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TMI Blog2022 (2) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... h his action. He cannot be held liable under Section 130 for contravention of the provision of law by other person in the supply chain. Wrongful claim of input tax credit may be result of a bonafide claim as well and does not necessarily involve intent to evade payment of tax. Moreover, wrongful claim of input tax credit is not one of the conditions enumerated under Section 130(1) of the 2017 Act that could entail confiscation of the goods. Section 130 being penal in nature has to be construed strictly. The investigation report relied upon by the respondents to initiate proceedings under Section 130 against the petitioner lacks sting. Under the 2017 Act, a trader is either a 'supplier' qua 'outward supply' or is a 'recipient' of 'inward supply'. The alleged 'intent to evade tax' must have a direct nexus with the activity of trader. The opinion formed by the authorities must reflect such nexus before proceeding under Section 130 of 2017 Act. A trader cannot be accused of having intention to evade payment of tax for act or omission on part of a person not immediately linked to his activity. It is virtually impossible for a trader to ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -18392-2021 - - - Dated:- 4-2-2022 - HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE PANKAJ JAIN Present: Mr. Sandeep Goyal, Advocate for the petitioner. Ms. Sudeepti Sharma, Addl. A.G., Punjab. PANKAJ JAIN, J. By way of present writ petition, the petitioner challenged detention of the goods under Section 129 of the CGST Act, 2017 and prayed for release of the same. 2. According to the petitioner, he sold copper scrap to one M/s. Mittal Engineering Industries, Jagadhri. While the goods were in transit in vehicle No.PB-11CP/0194 on 30.08.2021, the same were checked. Driver of the vehicle produced requisite documents, i.e. invoice and E-way Bill No.311352418264 dated 30.08.2021. Despite the documents being in order, the same were detained on the pretext that the 'genuineness of the tendered documents need verification from regular bills of A/c'. Form MOV-02 dated 30.08.2021 was issued and the petitioner was directed to station the conveyance carrying goods at office of Assistant Commissioner. The petitioner appeared on the date fixed, i.e. 02.09.2021. He was informed that investigation is underway and was asked to appear on 03.09.2021. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re being generated down the supply chain. The goods are being procured from suppliers without raising an invoice and then these are covered by fraudulent invoices generated by the non-existent firms to claim inadmissible input tax credit (ITC) in clear violation of Section 16(2)(c) of the PGST/CGST Acts, 2017. 7. State has relied upon an investigation report dated 09.09.2021, as per which, the following findings have been recorded:- Sr.No. Name of the dealer and GSTIN from whom the purchases made from Remarks Findings 1. M/s Star Enterprises, New Delhi. 07AKAPN4831G1ZC The dealer is having inward supply from M/S DURGA MULTIMETALS BIHAR (GSTIN10HTGPK 1952K1ZO) which in turn is showing the inward supply from MIS Aneja Enterprises Delhi and M/S Vardhman Sales, New Delhi. Both these firms do not have any inward supplies or no goods have ever been purchased by these firms making the transactions fraudulent and nonexistent. From M/S GUPTA TRADING COMPANY NEW DELHI (GSTIN 07CEHPG4358G1ZH). The dealer is having NIL inward as per the returns filed which me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , antedated document which has been prepared after filing of this writ petition. To demonstrate, learned counsel for the petitioner argued that at the end of investigation report dated 09.09.2021, there is a note written by ACST, as per which the petitioner was to be confronted with the findings of the report whereas a bare perusal of show cause notice issued to the petitioner dated 14.09.2021 (Annexure R-4) shall reveal that he was never confronted with the findings qua M/s. Gupta Traidng Company, New Delhi and M/s. Triangle Inter Trade, Patiala. Meaning thereby investigation report (R-1) was not in existence on 14.09.2021 when R-4 was issued. 9. His further contention is that there was no reason for the authorities to Act under Section 129 of the CGST Act, 2017 as the goods were being carried with the documents as required under law. So far as proceedings under Section 130 of the CGST Act are concerned, he claims that the same are malicious and have been initiated only after filing of the writ petition by the petitioner. As per him, there is no reason to proceed against him under Section 130 of the said Act as even if Annexure R-1 is believed to be gospel truth, petitioner can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 of the 2017 Act, the liability to pay tax on goods arises at the time of supply as determined in accordance with the provisions. Section 7 determines scope of supply. The Act further talks of inward supply and outward supply. Corresponding to the aforesaid expressions, i.e. the inwards supply as defined under Section 2(67) and outward supply as defined under Section 2(83) are the expression-'recipient of supply' as defined under Section 2(93) and 'supplier' as defined under Section 2(105). Section 9 provides for levy and collection of CGST. A conjoint reading of aforesaid provisions reveals that, the incidence to pay tax on goods arises at the time of supply. The value of taxable supply as per Section 15 includes the following components:- The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under sub-Section (1) of Section 39 verify, validate, modify or delete the details of supplies furnished by the suppliers. It further provides that the procedure