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TMI Blog2022 (9) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ie the documents tendered were found to be defective. The order also stated that the genuineness of the goods in transit, their quantity, etc., and/or the tendered documents required further verification. It was stated that the E-Way bill had not been tendered for the goods in movement and therefore, the vehicle was to be stationed at Belagavi and allow the physical verification and inspection of the goods in movement. 3. On the 14.09.2021, the physical verification of the goods and conveyance was conducted in the presence of the person in charge of the goods vehicle and it was stated that the conveyance was carrying Areca nuts and there was a difference in the quantity mentioned in the invoice and the quantity found upon physical verification. 4. On the 28.09.2021, the officer passed an order of detention under Section 129 of the Central Goods and Services Tax Act, 2017 (for short 'CGST Act' / 'the Act') in Form GST MOV-06. 5. On the following day, i.e., on 29.09.2021, the Deputy Director, DGGI, Zonal Unit, Belagavi, proceeded to issue a notice for confiscation of goods, conveyances and levy of penalty under Section 130 of the CGST Act, in Form GST MOV-10. 6. To this notice, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under the CGST Act. It was submitted that the power of confiscation would apply only in respect of those persons who were neither taxable persons nor persons chargeable to tax under the CGST Act. He, therefore, submitted that the entire proceedings were one without jurisdiction and were liable to be quashed. 14. Sri. G.S.Hulmani, learned counsel appearing for the Revenue, on the other hand, contended that admittedly the person transporting the goods did not possess any Eway bill nor had an E-way bill been generated and this was, therefore, a clear contravention of the provisions of the CGST Act and the Central Goods and Services Tax Rules, 2017 (for short 'the Rules'), and for this glaring contravention, the proper officer possessed the power not only to detain but also to confiscate. 15. He submitted that as per the circular dated 13th of April 2018, it was permissible for the Proper Officer to directly invoke Section 130 of the CGST Act if he was of the opinion that the movement of goods was being effected with the intent to evade payment of tax. He submitted that initially the proper officer did initiate proceedings for detention only, however, on noticing the intent to ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcent. 21. The tax is required to be collected in the manner prescribed and shall be payable by the taxable person (a person liable to be registered and a person who is required to register himself compulsorily under the Act). 22. However, the supply of alcoholic liquor for human consumption is not leviable under the Act and the levy on petroleum crude, high-speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel, shall only be from a date notified by the Government on the recommendation of the Council. 23. The charging section also provides for facilitating a levy on reverse charge mechanism in respect of specified category of supply of goods or services or both and also payment of tax on reverse charge mechanism in respect of specified categories of supply of goods or service or both which are received from an unregistered supplier. A provision is also made for payment of tax by an electronic commerce aggregator, in case, the supplies are made through it. 24. Under the Act, the time of supply of goods or services is defined and so also the value of the taxable supply under the provisions of Chapter IV. The Act also provides for availing input tax credit wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraud or making any wilful statement or suppression of facts, with the intent to evade payment of tax. 32. It is also provided therein for the proper officer to assess in respect of taxable persons who have not filed returns and against unregistered persons and the provision also enables conducting a special assessment in certain cases. Provisions are also made for conducting an audit and a special audit under Chapter XIII. 33. Thus, the provisions of the Act from Chapter III to XII provide for the levy on supply of goods or services or both and a detailed mechanism is also provided to ensure the levy is collected for the supply. This detailed mechanism to monitor the manner in which the levy is imposed and realised is ensured by making the entire process online thereby taking advantage of the technological advances in information technology. This is obviously to streamline the entire process of taxation with minimal disruption to the business of the taxable person. 34. The underlying objective that can be discerned from these provisions is that the Act fundamentally envisages the taxable person to be self compliant and encourages the taxable person to be voluntarily tax complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions contained therein provide for the determination of tax which is not paid either by error or by way of fraud and also enumerates general provisions relating to the determination of tax. Provisions are also made casting a duty on persons who have collected tax either rightly or wrongfully to remit the tax and provisions are also made for facilitating the recovery of tax. 41. Section 73 of the Act provides for the determination of tax that is not paid or short paid, in cases where fraud or any wilful misstatement or suppression of facts is not involved, while, Section 74 provides for the determination of tax that is not paid by reasons of fraud or any wilful statement or suppression of facts. The procedure envisaged in cases of determination of tax in cases of fraud and in cases where fraud is not involved is examined as they would be relevant in the context of this case. 42. In cases where fraud or wilful misstatement is not involved, the proper officer is empowered to issue a notice calling upon the person chargeable with tax to show cause as to why the amount specified in the notice along with applicable interest and a penalty leviable under the Act should not be paid. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortfall. If this demand is complied with, the proceedings stand concluded. 50. Thus, the person chargeable with tax is given an option of exonerating himself of any wrongdoing if he acts with promptitude and voluntarily pays the tax and the applicable interest. 