2020 (3) TMI 439 - HC - GST

Territorial Jurisdiction - Detention of goods - whether the Officers of Kerala would have a jurisdiction to detain and seize the goods or at the best could have intimated the jurisdictional Officer in Tamil Nadu to initiate proper proceedings against the petitioner in view of the report? HELD THAT - Section 129 opens with a non obstante clause empowering the Officers to detain and seize the goods, if it found to be in contravention of any of the any of the provisions of the Act and release of the vehicles, as per the conditions, enumerated, therein. In case of a bonafide dispute with regard to the classification between a transitor of the goods and the squad officer, the squad officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers and nothing beyond. In the present case, it is a case of bonafide miscalculation as to whether the goods would be exigible to 12% or 28% - Similar question was considered in the case of Synergy Fertichem 2019 (12) TMI 1213 - GUJARAT HIGH COURT In case of a bonafide dispute with regard to the classification between a transitor of the goods and the squad officer, the squad officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers and nothing beyond. The impugned order of detention Ext.P1 and consequential notice Ext.P2 in Form GST MOV-07 are not sustainable and hereby quashed - The goods are directed to be released to the petitioner with a further direction that the inspecting authority of Kerala would prepare a report and submit the same to the assessing authority, Tamil Nadu for taking action, if deem it appropriate, in accordance with law - Decided in favor of petitioner.

Issues Involved:
1. Jurisdiction of GST authorities in Kerala to detain goods imported from Tamil Nadu.
2. Classification and applicable GST rate for carbonated fruit drinks.
3. Validity of detention and seizure under Section 129 of the GST Act.
4. Procedures for addressing disputes regarding tax classification and rate.

Detailed Analysis:

1. Jurisdiction of GST Authorities in Kerala:
The petitioner contended that the GST authorities in Kerala lacked jurisdiction to issue a show cause notice regarding the tax on imported goods, asserting that only Tamil Nadu officers could initiate such proceedings. The petitioner argued that, at best, Kerala authorities should have sent an intimation to Tamil Nadu authorities. This argument was based on the notion that the classification and tax rate assessment should be handled by the jurisdictional officers where the company is registered.

2. Classification and Applicable GST Rate:
The petitioner classified their carbonated fruit drinks under HSN 2202 9920, attracting a GST rate of 12%. However, the Kerala authorities intercepted the goods on the premise that they should be classified under HSN 2202 10, which attracts a 28% GST rate. The petitioner maintained that this was a bona fide dispute concerning the exigibility of tax and not an evasion. They provided valid tax invoices and E-way bills, asserting that there were no discrepancies in the quantity or description of the goods.

3. Validity of Detention and Seizure under Section 129 of the GST Act:
The Kerala authorities relied on Section 129 of the CGST Act, which empowers officers to detain or seize goods in transit if they are found to be in contravention of the Act or its rules. They argued that the goods could be released only upon payment of the applicable tax and penalty. The petitioner countered that this provision should not apply in cases where there is a bona fide dispute regarding tax classification and rate, especially when all documents are in order.

4. Procedures for Addressing Disputes:
The court referred to the Division Bench judgment of the Gujarat High Court in Synergy Fertichem Pvt. Ltd. v. State of Gujarat, which held that in cases of bona fide disputes regarding tax classification, the proper procedure is to alert the assessing authority rather than detain the goods. This approach was supported by the Kerala High Court's decision in N.V.K Mohammed Sulthan Rawtger and Sons vs. Union of India, which emphasized that detention should not be used when there is a genuine dispute about the tax rate.

Judgment:
The court concluded that the Kerala authorities should not have detained the goods but should have prepared a report and submitted it to the Tamil Nadu assessing authority. The court quashed the detention order and the consequential notice, directing the release of the goods. The Kerala authorities were instructed to report the matter to the Tamil Nadu authorities for any further action deemed appropriate.

Conclusion:
The court's decision underscores the importance of jurisdictional boundaries and proper procedures in addressing tax disputes. It emphasizes that detention should not be used as a tool for resolving bona fide disputes regarding tax classification and rate. Instead, such matters should be referred to the appropriate assessing authorities for resolution.

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