for furnishing the details of outward supply by supplier on the common portal for the purposes of availing input tax credit by the recipient shall be such as may be prescribed. As per Section 43A(6), the supplier and recipient of the supply shall be jointly and severally liable to pay tax or to pay the input tax credit availed as the case may be in relation to outward supplies for which the details have been furnished under sub-Section(3) of sub-Section(4), but return thereof to be furnished. Thus, as per the Act availing of input tax credit by a registered person under the Act is subject to assessment. Goods in Transit: 18. The 2017 Act and Rules framed thereunder contain specific provisions enlisting requirements and prescriptions for goods in transition. Section 68 deals with inspection of goods in movement. Sub-section 1 thereof stipulates that the person in charge of a conveyance carrying goods shall carry with him the documents and devices prescribed in this behalf. Section 68(2) further provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be released, (a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty; (b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty; (c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed: Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods. (2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 122. (2) Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit: Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon: Provided further that the aggregate of such fine and penalty leviable shall not be less than the [penalty equal to hundred per cent of the tax payable on such goods]: Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon. (3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in subsection (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance. (4) No order for confiscation of goods or conveyance or for impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where any conveyance referred to in sub-section (1) of the said section is intercepted by the proper officer at any place, he may require the person in charge of the conveyance to produce the documents for verification, and the said person shall be liable to produce the documents and also allow the inspection of goods. 1.1 Rules 138 to 138D of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules ) lay down, in detail, the provisions relating to e-way bills. As per the said provisions, in case of transportation of goods by road, an e-way bill is required to be generated before the commencement of movement of the consignment. Rule 138A of the CGST rules prescribes that the person in charge of a conveyance shall carry the invoice or bill of supply or delivery challan, as the case may be; and in case of transportation of goods by road, he shall also carry a copy of the e-way bill in physical form or the e-way bill number in electronic form or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner. 1.2 Section 129 of the CGST Act provides for detention, seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the person in charge of the conveyance in FORM GST MOV 01. In addition, the proper officer shall issue an order for physical verification/inspection of the conveyance, goods and documents in FORM GST MOV-02, requiring the person in charge of the conveyance to station the conveyance at the place mentioned in such order and allow the inspection of the goods. The proper officer shall, within twenty four hours of the aforementioned issuance of FORM GST MOV-02, prepare a report in Part A of FORM GST EWB-03 and upload the same on the common portal. (e) Within a period of three working days from the date of issue of the order in FORM GST MOV-02, the proper officer shall conclude the inspection proceedings, either by himself or through any other proper officer authorised in this behalf. Where circumstances warrant such time to be extended, he shall obtain a written permission in FORM GST MOV-03 from the Commissioner or an officer authorized by him, for extension of time beyond three working days and a copy of the order of extension shall be served on the person in charge of the conveyance. (f) On completion of the physical verification/inspection of conveyance and goods in move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of bank guarantee equal to the amount payable under clause (a) of clause (b) of subsection (1) of section 129 of the CGST Act. The finalisation of the proceedings under section 129 of the CGST Act shall be taken up on priority by the officer concerned and the security provided may be adjusted against the demand arising from such proceedings. (j) Where any objections are filed against the proposed amount of tax and penalty payable, the proper officer shall consider such objections and thereafter, pass a speaking order in FORM GST MOV-09, quantifying the tax and penalty payable. On payment of such tax and penalty, the goods and conveyance shall be released forthwith by an order in FORM GST MOV05. The order in FORM GST MOV 09 shall be uploaded on the common portal and the demand accruing from the order shall be added in the electronic liability register and, upon payment of the demand, such register shall be credited by either debiting the electronic cash leger or the electronic credit ledger of the concerned person om accordance with the provisions of section 49 of the CGST Act. (k) In case the proposed tax and penalty are not paid within seven days from the date of issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in FORM GST MOV-11, after taking into consideration the objections filed by the person in charge of the conveyance and the same shall be served on the person concerned. Once the order of confiscation is passed, the title of such conveyance shall stand transferred to the Central Government. In the order passed