2018 (7) TMI 1181 - HC - GST

Detention and seizure of goods - Declaration as required under Rule 138 being KER-I, was not seen uploaded or the print out accompanied with the goods - Whether in the case of a transport, wherein obviously there is no tax liability on the goods, there could be a detention and seizure effected under Section 129 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Kerala State Goods and Services Tax Act, 2017 (SGST Act) and a release ordered as provided under sub-section (1) or order passed under sub-section (3) of Section 129? Held that - In the present case, the delivery challan which accompanied the transport is one issued by the assessee respondent, over which the assessee has absolute control and could be subject to manipulation. The assessee having transported the goods with delivery chalan, could very well sell the goods if the transport is undetected and then tear it up, as also issue a chalan with the same number for the next transport. The intimation regarding the transport of goods to the Assessing Officer is not achieved by the mere issuance of a challan under Section 55. This would be achieved only if there is a declaration under Section 138, which would ensure that the transaction is not otherwise and there is no diversion of the goods. This would establish the bonafides of the assessee and the transport, which could very well be checked and verified by the Department. There is no dispute that in the present case the declaration uploaded was subsequent to the detention of the vehicle. This would not absolve the liability to tax and penalty under Section 129 - The violation would stand on a totally different footing, from a forged declaration or an incomplete or blank declaration accompanying the transport. Hence if the declaration as in this case, was infact uploaded prior to the transport the assessee could be absolved from the penalty but otherwise penalty is an automatic consequence. The time when such declaration was uploaded is crucial and a declaration made after the detention of the goods cannot lead to the assessee being absolved from the penalty. We cannot agree with the learned Single Judge that merely because there was no suspicion raised against the delivery challan there is an admission of non-taxability of the goods transported. The finding that the transaction would not fall within the scope of taxable supply under the statute, cannot be sustained for reason of there being no declaration made under Rule 138. The resultant finding that mere infraction of the procedural rules cannot result in detention of goods though they may result in imposition of penalty cannot also be sustained - The respondents are entitled to an adjudication, but they would have to prove that in fact there was a declaration made under Rule 138 before the transport commenced. If they do prove that aspect, they would be absolved of the liability; otherwise, they would definitely be required to satisfy the tax and penalty as available under Section 129. The vehicle and the goods having been already released unconditionally, further notice shall be issued and the adjudication under sub-section (3) completed; upon which if penalty is imposed, definitely the respondents would have to satisfy the same - Petition allowed - Decided in favor of revenue.

Issues Involved:
1. Detention and seizure of goods under Section 129 of the CGST Act and SGST Act.
2. Requirement of declaration under Rule 138 (KER-I) for non-taxable transport.
3. Interpretation of Sections 129 and 130 of the CGST Act regarding detention and penalty.
4. Applicability of mens rea in the imposition of penalty under Section 129.
5. Validity and genuineness of delivery chalan accompanying the transport.
6. Adjudication process under Section 129(3) and its implications.

Detailed Analysis:

Issue 1: Detention and Seizure of Goods under Section 129 of the CGST Act and SGST Act
The primary question was whether goods with no tax liability could be detained and seized under Section 129 of the CGST Act and SGST Act. The court examined the facts of the cases where the goods were detained due to the lack of a declaration under Rule 138 (KER-I), despite being accompanied by a delivery chalan.

Issue 2: Requirement of Declaration under Rule 138 (KER-I) for Non-Taxable Transport
The court found that the transport of goods without the required declaration under Rule 138 (KER-I) constituted a violation of the Act and Rules, even if the goods were non-taxable. The delivery chalan alone was insufficient, and the absence of the declaration raised a reasonable presumption of an attempt to evade tax.

Issue 3: Interpretation of Sections 129 and 130 of the CGST Act Regarding Detention and Penalty
The court interpreted Sections 129 and 130, concluding that detention under Section 129 is justified only when there is a suspicion of goods being liable to confiscation. Mere procedural infractions, such as the absence of a declaration under Rule 138, could result in penalties but not necessarily detention. However, the court vacated the learned Single Judge's finding that procedural infractions alone cannot justify detention.

Issue 4: Applicability of Mens Rea in the Imposition of Penalty under Section 129
The court referred to precedents, including Guljag Industries and D.P. Metals, to determine that mens rea (guilty mind) is not a necessary requirement for imposing penalties under Section 129. The statutory scheme under Section 129 imposes a civil liability for contraventions without reference to mens rea. However, the court emphasized that if a declaration was uploaded before the transport, the absence of mens rea could absolve the liability.

Issue 5: Validity and Genuineness of Delivery Chalan Accompanying the Transport
The court noted that the delivery chalan, which is prepared by the consignor and not issued by the department, could be subject to manipulation. The genuineness of the delivery chalan was not disputed by the detaining officer, but the absence of a declaration under Rule 138 was a significant procedural infraction.

Issue 6: Adjudication Process under Section 129(3) and Its Implications
The court clarified that the adjudication process under Section 129(3) is not a mere formality. The transporter or consignor must prove that the declaration was uploaded before the transport commenced. If proven, they would be absolved of the penalty. Otherwise, the penalty would be imposed as per Section 129. The court directed that the adjudication process be completed, and if penalties are imposed, the respondents must satisfy them.

Conclusion:
The court vacated the judgment of the learned Single Judge, allowing the appeals and directing further adjudication under Section 129(3). The vehicle and goods, already released unconditionally, would be subject to the outcome of the adjudication process. The court emphasized the importance of compliance with procedural rules and the statutory requirement of declarations under Rule 138 for non-taxable transports.

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