2022 (9) TMI 786 - HC - GST

Jurisdiction - Detention of goods alongwith vehicle - power of Proper Officer for detention of goods which are in transit in the exercise of his power under Section 129 of the Act - power to initiate proceedings to confiscate under Section 130 of the Act and thereafter conduct an enquiry and proceed to order confiscation of the goods? - HELD THAT - The power to confiscate is the ultimate penal measure provided under the Act and is, therefore, to be exercised with great care and caution and as a last measure. This power to confiscate, given the statutory framework, is a distinct and independent power conferred under the Act which can be exercised only in cases where the power to detain and seize has not been invoked. Once the power to inspect, seize or detain the goods and conveyances is invoked either under Section 67 of the Act or under Section 129 of the Act, the power to confiscate under Section 130 would not be available. This is evident from Section 129 (6) which states that proceedings under Section 130 can be invoked only if the applicable tax and penalty are not paid despite an order being passed in that regard. The power to detain under Section 129 cannot be converted to a proceeding under Section 130 of the Act since both these provisions operate independently of each other and in completely different contexts. The power to detain is only to stop the transit of the goods and thereby prevent its movement till the tax and penalty is paid. However, the power to confiscate is the process of divesting the owner of the goods of all title to the goods for a contravention of the provisions of the Act and Rules. The entire procedure adopted by the proper officer from converting the detention proceedings into a confiscatory proceeding, ultimately leading to the order of confiscation is wholly illegal and contrary to the statutory scheme of the Act. The Appellate Authority has mechanically accepted the reasoning of the order of the proper officer and has dismissed the appeal without examining the statutory scheme of the Act. The impugned orders cannot be sustained and the same are quashed. The question that is framed is accordingly answered in the negative. Since it is stated that the confiscated goods are already sold in a public auction, the respondents are directed to pay the petitioners (the owner of the goods), the sale proceeds of the auction after deducting the penalty prescribed under Section 129(1)(a) of the Act, within a period of four weeks from the date of receipt of a certified copy of this order - the proper officer shall also release the conveyance, if it is not already released. Petition allowed.

Summary

Issues Involved:
1. Detention of goods under Section 129 of the CGST Act.
2. Confiscation of goods under Section 130 of the CGST Act.
3. The legality of converting detention proceedings into confiscation proceedings.
4. Compliance with statutory provisions and procedural requirements.
5. The application of penalties for non-compliance with CGST Act provisions.

Issue-Wise Detailed Analysis:

1. Detention of Goods under Section 129 of the CGST Act:
On September 13, 2021, the Proper Officer intercepted seven trucks transporting Areca nuts and detained them due to the absence of requisite documents, including the E-Way bill. The officer issued Form GST MOV-02 for physical verification. Upon verification, discrepancies were found between the invoice quantity and the actual quantity of goods. Consequently, an order of detention under Section 129 of the CGST Act was issued on September 28, 2021, in Form GST MOV-06.

2. Confiscation of Goods under Section 130 of the CGST Act:
On September 29, 2021, the Deputy Director issued a notice for confiscation of goods and conveyances under Section 130 of the CGST Act, citing the intent to evade tax. Despite the petitioner's reply, the Deputy Director proceeded with the confiscation order on November 24, 2021, in Form GST MOV-11. The petitioner appealed to the Joint Commissioner, who dismissed the appeal, leading to the present writ petition.

3. Legality of Converting Detention Proceedings into Confiscation Proceedings:
The petitioner argued that once goods were detained under Section 129, the proper officer lacked the power to initiate confiscation proceedings under Section 130 without first allowing the opportunity to pay the tax and penalty. The court examined the statutory framework and concluded that the power to confiscate under Section 130 is distinct and cannot be invoked after initiating detention under Section 129 unless the tax and penalty are not paid within 14 days as stipulated in Section 129(6).

4. Compliance with Statutory Provisions and Procedural Requirements:
The court emphasized the statutory intent to recover tax and penalty rather than confiscate goods. The statutory scheme under Sections 73 and 74 provides mechanisms for determining tax liability and penalties, encouraging compliance by allowing the wrongdoer to rectify errors. The court found that the proper officer's action of converting detention into confiscation proceedings was contrary to the statutory scheme and nullified the owner's right to release the goods upon payment of the applicable tax and penalty.

5. Application of Penalties for Non-Compliance with CGST Act Provisions:
The court noted that for transporting goods without an E-Way bill, the proper officer could impose a penalty under Section 122(1)(xiv) of the CGST Act. Additionally, for undervaluation or mis-declaration, penalties under Sections 73 and 74 could be applied. However, the court found that the proper officer's decision to initiate confiscation proceedings based on undervaluation and mis-declaration was inappropriate, as these issues should be addressed through the prescribed determination process under Sections 73 and 74.

Conclusion:
The court concluded that the proper officer's actions in converting detention proceedings into confiscation proceedings were illegal and contrary to the statutory scheme. The court quashed the impugned orders and directed the respondents to pay the petitioner the sale proceeds of the auctioned goods after deducting the penalty under Section 129(1)(a) within four weeks. The conveyance was also ordered to be released if not already done. The proper officer was granted liberty to initiate proceedings for tax determination under Sections 73 or 74, without this order affecting the merits of the allegations. The writ petition was allowed.