2020 (11) TMI 916 - HC - GST

Confiscation of goods - solver ornaments - unaccounted stocks - Section 67 of the Central Goods and Service Act, 2017 - Whether the 1st respondent is authorised to pass the impugned proceedings dated 04.02.2020? - HELD THAT - The argument of the petitioners that the 1st respondent is not legally authorised to issue the impugned proceedings is not correct in view of the Gazette notification No.37 of Revenue Department (CT-II) dated 30.06.2017 filed by the learned Government Pleader. Section 68(3) of the CGST Act confers power on the Proper Officer to intercept any conveyance on the way and require the person in-charge of the said conveyance to produce the documents prescribed under sub-section (1) of Section 68 and the devices for verification in which case the said person shall be liable to produce the same and also allow the inspection of goods. While so, in the Gazette notification No.37, the Chief Commissioner of State Tax notified certain officers as Proper Officer occurring in different sections of the SGST Act. In Serial No.23, certain officers viz., (i) Goods and Service Tax Officer (ii) Deputy Assistant Commissioner (iii) Assistant Commissioner (iv) Deputy Commissioner and (v) Joint Commissioner having jurisdiction and/or (i) Deputy Assistant Commissioner (ii) Assistant Commissioner and (iii) Deputy Commissioner as authorised by the additional Commissioner/Commissioner in case of State Enforcement Wing are authorised as Proper Officers to act under Section 68(3). While so, by an amendment vide Ref.No.CCW/GST/74/2015 dated 28.03.2018 the Commissioner of Commercial Taxes authorized the officer not below the cadre of Deputy Assistant Commissioner of State Tax as Proper Officer for the purpose of Section 68(3). In the instant case, the confiscation proceedings are issued by the Deputy Assistant Commissioner (ST)-I, Hindupur, the first respondent herein, who is authorised as per the above Gazette notification. Whether the 1st respondent is legally justified in proceeding simultaneously under Section 129 130 of the CGST Act against the petitioners? - HELD THAT - We have gone through the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT 2019 (12) TMI 1213 - GUJARAT HIGH COURT and it was held therein that both the sections, though commenced with a non obstante clause, yet are mutually exclusive and independent. It implies that the confiscation proceedings can be taken up by the authorities after exhausting the measures under Section 129(6) and also simultaneously along with Section 129 and there is no bar. However, since the phrase with an intent to evade the payment of tax is employed in Section 130 of the Act, before invoking the confiscation proceedings under Section 130 at the threshold, the concerned authority must form a firm opinion that the assessee has deliberately avoided the payment of tax. Such opinion must be an express one and recorded with the reasons. It must be noted that except arguing that the authorities cannot invoke both the sections simultaneously, the petitioners have not produced any case law which militates against the views expressed in the above judgment. Whether the order dated 04.02.2020 of the 1st respondent is legally sustainable? - HELD THAT - While interpreting the Tax Statutes and applying to the facts and holding that the provisions thereof are violated, the authorities must give cogent reasons. Unfortunately, in the instant case, the reasons, are a casualty - the impugned order does not stand to legal scrutiny and liable to be set aside. While the confiscation order dated 04.02.2020 passed by the 1st respondent is set aside, the 1st respondent is directed to conduct an enquiry afresh and afford an opportunity of personal hearing to the petitioners with reference to their explanation and pass an appropriate order by giving cogent reasons in accordance with law - Petition allowed.

Summary

Issues Involved:

1. Authorization of the 1st respondent to pass the impugned proceedings.
2. Legality of proceeding simultaneously under Section 129 and Section 130 of the CGST Act.
3. Legal sustainability of the order dated 04.02.2020 by the 1st respondent.

Detailed Analysis:

1. Authorization of the 1st respondent to pass the impugned proceedings:

The court examined whether the 1st respondent was authorized to issue the impugned proceedings. It was argued by the petitioners that the 1st respondent lacked the legal authority. However, the court found this argument incorrect based on the Gazette notification No.37 of Revenue Department (CT-II) dated 30.06.2017, which authorized the Deputy Assistant Commissioner (ST)-I, Hindupur, as a "Proper Officer" under Section 68(3) of the CGST Act. Hence, the 1st respondent was legally authorized to pass the impugned proceedings.

2. Legality of proceeding simultaneously under Section 129 and Section 130 of the CGST Act:

The court addressed whether the 1st respondent was justified in proceeding under both Section 129 and Section 130 of the CGST Act. The petitioners contended that these sections are interrelated and the authorities cannot initiate confiscation proceedings under Section 130 without first exhausting the procedure under Section 129. The court referred to the judgment in Synergy Fertichem Pvt. Ltd. v. State of Gujarat, which clarified that Sections 129 and 130 are independent and mutually exclusive. The court agreed with this interpretation, stating that the authorities can proceed under both sections simultaneously. However, it emphasized that before invoking Section 130, the authority must form a firm opinion that the assessee deliberately avoided tax payment and record reasons for such belief.

3. Legal sustainability of the order dated 04.02.2020 by the 1st respondent:

The court scrutinized the confiscation order dated 04.02.2020. The petitioners had submitted an explanation along with documents to justify the transport of the silver ornaments. The 1st respondent rejected their explanation on three grounds: non-production of documents at the initial check, the explanation being an afterthought, and the petitioners not availing the opportunity for a personal hearing. The court found these grounds inadequate and not legally tenable. It emphasized that mere non-production of documents at the inception does not automatically falsify the records produced later. The 1st respondent failed to provide cogent reasons for rejecting the petitioners' explanation and documents. The court held that the impugned order lacked legal scrutiny and was liable to be set aside.

Conclusion:

The court allowed the writ petition, set aside the confiscation order dated 04.02.2020, and directed the 1st respondent to conduct a fresh enquiry, afford a personal hearing to the petitioners, and pass an appropriate order with cogent reasons within eight weeks. The detention of the subject goods and conveyance would hold until the new order is passed.