51. If, however, the person chargeable with tax, chooses to contest the proceedings and submits a representation, the proper officer would be required to consider the representation and determine the tax and interest. In such an event, the person chargeable with tax also invites a liability to pay a penalty of 10% of the tax or Rs.10,000/- whichever is higher. This element of a penalty imposed is obviously because the person chargeable with tax forced the proper officer to embark on the process of determination of tax. 52. Thus, there is a clear element of incentivising and also disincentivising persons chargeable with tax which is built into the statutory scheme, when it comes to the determination of tax. 53. In cases of proceedings initiated for determination of tax for non-payment of tax not on account of a moral impropriety i.e., fraud, wilful misstatement and suppression of facts, the same statutory scheme is rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argeable with tax. If he chooses to make immediate amends and pays the applicable tax along with interest, the rate of the penalty imposed would be lighter. If, however, he wishes to compound his wrongdoing by not paying the actual tax, the rate of penalty gets increased and if this penalty is paid, the matter rests. However, if he chooses to contest the proceedings further and forces the proper officer to make a determination of the tax and interest, he is burdened with the payment of 50% of the tax as a penalty. 60. What is to be discerned from this statutory framework is that the law showers a certain amount of leniency even if there is a wrongdoing. If the wrongdoing is on account of error and is acknowledged and immediate amends are made by paying the tax even before a show cause notice is served, the person does not suffer a penalty. If the wrongdoing is on account of an immoral conduct, even then, if the wrongdoer acknowledges his error and makes amends before receipt of a show cause notice, he is saddled with a penalty of just 15% and if he chooses not to pay the actual tax payable, he is saddled with a larger penalty of 25%. If he desists further and contests the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been detained or seized, if the owner of the goods comes forward to pay the applicable tax on such goods and a penalty equal to 100% of the tax payable on such tax. Thus, if the owner comes forward and pays the applicable tax and also an equivalent amount of tax as a penalty, the owner is entitled, as a matter of right, to get the goods released to his custody. 68. If, however, a person other than the owner comes forward to pay the applicable tax and also a penalty equal to 50% of the value of goods reduced by the tax amount paid, that person also, as a matter of right, is entitled to get the detained goods, conveyances and the documents related thereto released to his custody. 69. In both cases, however, the penalty payable is lesser if the goods are exempted goods, with which we are not however concerned in this case. 70. The goods detained or seized are also liable to be released if a security equivalent to the amount payable as prescribed in clause (a) or clause (b). In other words, if the owner of the goods furnishes a security equivalent to the applicable tax and a penalty equivalent to the applicable tax, the goods, conveyances and the documents related to them are bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 129 if they comply with the conditions specified in clauses (a), (b) or (c) of Section 129(1). 79. To put it differently, the proper officer does not possess the power to refuse the release of the detained goods and conveyances: a. if the applicable tax and penalty of 100% of the tax is paid by the owner or b. if 50% of the value of the goods reduced by the applicable tax, is paid by a person other than the owner or c. if security equivalent to the aforesaid sums are furnished. 80. This indicates that the true intent to detain the goods or the conveyances is to ultimately facilitate the recovery of the applicable tax and if the same is paid along with the penalty, the goods and conveyances are bound to be released. 81. In fact, by virtue of sub-section (5) of Section 129, if the owner or any other person complies with the order passed by the officer by paying the applicable tax, interest and penalty, the entire detention and seizure proceedings are deemed to have been concluded. 82. It is only if the order is not complied within 14 days, do the authorities secure a right to initiate confiscation proceedings under Section 130 of the Act. Thus, the power of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable tax, in case of owner of the goods; or in case of a nonowner, the applicable tax and penalty equal to 50% of the market value of the goods reduced by the tax paid thereon). 88. In cases relating to the confiscation of the conveyance, the proper officer is obliged to give the owner of the conveyance an option of paying a fine equal to the tax payable on the goods in lieu of the confiscation of the conveyance. 89. In cases where a fine in lieu of confiscation is imposed, the owner of the goods or the conveyances is also required to pay in addition to the fine, the tax and penalty and other charges. However, an order of confiscation cannot be made unless an opportunity of being heard is afforded to the person. On such confiscation being made, the title to the goods and conveyances would vest in the Government and the proper officer adjudging the confiscation is entitled to take possession of the confiscated things and he is also empowered to dispose off the goods or conveyance if the fine in lieu of confiscation is not paid within three months. 90. As could be seen from the statutory framework, the power to inspect and seize the goods is granted to the proper officer un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etary loss. In other words, even in cases where tax was not paid either by reason of error or with the intent to pay the tax, the objective is to realise the tax, interest and penalty and not to confiscate the goods. 96. Viewed from this background, it becomes clear 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. 97. Thus, the procedure adopted by the proper officer, in this case, to embark on confiscation proceedings after invoking his power under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e event he is found transporting the goods in contravention of the provisions of the Act. If the proper officer is given the option of imposing the extreme measure of confiscation for transporting the goods in contravention of the provisions of the Act, the true intent of the law which is only to collect the tax with penalty would be defeated and the proper officer would basically ensure that the entire goods vest in the Government apart from the imposition of the liability to pay the applicable tax and penalty. 