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TMI Blog2024 (5) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not interfere with the adjudicating authority decision as it is based on its own observance of the material / evidence before it. However, where the appellate authority is equally empowered to exercise the discretion under the appellate provision, the appellate authority is entitled to evaluate the material / evidence to come to a different conclusion or order than the adjudicating authority - In the judgment impugned in the present case, the appellate authority having considered the facts and circumstances of the case as well as the evidence as exercised the discretion under Section 107 (11) in modifying the order of penalty / fine to four times of the tax payable. Whether the discretion exercised by the appellate authority under Section 107 (11) of the CGST /SGST Act is arbitrary, unreasonable based on irrelevant consideration or there is some other legal error? - HELD THAT:- If the order of the appellate authority is based on relevant consideration and is not manifestly injust, improper or unreasonable, this court would have very little scope for interference in the discretion exercised by the appellate authority in modifying the order passed by the adjudicating authority - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices Tax / State Goods and Service Tax Act 2017 ('the CGST / SGST Act' for short) and Rules made thereunder. The State Tax Officer, Squad No. 1 SGST Department Ernakulam, while conducting vehicle checking on 07.09.2021, received intimation from the Railway Protection Force, Ernakulam regarding the transport of gold by Mr. Nikhil Suresh without any documents as required under the provisions of CGST / SGST Act. On inspection, the carrier failed to produce documents to prove the genuineness of the gold ornaments under the transportation. 2. The railway protection team handed over the gold ornaments to the State Tax Officer and issued a summons. The statement of the carrier was recorded. After knowing the detention of the gold ornaments and issuance of notices to the respondent, the respondent appeared before the adjudicating officer and filed objections. However, the respondent failed to produce any documents. Hence, the State Tax Officer issued notices proposing to confiscate the gold ornaments transported without any document and impose the penalty as provided under Section 130 of the GST Act. 3. The State Tax Officer finalised the order of confiscation under Section 130 of the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India. 6. It is further submitted that the first appellate authority has failed to note that once the goods are confiscated, it become the property of the Government, and it is only the adjudicating authority who is empowered to decide the quantum of fine payable in lieu of the release of the goods so confiscated. The first appellate authority has no power or jurisdiction to substitute his own judgment on the discretion as to the quantum of fine payable in lieu of confiscation so long as the discretion exercised by the adjudicating officer is not hit by any of the proviso to Section 130 of the CGST / SGST Act, 2017. 7. Proviso 1 of Section 130 of the Act puts fetter on the absolute discretion conferred on the adjudicating officer to fix a fine. The adjudicating officer cannot impose a fine beyond the market value of the goods confiscated. It is within the realm of power vested in the adjudicating authority to impose the fine upto the market value of the goods confiscated. Unless it is said that the discretion exercised by the adjudicating authority is arbitrary or unreasonable, the appellate authority should not interfere with the powers of discretion of the adjudicating autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less than the tax chargeable thereon. It further provides that the aggregate of such fine and penalty leviable shall not be less than the penalty equal to hundred percent of the tax payable on such goods. Section 130 (3) also provides that in addition to penalty as maybe imposed under Section 130 (2) in lieu of the confiscation of the goods or conveyance, the person supplying or receiving any goods will also be liable to any tax, penalty and charges payable in respect of such goods or conveyance. Before passing the order of confiscation of goods or conveyance or for imposition of penalty, an opportunity of hearing is contemplated under Section 130 (4). Section 130 (5) provides that whether any goods or conveyance are confiscated under the Acts, the title of such goods are convinced vest in the Government. Section 130 which is relevant for taking decision in the present case is extracted hereunder:-. "130.(1) Notwithstanding anything contained in this Act, if any person -- (i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (ii) does not account for any goods on which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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." 13. Section 107 of the CGST / SGST Acts is an appeal provision to the appellate authority. Section 107 (1) provides that any person aggrieved by any decision or order passed under this CGST / SGST Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person. 14. Section 107 (11) empowers the appellate authority that after making such further enquiry as maybe necessary, the appellate authority may pass such order as it thinks fit and proper, confirming, modifying or annulling the decision or order appealed against but the appellate authority shall not refer the case back to the adjudicating authority that has passed the said decision or order. First proviso to Section 107 (11) provides that an order enhancing any fee or penalty or fine in lieu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing judgments:- a) Collector of Customs v. Gunwant Lal Godawat [(2010) I RLW 764] b) Gunwat Lal Godawat v. Union of India, [(2018) 12 SCC 309], Kantaru Rajeevaru v. c) Indian Young Lawyers Association, [(2020) 9 SCC 121] d) Deputy Commissioner, Dakshina Kannada District v. Rudolp Fernandes, [(2020) 3 SCC 306] e) Union of India v. Kuldeep Sing, [(2004) 2 SCC 590] f) The Commissioner of Customs v. Mansi Impex [(2011) 270 ELT 631 SC] 18. Sri. Tomson T Emmanuel, the learned counsel for the respondent has however submitted that the appeal under Section 107 against an order passed under Section 130 of the CGST / SGST Act lies on facts, evidence and law. Section 107 (11) empowers the appellate authority to pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against. If the appeal before the appellate authority was only on point of law, then there was no scope for the appellate authority against an exercise of discretion by the adjudicating authority in imposing the redemption fine, in lieu of the confiscation of the seized goods, unless the discretion exercised by the adjudicating authority was vitiated by unreaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonableness, self-misdirection, irrelevant consideration or some other legal error, there is no scope for interference by the appellate authority on the discretion exercised by the adjudicating authority. Nelsovil limited v. Minister of Housing and Local Government [(1962) 1 WLR 404]. 