2023 (8) TMI 583 - HC - GST

Detention of goods and vehicles while in transit with valid invoices - Proceedings against the Seller / 4th respondent alongwith the proceedings against the purchase of goods - Seller being alleged to be fake and registration proposed to be cancelled by the authorities having jurisdiction over seller - whether the Revenue can confiscate the goods of the petitioners basing on the proceedings initiated against the 4th respondent? - HELD THAT - The proceedings for detention of goods can be initiated while the goods are in transit in contravention of provisions of the CGST/APGST Act. In the instant case also the 1st respondent has detained the goods of the 1st petitioner while they were in transit from Vijayawada to Sankarampet, Medak, Telangana State. That being the factual scenario, the question is whether 1st respondent can confiscate the goods of the 1st petitioner without initiating any proceedings against him U/s 129 but initiating proceedings U/s 130 of CGST/APGST Act against the 4th respondent on the ground of dubious credentials of the 4th respondent. In our considered view though the 1st respondent may initiate proceedings against the 4th respondent U/s 130 of the Act in view of his absence in the given address and not holding any business premises at Vijayawada, however, he cannot confiscate the goods of the 1st petitioner merely on the ground that the 1st petitioner happen to purchase goods from the 4th respondent. In essence, the petitioners have to establish their own credentials but not the 4th respondent. In that view, the 1st respondent is not correct in roping the petitioners in the proceedings initiated against the 4th respondent without initiating independent proceedings U/s 129 of CGST/APGST Act against the petitioners. As the 1st petitioner claims to have purchased goods from the 4th respondent whose physical existence in the given address is highly doubtful as per the enquiry conducted by the Joint Commissioner (ST), Kurnool, the 1st petitioner as observed supra, owes a responsibility to prove the genuineness of the transactions between him and the 4th respondent. Therefore, the 1st respondent can initiate proceedings U/s 129 of CGST/APGST Act against the petitioners and conduct enquiry by giving opportunity to the petitioners to establish their case. These writ petitions are accordingly disposed of giving liberty to the 1st respondent to initiate proceedings against the petitioners U/s 129 of CGST/APGST Act, 2017 within two weeks from the date of receipt of a copy of this order and conduct enquiry by giving an opportunity of hearing to the petitioners and pass appropriate orders in accordance with governing law and rules.

Summary

Issues Involved:

1. Legality of detaining goods and vehicles without initiating proceedings against petitioners.
2. Compliance with procedural requirements under CGST/APGST Act, 2017.
3. Validity of proceedings initiated against a non-existent seller.

Summary:

Issue 1: Legality of Detaining Goods and Vehicles Without Initiating Proceedings Against Petitioners

The petitioners challenged the detention of their goods and vehicles by the 1st respondent, asserting the detention was illegal as it was based on the alleged non-existence of the 4th respondent's business premises. The court noted that the 1st petitioner had valid documents for the goods in transit, including invoices and e-way bills. The court emphasized that if the 1st respondent suspected the genuineness of the 1st petitioner's business, proceedings should have been initiated under Section 129 of the CGST/APGST Act against the petitioners, instead of directly proceeding under Section 130 against the 4th respondent. The court held that the 1st respondent cannot confiscate the goods of the petitioners based on proceedings against the 4th respondent without initiating independent proceedings against the petitioners.

Issue 2: Compliance with Procedural Requirements under CGST/APGST Act, 2017

The petitioners contended that the 1st respondent did not follow the prescribed procedure under the CGST/APGST Act, 2017, as no notices were issued in GST MOV-02 to MOV-09 before issuing the confiscation notice in Form GST MOV-10. The court observed that the proper officer is authorized to inspect goods in movement under Section 68 of the CGST/APGST Act, and the documents required for such inspection are specified in Rule 138A of the CGST/APGST Rules. The court found that the 1st respondent did not comply with the procedural requirements, as the notices were issued directly under Section 130 without following the due process under Section 129.

Issue 3: Validity of Proceedings Initiated Against a Non-Existent Seller

The 1st respondent's action was based on the allegation that the 4th respondent, from whom the 1st petitioner purchased the goods, was a non-existent entity with a suspended GST registration. The court held that while the 1st respondent could initiate proceedings against the 4th respondent under Section 130, it could not extend those proceedings to confiscate the goods of the 1st petitioner without initiating independent proceedings under Section 129. The court emphasized that the 1st petitioner has a responsibility to prove the genuineness of the transactions with the 4th respondent, including the mode of payment and receipt of goods, but not the business activities or registration validity of the 4th respondent.

Conclusion:

The court disposed of the writ petitions, directing the 1st respondent to initiate proceedings under Section 129 of the CGST/APGST Act against the petitioners within two weeks and conduct an enquiry, providing an opportunity for the petitioners to establish their case. The court also ordered the release of the detained goods upon the 1st petitioner's deposit of 25% of their value and execution of a personal bond for the balance, and the release of the vehicles upon the 2nd petitioner's execution of personal security bonds for their value.