Section 130 having been found to be misconceived, the respondents must now be permitted to pass formal orders under Section 129(3), in respect of the detention that I have found to be justified on the facts and circumstances of these cases. The respondents are directed to pass orders based on the material available with them, and the statements taken from the petitioners under Section 129(3) of the GST Act - petition allowed.

Summary

Issues Involved:
1. Legality of the detention of goods and vehicle under Section 129 of the GST Act.
2. Legality of the confiscation orders passed under Section 130 of the GST Act.

Detailed Analysis:

1. Legality of the Detention of Goods and Vehicle under Section 129 of the GST Act:

The petitioners, owners of goods consigned from Tamil Nadu to Maharashtra and the vehicle transporting them, faced detention by the respondents in Kerala. The consignment, covered by an invoice and e-way bill showing IGST payment, was intercepted because the vehicle was off the normal route. The respondents issued an order for physical verification (FORM GST MOV-2). The respondents collected information suggesting the consignment originated from Kerala, not Tamil Nadu, and invoked Section 130 of the GST Act, issuing a notice in FORM GST MOV-10. Despite the petitioners' reply, the respondents confiscated the goods and vehicle under FORM GST MOV-11, confirming tax and penalty, and allowing redemption on payment of a fine.

The court found that the respondents had misunderstood the scope of Sections 129 and 130. Sections 129 and 130 are independent provisions. While Section 129 deals with detention for irregularities in transit documents, Section 130 requires material evidence suggesting an intention to evade tax. The court noted that the respondents' material justified detention under Section 129 due to the invalid documents but did not establish an intention to evade tax necessary for Section 130. The court emphasized that the invoice raised by the petitioners indicated tax compliance, and the respondents failed to rebut this presumption. Hence, the detention under Section 129 was justified, but the further invocation of Section 130 was not.

2. Legality of the Confiscation Orders Passed under Section 130 of the GST Act:

The respondents argued that the interception revealed a sham transaction intended to evade tax, citing irregularities in the transportation documents and the petitioners' lack of knowledge about the transaction. They contended that the petitioners' details were used fraudulently to secure GST registration in Tamil Nadu, and the goods were actually loaded in Kerala. The court, however, found no material evidence suggesting an intention to evade tax, a necessary precondition for invoking Section 130. The court highlighted that the petitioners' invoice declared IGST liability, and the respondents did not provide evidence to counter this declaration. The court concluded that the invocation of Section 130 was not justified without establishing mens rea.

The court quashed the confiscation orders under Section 130 (FORM GST MOV-11) and directed the respondents to pass orders under Section 129(3), allowing the petitioners to release the goods and vehicle upon payment of the tax amount and furnishing a bank guarantee for the penalty. The court emphasized that while the irregularity in documents justified detention under Section 129, the respondents failed to establish the necessary intent for Section 130.

Conclusion:

The court allowed the writ petitions, quashing the orders under Section 130 and directing the respondents to proceed under Section 129(3). The petitioners were permitted to release the goods and vehicle upon fulfilling the specified conditions, and the respondents were instructed to communicate the judgment for immediate action.