21. In Wootton v. Central Land Board [(1957) 1 WLR 424 at 432], it is said that the court / appellate authority may allow such appeal where the appeals lies only on the question of law, if it appears that the adjudicating authority's decision would produces manifest injustice, or is plainly wrong. Even otherwise if there is manifest, self misdirection and so on so forth or erroneous exercise of discretion, it would enable the appellate authority to interfere with the decision whether the discretion is vested in the adjudicating authority as such. Any erroneous exercise of discretion is always considered to be an error in point of law. 22. Where the right of appeal is unrestricted, the appellate authority or the court should not interfere with the adjudicating authority decision as it is based on its own observance of the material / evidence before it. However, where the appellate authority is equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption at a higher value would not make commercial sense since the buyer will prefer buying from the market). Section 73 read with Section 2(v) of the Act mandates that the redemption fine will not exceed the market value of the gold seized as on the date of seizure. The Act takes away the discretion available to the officer to determine the relevant date for valuation by mandating the relevant date to be the date of seizure, which in any case is one of the methods available to the officer for calculating the redemption fine under rule 126M(8). Therefore, the Act only reduces the discretion available under Rule 126M (8) with respect to the relevant date for calculation of the redemption fine. The officer continues to have the discretion to impose a fine lesser than the market value as on the date of seizure. There is therefore no inconsistency between the DoI Rules and the Act." 63. The substance of the submission is that both the RULES and the GOLD ACT provide for giving an option to the "owner" of the gold adjudged to be confiscated. While the RULES provide an unrestricted discretion to the "officer adjudging" to determine the amount of fine, GOLD ACT restricts the discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the authorization of a statute and acts done pursuant to the authorization under a different statute or a statutory instrument but deemed to have been done under the earlier of the above mentioned two statutes. When a statute creates a fiction requiring certain events which took place prior to the commencement of such a statute to be deemed to have been done under the statute, such a fiction does not retrospectively authorise doing of such acts. It only takes note of the existence of certain state of affairs and creates putative state of affairs by declaring that such anterior events should be deemed to have taken place under, the statute which came into existence later. Such fictions could only have limited consequences. 67. Prior to the GOLD ACT, seizure and confiscation of gold were authorised by the RULES. Though, by virtue of the fiction created under Section 116, the confiscations adjudged under the RULES are deemed to be confiscations adjudged under the GOLD ACT, the Scheme and the limitations of such fiction are already explained earlier in para 29. Therefore, neither Section 73 nor the definition under Section 2(v), in our opinion, would be applicable for the confisca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis. The conclusion of the Tribunal that the fine in lieu of confiscation must be equal to the value of the gold as on the date of its seizure is not based on any principle of law. The correctness of the said conclusion was the subject matter of the reference before the High Court. The High Court was completely justified in examining the correctness of the legal basis on which the figure of Rs. 12.5 lakhs was arrived at. For the reasons already recorded by us earlier, the High Court rightly came to the conclusion that the fine in lieu of confiscation must represent the value of the gold so confiscated as on the date (9.12.94) the appellant was given an option to pay the fine in lieu of confiscation. Even according to the said order of the Collector, the value of the gold as on that date was Rs. 11.04 crores. Therefore, the High Court was right in its direction. 72. We are only left with one submission made on behalf of the Union of India, i.e., in view of the enormous delay which took place in the confiscation proceedings (50+ years), the appellant must be made to pay the interest on the amount of fine of Rs. 11.04 crores. Otherwise, it would have the effect of permitting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods where the importation or exportation is prohibited under the Customs Act or under any other law for the time being in force, is required to give an option to pay in lieu of confiscation of fine as the said officer considers. However, such fines should not exceed the market price of the goods confiscated, in case of imported goods, the duty chargeable thereon. In the said case the Commissioner imposed the redemption fine in lieu of confiscation and also penalty in terms of provision of Section 112 and 125 of the Customs Act respectively. However, the said orders passed by the commissioner came to be interfered by the Tribunal and the Tribunal reduced the quantum of redemption fine as also the penalty. 32. Considering the provisions of the Customs Act, the Supreme Court held that the quantum of redemption fine would be imposed is always be dependent on the determination of the market price of the goods confiscated. This is one of the pre-requisite prescribed in that statue itself. In the said case, there was no market survey done for determining the market price of the goods, and therefore, it could not have been possible for the Commissioner to arrive at legally justified and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion are liable to confiscated. Section 130 can be invoked, if any of the five clauses of subsection 1 applies, even in cases where the amount of tax and penalties have been paid under Section 129. 38. Confiscation proceedings under Section 130 can be initiated based on the incriminating evidence against the owner of the goods in the course of the inquire, if any, even after the release of the goods or conveyance on the payment of the tax and penalty under Section 129 of the Act. It is not necessary to conclude the proceedings under Section 129 before initiating proceedings under Section 130. However, the contravention of the Act and Rules justifying detention under section 129 will not by itself result in confiscation of goods or conveyance. Section 130 is an independent provision empowering confiscation in cases of intention to avoid tax. In a given case, the same breach or contravention of the provision of the Act or Rules can lead to detention of seizure of the goods under Section 129 and confiscation under Section 130(1) of the Act. 39. The authority must be convinced that the contravention of the provisions of the Act or rules made thereunder was with definite intent to avoi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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