102. Fourthly, the power conferred under Section 168 on the Commissioner to issue a Circular is to basically ensure that there are clear instructions laid out for the uniform implementation of the provisions of the Act. This power to issue instructions for the uniform implementation of the Act cannot vest the Commissioner to prescribe a set of instructions which go against the grain of the statutory provisions. The instructions in the Circular empowering the proper officer to invoke the power of confiscation under Section 130 of the Act after he has invoked the power of detention under Section 129 amounts to nullifying the right available to the owner of the goods or the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is contemplated under Section 73 or Section 74 or Section 130. It is to be kept in mind when a specific provision is enacted for dealing with a specified situation such as the goods being in transit and that very provision demarcates the extent of the power that the proper officer can exercise, that provision cannot be sidestepped and resort be had to some other provision which enables the very confiscation of the goods. 107. It is also to be kept in mind that the power of confiscation, under the scheme of the statute, would only be the power conferred on the proper officer in situations other than when the goods are in transit. This is simply because the statute has specifically provided for the power that is available to a proper officer when the goods are in transit and obviously when the goods in transit are detained, only that procedure prescribed can be applied and not any other provision. The Commissioner by issuing a circular has basically devised a new procedure contrary to the one provided under the statute, which is impermissible. Thus, the reliance placed on the Circular can be of no avail and the power to switch over to the confiscatory proceedings midway when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to the tax evaded, whichever is higher on the taxable person. 112. Sub-section (2) of Section 1224 states that every registered person who supplies any goods on which tax has not been paid or short paid for any reason other than fraud shall be liable to a penalty of ten thousand rupees or ten percent of the tax due, whichever is higher. If on the other hand, it is by reason of fraud, the registered person would be liable to a penalty of ten thousand rupees or the tax due, whichever is higher. 113. Thus, if the taxable person transports goods without the cover of the documents prescribed, a penalty of ten thousand rupees or an amount equivalent to the tax is payable and if a registered person supplies goods on which tax is not paid or short paid, he is required to pay a penalty of ten thousand rupees or ten percent of the tax, if it is by error and a penalty of ten thousand rupees or the tax due, if it is by reason of fraud. 114. In other words, for transporting the goods without an e-way bill (it is admitted in this case that the consignment was accompanied by a tax invoice), the taxable person (i.e., a person who is registered under Section 22 of the Act) would be liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 73 and Section 74 of the Act. The proper officer, at the time of detention of the goods, cannot obviously convert the power to detain the goods and proceed to exercise of his power to confiscate, especially, when the proper officer has been conferred the power to determine the tax in a specified manner under Sections 73 and 74 of the Act. In other words, the proper officer cannot transform the detention proceedings into a confiscatory proceeding. 121. As far as the mis-declaration of the weights of the goods is concerned, as the same amounted to an offence as prescribed under Section 122(1)(i)6, the proper officer could impose the penalty as prescribed in Section 122 and that could not entitle him to invoke his power to confiscate the goods itself. 122. It is to be kept in mind the predominant principle under the Act is to ensure that the registered person is given a chance to rectify his wrongdoing whenever the wrongdoing is noticed and pay the applicable tax and penalty or interest as the case may be. The proper officer cannot snatch away that right conferred on the registered person by invoking proceedings to confiscate the goods itself. The power of confiscation be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable. It is to be borne in mind that there is no law which demands that the supply of goods should be made only at a market value. In fact, in business, the rate at which the goods are supplied could vary depending on the various factors and could not be determined uniformly. Therefore, the entire basis that there was undervaluation was completely incorrect and the consequential conclusion that there was under-valuation with an intent to evade payment of tax, cannot also be accepted. 128. The fifth ground that there was a nonexistent/ dummy supplier and a recipient can only be a ground for determination of tax under Section 74 and cannot really be raised and determined in a confiscatory proceeding, given the fact that the petitioner was a registered person and its registration had been accepted by the Department. 129. In my view, 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 dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nishing 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 conveyances. (3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c). (4) No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard. (5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded. (6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such goods or conveyance. (4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard. (5) Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government. (6) The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession. (7) The proper officer may, after satisfying himself that the confiscated goods or conveyance are not required in any other proceedings under this Act and after giving reasonable time not exceeding three months to pay fine in lieu of confiscation, dispose of such goods or conveyance and deposit the sale proceeds thereof with the Government. 3. 122. Penalty for certain offences. (1) Where a taxable person who-- (i) x x x (xiv) transports any taxable goods without the cover of documents as may be specified in this behalf; x x x he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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