2019 (12) TMI 1213 - HC - GST

Interpretation of statute - Detention / Confiscation of goods alongwith conveyance - exercise of power arbitrarily and without any application of mind. - Sections 129 and 130 respectively of the Central Goods Services Tax Act, 2017 - whether the two provisions overlap or are independent of each other? - truck detained by the officer concerned on the ground of absence of the e-way bill in respect of the goods - It is the case of the writ applicants that having come to know about the detention of the truck, they promptly generated the e-way bill in respect of the transaction. The authorities, however, declined to release the goods on the ground that while the goods were being transported, the driver of the vehicle was not carrying the e-way bill - authorities insisted for payment of tax and 100% penalty under Section 129 of the Act as well as redemption fine in lieu of the confiscation equal to the value of goods under Section 130 of the Act. The sum and substance of the submissions canvassed on behalf of the writ applicants is that the proceedings for confiscation of goods or conveyance cannot be initiated under Section 130 of the Act without first complying with the procedure as prescribed under Section 129 of the Act and the second limb of the submission is that once the tax and the penalty is paid under Section 129 of the Act, then the authority has no power to proceed further under Section 130 of the Act for the purpose of confiscation of the goods and the conveyance. HELD THAT - AS PER J. B. PARDIWALA, J Concurrent (i) Section 129 of the Act talks about detention, seizure and release of goods and conveyances in transit. On the other hand, Section 130 talks about confiscation of goods or conveyance and levy of tax, penalty and fine thereof. Although, both the sections start with a non-obstante clause, yet, the harmonious reading of the two sections, keeping in mind the object and purpose behind the enactment thereof, would indicate that they are independent of each other. Section 130 of the Act, which provides for confiscation of the goods or conveyance is not, in any manner, dependent or subject to Section 129 of the Act. Both the sections are mutually exclusive. . (ii) The phrase with an intent to evade the payment of tax in Section 130 of the Act assumes importance. When the law requires an intention to evade payment of tax, then it is not mere failure to pay tax. It must be something more. The word evade in the context means defeating the provisions of law of paying tax. It is made more stringent by use of the word intent . The assessee must deliberately avoid the payment of tax which is payable in accordance with law. However, the element of mens rea cannot be read into Section 130 of the Act. (iii) For the purpose of issuing a notice of confiscation under Section 130 of the Act at the threshold, i.e., at the stage of detention and seizure of the goods and conveyance, the case has to be of such a nature that on the face of the entire transaction, the authority concerned should be convinced that the contravention was with a definite intent to evade payment of tax. The action, in such circumstances, should be in good faith and not be a mere pretence. In other words, the authorities need to make out a very strong case. Mere suspicion may not be sufficient to invoke Section 130 of the Act straightway. (iv) If the authorities are of the view that the case is one of invoking Section 130 of the Act at the very threshold, then they need to record their reasons for such belief in writing, and such reasons recorded in writing should, thereafter, be looked into by the superior authority so that the superior authority can take an appropriate decision whether the case is one of straightway invoking Section 130 of the Act. (v) Even if the goods or the conveyance is released upon payment of the tax and penalty under Section 129 of the Act, later, if the authorities find something incriminating against the owner of the goods in the course of the inquiry, if any, then it would be permissible to them to initiate the confiscation proceedings under Section 130 of the Act. (vi) Section 130 of the Act is not dependent on clause (6) of Section 129 of the Act. (vii) Sections 129 and 130 respectively of the Act are mutually exclusive and independent of each other. If the amount of tax and penalty, as determined under Section 129 of the Act for the purpose of release of the goods and the conveyance, is not deposited within the statutory time period, then the consequence of the same would be forfeiture of the goods and the vehicle with the Government. This does not necessarily imply that the confiscation proceedings can be initiated only in the event of the failure on the part of the owner of the goods or the conveyance in depositing the amount towards the tax and liability determined under Section 129 of the Act. (viii) For the purpose of Section 129(6) of the Act, it would not be necessary for the department to establish any intention to evade payment of tax. If the tax and penalty, as determined under Section 129, is not deposited within the statutory time period, then the goods and the conveyance shall be liable to be put to auction and the sale proceeds shall be deposited with the Government. (ix) Similarly, the reference to Sections 73 and 74 respectively of the Act is not warranted for the purpose of interpreting Sections 129 and 130 of the Act, more particularly, when they all are independent of each other. The provisions of Sections 73 and 74 of the Act are similar to the provisions of Section 11A of the Central Excise Act and Section 28 of the Customs Act, which deal with the adjudication proceedings. Despite this, Section 110 is present in the Customs Act, which speaks