above, a suitable time not exceeding three months shall be offered to make the payment of penalty and fines imposed in lieu of confiscation and get the conveyance released. The order in FORM GST MOV-11 shall be uploaded on the common portal and the demand accruing from the order shall be added in the electronic liability register and, upon payment of the demand, such register shall be credited by either debiting the electronic cash ledger or the electronic credit ledger of the concerned person in accordance with the provisions of section 49 of the CGST Act. (p) The order referred to in clauses (n) and (o) above may be passed as a common order in the said FORM CGST MOV-11. (q) In case neither the owner of the goods nor any person other than the owner of the goods comes forward to make the payment of tax, penalty and fine imposed and get the gods or conveyance rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Act, the same are liable to detention/seizure. On the other hand, Section 130 provides for 5 different situations in which the goods or conveyances are liable to confiscation and the person is liable to penalty under Section 122. Reading of Section 131 further makes it clear that Section 130 is a penal clause and confiscation is a form of punishment over and above other punishments prescribed under the Act. Section 130 is more stringent as compared to Section 129. 22. Where the goods in transit in contravention of the provisions of the Act invites detention under Section 129, to invoke Section 130, the supply should not only be in contravention of the provisions of the Act, but such contravention should be with an intent to evade payment of tax. Thus, where there is a contravention of the provisions of the Act or the rules made thereunder and is punctuated with an intent to evade payment of tax, Section 130 can be invoked. Even though the goods have been detained or seized for contravention of provision of the Act under Section 129, if the competent authority finds during investigation that the provision(s) of the Act have been contravened with intent to ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea against taxability is raised and there is neither misdeclaration nor concealment, exercise of power of imposing penalty at the check-post on the ground of attempt at evasion may not be called for. (emphasis supplied) Conclusion : 25. When the aforesaid principles of law and the bare provisions of law are applied to the present case, we find that the investigation report relied upon by the respondents to initiate proceedings under Section 130 against the petitioner lacks sting. Under the 2017 Act, a trader is either a 'supplier' qua 'outward supply' or is a 'recipient' of 'inward supply'. The alleged 'intent to evade tax' must have a direct nexus with the activity of trader. The opinion formed by the authorities must reflect such nexus before proceeding under Section 130 of 2017 Act. A trader cannot be accused of having intention to evade payment of tax for act or omission on part of a person not immediately linked to his activity. Learned counsel for the State agreed that even if a trader wants to be prudent, there is no system in place from where he can check as to whether his predecessors in supply chain have paid input tax cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 33 cr. and transferred ITC of more than ₹ 6 cr. to various beneficiaries thus contravening the provisions of Section 132 (1) (b) of the Act which says that Issues any invoice or Bill without supply of goods or services or both in violation of the provisions of this act or the rules made there under leading to wrongful availment or utilization of Input Tax Credit where as the rest of the dealers in the said supply chain have contravened the provisions of section 132 (1) (c) of the act which says, avails input Tax credit using such invoices or bills as referred to in clause 132(1)(b) . 28. There is no finding with respect to contravention of any provision of the Act by the petitioner. The only contravention of the provision alleged is against M/s. Balbir Enterprises, who is shown to have indulged in outward supply without having any inward supply. It has been alleged that he has not been paying any tax and thus, the successor dealers in the said supply chain are guilty of availing input tax credit wrongfully. 29. From the pleadings on record, it is clear that there is no allegation that the petitioner has contravened any provision of the Act or the rules framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods in transit are being transported in contravention of any provision of the Act or the rules framed thereunder, the goods are liable to be seized and detained as per provision of Section 129 of the Act. However, in case the goods in transit are accompanied with the documents as prescribed under the Act, authorities need not proceed under Section 129 of the 2017 Act. The provisions prescribing time limit to conclude inspection in circular dated 13.04.2018 are mandatory. The goods/conveyance cannot be detained without passing appropriate orders in accordance with law. In case, the authorities find that action of the person falls within four corners of Section 130(1), the authorities have right to proceed under Section 130 of the Act. However, the opinion of the authorities which forms basis of proceedings under Section 130 must have reasonable nexus with the action of the person against whom proceedings are being initiated. Such nexus must be manifest from the record and conveyed to the person in compliance of Section 130(4) of the Act. A bonafide issue which is subject matter of assessment under the Act cannot be a ground to proceed under Section 130 of the Act unless the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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