2023 (3) TMI 530 - HC - GST

Storage of goods at unreported location after expiry of e-way bill - Contravention of Section 67(2) read with Section 129 of the State Goods and Services Tax Act, 2017 - It has been contended that if the goods were inspected and seized in transit then provision of Section 68 ought to have been invoked and not Section 67, as has been done in the present case - non-affording of an opportunity of hearing to the petitioner prior to passing the order of penalty under Section 129 of the Act - violation of principles of natural justice (audi alterem partem). HELD THAT - It appears that an e-way bill was generated in respect of the vehicle no. RJ04GC1737 on 9th February, 2022 for transporting fifteen thousand kilograms of cumin seeds by road from Gujrat to Siliguri. The e-way bill was valid upto 20th February, 2022. On receiving information about illegal storage of goods, the authority inspected a godown on 22nd February, 2022 where 12,840 kilograms of cumin seeds were found. The stock of the goods was assessed. The person in charge of the godown produced the tax invoice, consignment note and the e-way bill of the said goods - On scrutiny of the aforesaid documents it was found that the goods were in order but the corresponding e-way bill expired. The authority was of the opinion that as the goods did not reach the end point as mentioned in the e-way bill, the goods were in transit. According to the respondent authority, the goods ought to have been covered with valid e-way bills till the time of delivery to the recipient. Section 67(2) of the Act empowers the proper officer to confiscate goods, if secreted in any place, for evading payment of tax. The place may be searched and goods seized and the same shall be released on payment of applicable taxes. The proper officer, if has reasons to believe that the goods are stored in a warehouse or godown or any other place without paying tax or not paying requisite tax, may cause inspection, search and seizure. The provision relates to a particular place where inspection, search and seizure can be made - Section 129 deals with detention, seizure and release of goods and conveyances, in transit . The said provision is to be invoked when the goods are in movement on a conveyance. In the present case, admittedly, the goods were seized two days after expiry of the e-way bill on being offloaded and stored in a godown not mentioned in the e-way bill. The e-way bill is for the purpose of moving/transporting the goods from one place to the other. Law does not require a way bill to remain valid for such period the goods remain in the godown. The petitioner submits, with conviction, that the godown from where the goods were seized is the final destination and the goods were duly delivered to the recipient. The authority has not come up with a case that the goods ought not to have been offloaded and stored at the said godown but should have been transported to the place mentioned in the e-way bill - the authority erroneously opined that as the goods were yet to reach the final destination mentioned in the e-way bill, accordingly, the same may be treated as on transit ; for which the e-way bill ought to have been extended. The authority ought not to have imposed penalty without resorting to the proper provision. The petitioner was certainly at fault in not recording the additional godown at the time of generation of the e-way bill, but at the same time, the petitioner ought not to be penalized with two hundred percent penalty for such trivial offence. As the goods were not confiscated while on the move, imposition of penalty under Section 129 of the Act is erroneous and bad in law. The aforesaid section cannot be relied upon to penalize the RTP when the goods are seized from a godown. In Magnum Steel 2023 (3) TMI 251 - SC ORDER the Hon ble Supreme Court held that the person authorizing the search must express his satisfaction that the material is sufficient for conducting a search and a reasonable belief that some objective material exists on the official record to trigger searches. The report of the proper officer is an unsatisfactory one, not enough to initiate search in the godown. In the case at hand it does not appear that the authority acted in accordance with the appropriate legal provisions and instead penalised the petitioner in a mechanical manner without proper application of mind. The impugned order of the adjudicating authority and the appellate forum are liable to be set aside and, are accordingly, set aside. The respondent authority is directed to refund the amount collected from the petitioner as penalty positively within four weeks from the date of communication of this order - Petition disposed off.

Summary

Issues Involved:
1. Legality of seizure under Section 67(2) of the State Goods and Services Tax Act, 2017.
2. Imposition of penalty under Section 129 of the Act.
3. Alleged violation of principles of natural justice.
4. Adherence to statutory provisions and constitutional mandates.
5. Determination of goods being in transit or stored in a godown.

Summary:

Issue 1: Legality of Seizure under Section 67(2)
The petitioner challenged the adjudicating order and the appellate authority's affirmation, arguing that the seizure of goods under Section 67(2) was improper. The goods were seized from a godown on 22nd February 2022, with the e-way bill having expired on 20th February 2022. The petitioner contended that Section 67(2) applies to goods stored in a static position and not in transit, and thus the seizure was improper.

Issue 2: Imposition of Penalty under Section 129
The petitioner argued that the penalty under Section 129 was impermissible since the initial seizure was under Section 67(2). The adjudicating authority imposed a penalty under Section 129(1)(a), which was affirmed by the appellate authority. The petitioner contended that the goods could not be simultaneously held to be in transit and stored in a godown. The court found that the authority erroneously shifted between Sections 67 and 68, leading to an improper imposition of penalty under Section 129.

Issue 3: Alleged Violation of Principles of Natural Justice
The petitioner alleged a violation of the principles of natural justice, arguing that no proper opportunity for a hearing was provided before imposing the penalty. The court noted that the petitioner was given a fair opportunity to defend himself before both the adjudicating and appellate authorities.

Issue 4: Adherence to Statutory Provisions and Constitutional Mandates
The petitioner argued that the seizure and penalty imposition violated statutory provisions and constitutional mandates, specifically Article 19(1)(g) of the Constitution of India. The court found that the authority did not act in accordance with the appropriate legal provisions and penalized the petitioner mechanically without proper application of mind.

Issue 5: Determination of Goods Being in Transit or Stored in a Godown
The court observed that the goods were seized from a godown two days after the expiry of the e-way bill and were not in transit. The appellate authority's opinion that the goods could have been covered with a valid e-way bill till delivery was found to be erroneous. The court held that the petitioner should not be penalized with a 200% penalty for such a trivial offense and that Section 129 could not be relied upon for penalizing goods seized from a godown.

Conclusion:
The court set aside the impugned orders of the adjudicating and appellate authorities and directed the respondent authority to refund the penalty amount collected from the petitioner within four weeks. It was left open for the authority to assess any penalty payable for offloading goods at a place not mentioned in the e-way bill. The writ petition was disposed of accordingly.