2021 (4) TMI 1094 - HC - GST

Confiscation of goods - jewellery items - evasion of GST or not - HELD THAT - Perusal of section 129 of the GST Act, 2017 makes it clear that the authorities under the Act are vested with powers to detain or seize and after detention or seizure to proceed further in the matter for assessing the tax and penalty, in case if it is found that the person transporting the goods or storing the goods while they are in transit indulge in contravention of the provisions of the GST Act or the Rules made thereunder. However, Section 130 of the GST Act deals with mens rea of a person who intends to avoid payment of taxes. If any person supplies or misuses any goods in contravention of the provisions of the GST Act or Rules with intend to evade payment of taxes or fails to account for any goods, on which he is liable to pay tax, the provisions of Section 130 of the GST Act applies. Notice issued under section 130 of the GST Act (Ext.P2) makes it clear that, officers of the respondent department during shadow operation noticed two persons entering and coming out of the jewellery shop. The bags held by them were checked and those were found to be containing gold ornaments weighing 2270.13 grams including stone weight. Ext.P2 notice makes it clear that goods were not accompanied by any documents showing or reflecting payment of tax on them as per the provisions of the GST Act, 2017 - petition dismissed.

Summary

Issues:
1. Adjudication of confiscation of goods under GST Act
2. Compliance with Sections 129 and 130 of the GST Act
3. Mens rea requirement under Section 130 of the GST Act
4. Confiscation of gold jewellery without payment of taxes

Analysis:
1. The petitioner sought relief through a writ of certiorari to quash the confiscation of goods and an adjudication order under the GST Act. The petitioner argued that the respondent department did not follow Section 129 of the Central Goods and Services Tax Act, 2017, regarding the seizure of jewellery items. The petitioner claimed that the seized articles were samples for business purposes, and the impugned order did not specify any contravention of the GST Act by the petitioner. The petitioner requested interim stay for the petition.

2. The Government Pleader contended that Sections 129 and 130 of the GST Act operate in distinct fields, with mens rea being essential under Section 130. Section 129 deals with contraventions during transit, while Section 130 addresses intentional tax evasion. The petitioner's actions were seen as evasive, leading to the application of Section 130. The court reviewed the provisions and arguments presented.

3. The court analyzed Sections 129 and 130 of the GST Act, emphasizing that Section 129 pertains to contraventions during transit, while Section 130 focuses on intentional tax evasion. The notice under Section 130 detailed the seizure of gold jewellery without accompanying tax payment documents, indicating an intent to evade taxes. The impugned order confirmed the confiscation of goods under Section 130 due to the petitioner's actions and lack of tax payment evidence.

4. The court concluded that the respondent department correctly invoked Section 130 of the GST Act as the petitioner possessed over 2 kilograms of gold jewellery without evidence of tax payment. The petitioner's actions indicated an intention to evade taxes, as reflected in the notice and impugned order. The lack of evidence of lawful possession or tax payment led to the dismissal of the writ petition for lacking merit.

In summary, the judgment upheld the confiscation of goods under Section 130 of the GST Act due to the petitioner's possession of gold jewellery without tax payment evidence, indicating an intent to evade taxes. The court emphasized the importance of mens rea under Section 130 and the necessity of complying with the provisions of the GST Act to avoid confiscation and penalties.