2022 (5) TMI 862 - HC - GST

Seeking provisional release of goods and conveyance - suspicious transaction involving fake input tax credit - Power and jurisdiction u/s 129 versus u/s 130 - Delinking the two provisions - Whether the respondent authority is entitled to seize and detain the goods in transit and the conveyance, more particularly, when it is accompanied by a lawful e-way bill, invoices and without determining and offering the writ applicant opportunity to deposit tax, if any and penalty, the respondent authority were justified to distinctly proceed for confiscation proceedings by issuing notice under section 130 of the Act, 2017? - HELD THAT - Both sides have raised substantial legal issues regarding amendment made in various section of the Act, 2017 which is required to be considered after hearing respective parties on length. However, on ensuing summer vacation, time is constrain. For the reasons aforesaid, we are inclined to admit these matters. Hence, rule returnable on 23.06.2022. Seeking provisional release of goods - sub-clause (3) of section 129 of GST Act - HELD THAT - If after adjudging proceedings under section 130 of the Act, ultimately if the proper officer finds any contravention with intention to evade tax, the question of Fine may also arose in addition to the tax payable, penalty and other charges, and if not realized then the proper officer will be required to proceed for confiscation and auction of the goods and conveyance so detained. The Court has to strike balance as against the prayer of provisional release of goods and conveyance vis-a-vis securing revenue interest pending adjudication of confiscation proceedings. The respondent authorities are directed to provisionally release the goods and conveyance subject to the condition that the writ applicant shall deposit the total amount payable, including penalty, as determined by the respondent authority within period of one week from date of receipt of this order and upon realisation of such amount, the respondent authority shall forthwith release such goods and conveyance - petition disposed off.

Issues Involved:
1. Jurisdiction under Section 130 of the GST Act.
2. Compliance with Section 129(3) of the GST Act.
3. Provisional release of goods and conveyance.
4. Interpretation of amendments to Sections 129 and 130 of the GST Act.
5. Determination of tax and penalty.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 130 of the GST Act:
The primary issue revolves around whether the respondent authority had the jurisdiction to initiate proceedings under Section 130 of the GST Act. The petitioner argued that the proper officer could only confiscate goods or conveyance if there was an "intention to evade the payment of tax." This argument was supported by the precedent set in the case of Synergy Fertichem Pvt. Ltd. vs. State of Gujarat, which emphasized that the contravention must be with a definite intent to evade tax. The respondent, however, contended that the amendments to the Act allowed for independent proceedings under Section 130 without necessarily concluding proceedings under Section 129.

2. Compliance with Section 129(3) of the GST Act:
The petitioner argued that the omission to issue a notice under Section 129(3) within seven days of detention rendered the proceedings invalid. The court noted that the proper officer is required to issue a notice specifying the penalty payable within seven days and pass an order for payment of penalty within the same timeframe. The respondent countered that Sections 129 and 130 are distinct and independent, and once a notice under Section 130 is issued, it is not obligatory to issue a notice under Section 129(3).

3. Provisional Release of Goods and Conveyance:
The petitioner sought provisional release of the goods and conveyance, arguing that once the tax and penalty are paid, all proceedings should be deemed concluded as per Section 129(5). The court considered the provisional release under Section 129(3) read with Section 67(6), balancing the need for securing revenue interest against the petitioner's request for provisional release. The court directed the provisional release of goods and conveyance upon the petitioner depositing the total amount payable, including penalty, within one week.

4. Interpretation of Amendments to Sections 129 and 130 of the GST Act:
The respondent highlighted the amendments effective from 01.01.2022, which substituted the word "Notwithstanding" with "Where" in Section 130, indicating the legislature's intention to delink proceedings under Sections 129 and 130. This amendment was argued to empower the proper officer to proceed under Section 130 independently if there was an intention to evade tax. The court acknowledged this amendment but emphasized the need for a detailed hearing to resolve the substantial legal issues raised.

5. Determination of Tax and Penalty:
The court sought clarity on the exact amount payable by the petitioner under Section 129(3). The respondent provided the calculation, revealing that the total amount payable, including penalty, was Rs. 4,48,400 for one application and Rs. 4,81,248 for another. The court ordered the provisional release of goods and conveyance upon payment of these amounts and directed the respondent to conclude the proceedings under Section 130 within one month, providing proper opportunities for the petitioner to present objections and supporting documents.

Conclusion:
The court granted provisional release of the goods and conveyance upon payment of the determined amounts and directed the respondent to proceed with the Section 130 proceedings, ensuring due process and proper hearing. The court maintained a balance between securing revenue interests and addressing the petitioner's grievances, keeping all contentions and arguments open for final adjudication.

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