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TMI Blog2018 (11) TMI 1344X X X X Extracts X X X X X X X X Extracts X X X X ..... utory mandate under section 129 of the GST Act admit of any discretion to let the affected party pay a reduced amount of tax and penalty pending further adjudication, for having the interim custody of the detained goods? - Held that:- Division Bench in Indus Towers [2018 (7) TMI 1181 - KERALA HIGH COURT] has held that “if the conditions under the Act and Rules are not complied with, definitely Section 129 operates and confiscation would be attracted. The respondents are entitled to adjudication, but they would have to prove that” the goods being transported stand exempted from the rigours of the GST regime. I fail to persuade myself that I can take a different course from what has been judicially mandated in Indus Towers, for that case-holding squarely binds me. As a matter of abundant caution, I reiterate that I have not touched on the merits; nor should the authorities construe this judgment as expressing any view on the petitioners’ claims and contentions. The matter, as I have observed, concerns, interim custody of the goods. Section 129 and other provisions of the Act the Rules prescribe the procedure for that purpose. Either petitioner can get the goods released by comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the driver, the detention order, and the statutory notice respectively. 5. Through the Ext.P4(b) notice, the State Tax Officer demanded tax and penalty of ₹ 33,59,056/-. The next day, that is on 29 August 2018, the Company and Mohan replied to the statutory notice. On the subsequent day, once again, the Company sent another reply. These are the Exhibits P5, P5 (a), and P5 (B). In turn, the Tax Officer on 1st September 2018 informed the Company and Mohan, through Exhibit P6, that their explanation was rejected, but he re-fixed the penalty-reducing it by about ₹ 3 lakh. 6. Aggrieved, the Company and Mohan have filed this Writ Petition. Submissions: Petitioners : 7. Sri Harisankar V. Menon, the petitioners' counsel, has submitted that Mohan, as the purchaser, wanted to transport the vehicle to Trivandrum, in his independent capacity . Because of the distance, Mohan played it safe and requested the very dealer that sold the car to transport it. According to him, the company transported the vehicle only as a transporter, but not as a dealer. In other words, with the sale of the vehicle, and its immediate registration in Mohan's favour, the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. In the end, Dr. James has submitted that if the Court accepts, what she calls, the spin the petitioners put on the concept of used cars , every piece of movable property becomes a used item the moment it is purchased. In this regard, she has referred to certain provisions in the Motor Vehicles Act, too, besides the Value Added Tax Act. Relying heavily on some precedents of this Court, Dr. James has urged the Court to dismiss the writ petition. Discussion: 13. Let us first see out the grounds of detention. Exhibit P4, the notice issued under Section 129 (3) of the Act, contains these allegations: (1) the consignment is an interstate supply of more than ₹ 50,000/- value, so e-way bill is mandatory; (2) the temporary registration at Pondicherry is suspicious; (3) compensation cess is seen collected at 20% instead of 25%. The last two grounds the petitioners strongly refute. According to them, the statutory position is otherwise; the official assertion is only a mistake of fact. Let us not dwell deep on it, for the principal issue is the first one. 14. Now we will see which law governs these allegations. Recently, this Court had to examine the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with inspection, search, seizure, and arrest. Sub-section (6) mandates that the seized goods will be released, provisionally, upon the person s executing a bond and furnishing a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be. 20. If the consignor or the consignee transports the goods, either in its own conveyance or a hired one, it may generate an e-way bill in FORM GST INS-01, after furnishing information about the transporter and the vehicle in Part B of that Form. If it does not generate the e-way bill but hands over the goods to a transporter, the registered person must furnish the information to the transporter. Then, the transporter will generate Part B, based on that information. If the value of goods sought to be transported exceeds ₹ 50,000/-, every supplier, recipient, and the transporter must generate the e-way bill. For the value below ₹ 50,000/-, e-way bill is optional. 21. Under Rule 2 (1) of the Rules, the person in charge of a conveyance must carry- (a) the invoice or bill of supply or delivery challan; and (b) a copy of the eway b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der which a person transporting the goods need not carry the e-way bill. Here, Mohan persists with his plea that he entrusted the car to the company, after his purchasing it, only for its transportation to Trivandrum. As it is a used personal item, Rule 55A applies, and it obviates any e-way bill. 27. Now, let us examine the precedential position. A Division Bench in Commercial Tax Officer v. Madhu M.B., [ (2017) 64 GST 9 (Kerala)] considered the scope and ambit of section 129 of the CGST Act read with Rule 140 of the CGST Rules. To begin with, a learned Single Judge directed the release of detained goods on the petitioner s paying 50% of the demanded tax, besides his executing a simple bond. The Department appealed. The Division Bench analysed Section 129 of the then Simultaneous Ordinances. It also noted that Rule 140 permits the authorities to release the seized goods on the person s executing a bond for the value of goods in FORM GST INS-04 and furnishing security in the form of a Bank Guarantee, equivalent to the amount of applicable tax, interest, and penalty payable provisionally. After referring to both Section 67 (6) of the Act and Rule 140 of the KSGST Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulting in evasion of tax. 30. On facts, the Division Bench has held that the transaction, as projected, is non-taxable. Yet the statutory rules prescribe certain documents to accompany the goods, even with a non-taxable transport. Rule 55 and 138 are the prescriptions. As to the delivery challan, the consignor issues it, and the Department has no say in it. Nor can it vouch for its genuineness. The Division Bench, then, felt unable to sustain the finding that mere infraction of the procedural rules cannot result in the detention of goods. Finally, the learned Division Bench has held: If the conditions under the Act and Rules are not complied with, definitely Section 129 operates and confiscation would be attracted. The respondents are entitled to an adjudication, but they would have to prove that in fact there was a declaration made under Rule 138 before the transport commenced. If they do prove that aspect, they would be absolved of the liability; otherwise, they would definitely be required to satisfy the tax and penalty as available under Section 129. We, hence, vacate the judgment of the learned Single Judge and allow the appeal. The vehicle and the goods having been al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclude that the purchase of the car was, in the first place, a completed intra-state sale and that only the transport was an inter-state event? Venturing into that adjudication is premature, for both the Company and Mohan have the issue pending before the authorities concerned. They have an effective remedial measure of appeal, too. Any observation, at that stage, may prejudice their cause or may render the administrative adjudicatory mechanism otiose. All that the petitioners wanted is an interim release of the goods, pending further adjudication. Suffice if I confine myself to that. 35. Granted, Mohan could have driven the vehicle to the destination by himself. Then, this tax regime will not have affected him. But that has not happened. He did entrust the vehicle to a transporter-I assume, at least. So that alternative fact of his driving the vehicle to destination remains in the conjectural realms. That should not trouble us. 36. Sub-rule (2) of Rule 138 compels the registered person , as a consignor or as a consignee, to generate the e-way bill. If he does not generate e-way bill and hands over the consignment to a transporter, sub-rule (3) applies: the registered p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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