about seizure and similarly, Section 129 is present in the Act for detention/seizure. Therefore, Sections 129 and 130 of the Act have non-obstante clauses, whereby they can be operated upon in spite of Sections 73 and 74 of the Act. (x) The provisions of sections 73 and 74 respectively of the Act deal with the 'demands and recovery' to be made by the assessing officer based upon the assessment, whereas the provisions of Section 129 of the Act deal with the 'detention/ seizure'. While assessing the returns, if the assessing officer finds that the amount of tax has not been paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilized for any reason, either with mala fide intention or without the same, as the case may be, the provisions of Section 73/74 of the Act would be invoked. However, the provisions of Section 129 of the Act deal with situation where the evasion of tax/contravention of the Act/Rules is detected during transit itself, requiring the adoption of summary like proceedings. Therefore, the said provisions operate in different spheres. (xi) The comparison of the provisions of Customs Act/ Excise Act on one hand and the provisions of the Act on the other, as sought to be drawn on behalf of the writ applicants, is not correct. Section 110(1) of the Customs Act is not comparable to Section 129(1) of the Act inasmuch as, the provisions of Section 110 of the Customs Act contemplates that the proper officer may seize the goods which are liable for confiscation, whereas the provisions of Section 129 contemplate that the proper officer may detain/ seize the goods/ conveyance in transit in contravention of the provisions of the Act or the Rules. (xii) The provisions of Sections 110(2) and 124 of the Customs Act do not contemplate that the goods which are seized are to be released in a specific time limit, much less, within a period of six months. Apropos this, the said sections merely cast a duty on the department to issue a show cause notice within a period of six months from the date of seizure of goods, but the same does not contemplate as to in how much time, the same has to be adjudicated upon. Therefore, the contention raised on behalf of the writ applicants that the goods which are seized are to be released within a short span of time and that the legislature has not contemplated to retain the goods pending the confiscation proceedings. is not tenable. In addition to the above, even otherwise, the provisions of Section 110A of the Customs Act, which deal with the 'provisional release' of the goods, do not contemplate the release of the goods only on payment of penalty and interest but the proposed amount of fine is also to be included for provisional release of the goods. In view of this, the amount of fine should be taken into account while directing the provisional release of the goods/ conveyance as per Section 129(2) read with Section 67(6) of the Act read with Rule 140 of the Rules. (xiii) Although there is no serious challenge to the validity of the provisions of Sections 129 and 130 respectively of the Act, yet it is a settled principle of law that the power to levy tax includes all the incidental powers to prevent the evasion of such tax. The power to seize and confiscate the goods in the event of evasion of tax and the power to levy penalty are meant to check tax evasion and is intended to operate as a deterrent against the tax-evaders and are, therefore, ancillary or incidental to the power to levy tax on the goods and thus, fall within the ambit and scope of the legislative powers. (xiv) The goods are not liable to be detained on the ground that the tax paid on the product was less. In such circumstances, the Inspecting Authority is expected to alert the Assessing Authority to initiate appropriate proceedings for assessment of any alleged sale at which the dealer will have his opportunities to put forward his pleas on law and on fact. The process of detention of the goods cannot be resorted to when the dispute is bona fide, especially concerning the exigibility of tax and, more particularly, the rate of that tax. (xv) Even in the absence of the physical availability of the goods or the conveyance, the authority can proceed to pass an order of confiscation and also pass an order of redemption fine in lieu of the confiscation. In other words, even if the goods or the conveyance has been released under Section 129 of the Act and, later, confiscation proceedings are initiated, then even in the absence of the goods or the conveyance, the payment of redemption fine in lieu of confiscation can be passed. (xvi) The extraordinary powers under Article 226 of the Constitution, directing for release of the vehicles or goods, during the pendency of the confiscation, can only be sparingly exercised under extraordinary situations and circumstances when injustice occurs because of non-fulfillment of the conditions for confiscation AS PER HONOURABLE MR.JUSTICE A.C.RAO Addendum From the plain reading of Sections 129 and 130 of the Act, it is clear that the suppliers or receivers of the goods transport any goods in contravention of provisions of the Act or the Rules made thereunder are liable for the detention or seizure of the goods under Section 129 of the Act and under Section 130 (i)(v) of the Act for confiscation of the goods and conveyance. Thus, for the same breach and/or contravention of the provisions of the Act, there are two types of penalties provided under Section 129 and Section 130(i)(v) of the Act - the Legislature should, once again, look into both the provisions, i.e, Sections 129 and 130 of the Act and amend the sections accordingly so as to remove certain inconsistencies in the two provisions. Let this aspect be looked into by the State Government in accordance with law.

Summary

Issues Involved:

1. Interpretation and application of Sections 129 and 30 of the Central Goods & Services Tax Act, 2017 (CGST Act).
2. Whether the authorities can invoke Section 130 directly without following the procedure under Section 129.
3. Whether the goods can be confiscated under Section 130 if tax and penalty under Section 129 have been paid.
4. Whether the physical availability of goods is necessary for imposing redemption fine under Section 130.
5. The scope of the High Court's intervention under Article 226 during the pendency of confiscation proceedings.

Detailed Analysis:

1. Interpretation and Application of Sections 129 and 130 of the CGST Act:

The court was called upon to interpret Sections 129 and 130 of the CGST Act. Section 129 deals with the detention, seizure, and release of goods and conveyances in transit, while Section 130 deals with the confiscation of goods or conveyances and the levy of tax, penalty, and fine. Both sections start with a non-obstante clause, indicating that they operate independently of each other. The court emphasized that Section 130, which provides for confiscation, is not dependent on Section 129 and that both sections are mutually exclusive.

2. Direct Invocation of Section 130 Without Following Section 129:

The court clarified that for invoking Section 130 at the threshold, the authorities need to make out a very strong case that the contravention was with a definite intent to evade payment of tax. Mere suspicion is not sufficient to invoke Section 130 directly. The authorities must record their reasons for such belief in writing, which should then be reviewed by a superior authority.

3. Confiscation Under Section 130 if Tax and Penalty Under Section 129 Are Paid:

The court held that even if the goods or conveyance are released upon payment of tax and penalty under Section 129, the authorities can later initiate confiscation proceedings under Section 130 if they find something incriminating against the owner of the goods. Section 130 is not dependent on Section 129(6), and the two sections operate independently.

4. Physical Availability of Goods for Imposing Redemption Fine:

The court addressed the issue of whether the physical availability of goods is necessary for imposing redemption fine under Section 130. It concluded that even in the absence of the physical availability of the goods or conveyance, the authority can proceed to pass an order of confiscation and also pass an order of redemption fine in lieu of confiscation.

5. Scope of High Court's Intervention Under Article 226:

The court noted that while it has wide powers under Article 226 of the Constitution, such powers should be exercised sparingly and only in extraordinary situations where substantial injustice has occurred. The court emphasized that it would not go into disputed questions of fact and that the extraordinary powers should be used to remedy situations where there is a complete violation of the procedure prescribed for confiscation.

Final Conclusion:

The court summarized its conclusions as follows:

- Sections 129 and 130 are independent of each other.
- Section 130 can be invoked directly only in strong cases where there is clear intent to evade tax.
- Confiscation proceedings can be initiated even after the payment of tax and penalty under Section 129.
- Physical availability of goods is not necessary for imposing redemption fine under Section 130.
- High Court's intervention under Article 226 should be limited to extraordinary situations where there is a clear violation of procedural requirements.

The court also suggested that the government consider translating GST rules and regulations into vernacular languages and setting up efficient dispute resolution mechanisms to minimize litigation and ensure smooth implementation of the new tax regime.