Appeal |
H R Enterprise (the Petitioner) filed writ Petition before High Court of Rajasthanon account goods detained “to verify genuineness of the transaction” |
Facts of Case |
1.The petitioners submits that consignment in question which was beingtransported was having all requisite/prescribed documents while in transit. 2.When the Officer intercepted the goods, all the documents prescribed underlaw, such as Tax Invoice; E-Way Bill, Weigh Slip; were furnished, yet he did not allow the petitioner to move.3.The requisite documents were produced before the Officer. However, theofficer firstly directed the petitioner to remain stationed with the vehicle and goods loaded therein for the purpose of physical verification. He issued notice in MOV-2 and, thereafter, got extension to complete inspection from the competent authority, simply with a view to conduct inquiry relating to allegedwrongful availment of input tax credit. |
Reason for which goods were detained by the Department & Reply submitted by the Tax Payer to the Officer |
The conveyance was intercepted to verify the genuineness of the transaction |
Contention of the Tax Payer |
- It is the argument of the petitioners that such fishing and rowing inquiry in relation to availment of input tax credit and suspicion about the purchase transaction is not within the domain of Officer, while goods are in movement.
- It is argued for the petitioners that such inquiry, if at all, is necessary, the same is permissible to be done by regular Assessing Officer and not by the Anti Evasion Officer or any check-post in charge or flying squad.
- While emphasizing that not only the detention, even the inquiry sought to be undertaken by, is without jurisdiction.
- It has been contended that petitioners’ predicament for getting release of vehicle and goods, provisions of section 129 of the Act of 2017 read with rules 140 and 141 of the Goods and Service Tax Rules, 2017 (for short, ‘the Rules of 2017’) require payment of tax and penalty or furnishing of a bank guarantee equal to the amount of applicable tax and penalty.
- He argues that in the facts of the present case, if the petitioners are required to pay the proposed amount or to furnish bank guarantee, it would adversely affect business rights inasmuch as, final amount is yet to be adjudicated and the proposed penalty is to the tune of Rs. 10,74,780/- (50% of the value of goods) apart from tax of Rs. 1,93,460/-
- Learned counsel invites Court’s attention towards the circular dated 10- 4-2018, issued by the Central Board of Indirect Taxes and Customs and submits that an officer empowered to intercept and inspect a conveyance, is only required to verify prescribed documents and where prima-facie no discrepancies are found, he is required to allow the goods to move further.
- It is argued that the Officer has neither understood the import and purport of the provisions of sections 68 & 129 of the Act nor has he adhered to the mandate of the circular, which is binding upon him.
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Contention of the Department |
- The petitioners have directly rushed to this Court without even filing reply. It is further contended that the petitioners could have applied for release of the goods as provided under sections 67, 68 and 129(1) of the Act of 2017, instead of invoking writ jurisdiction of this Court.
- He further argues that as an efficacious alternative remedy of preferring an appeal against the detention order is available to the petitioners, instant writ petition is not maintainable. By placing reliance on the judgment, passed by Hon’ble the Supreme Court in the case of State of Uttar Pradesh v. Kay Pan Fragrance (P.) Ltd. Wherein Hon’ble the Supreme Court has clearly held that the High Court should not interfere and issue order(s) of release of the vehicles/goods and in appropriate case, it should direct the concerned petitioner to furnish security as provided under rules 140 and 141 of the rules of 2017. Few more cases were submitted before the court.
- It was further contended that on finding any violation of the provisions of the Act, the Officer is empowered to conduct inquiry and assess the tax/penalty.
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Principle Laid down by High Court |
- The Court is of prima facie view that the provisions of Sections 67, 68 and 129 of the Act of 2017 are required to be interpreted. The circular dated 13-4-2018, issued by the Central Board of Indirect Taxes and Customs though addresses the hardship being faced by the trade/industry on account of incorrect interpretation, if not misuse/abuse of the provisions of Sections 67/68 & 129 of the Act of 2017 and lays down guidelines for inspection and release of the goods in transit, but the same has not been adhered to by the officer
- As is evident in the present case, if a Check Post Officer or Anti Evasion Officer intercepting the goods and vehicle while in transit, is permitted to carry on such fishing and rowing inquiry, it would impede, rather retard free flow of trade resulting in unnecessary and unwarranted harassment to the carrier of goods, so also to the consignor/consignee.
- It is an admitted case of the officer that all the documents prescribed under law were available and goods, including its weight, was found in order. Even, genuineness of the goods in transit per se is not in dispute inasmuch as, documents and e-way bill/other documents and the nature of goods on physical examination was found to be in accord.
- In preliminary opinion of this Court, once the goods in question are in conformity with the documents of transit, the scope of inquiry under section 68 of the Act of 2017 by Anti Evasion Officer/Check Post Officer or flying squad ends. He cannot kick start an inquiry relating to the genuineness of purchase and corresponding input tax credit, which essentially relates to purchase of goods.
- The contention that the enquiry being undertaken by the officer is permissible as per the provisions of Section 129 (1) of the Act of 2017, on a deeper scrutiny turns out to be not as palatable as has been projected. Because, sub-section (1) uses the expression “where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules………”. The language used in sub-section (1) of section 129 of the Act of 2017 is indicative of the position that the goods in transit or under stock, which are in transit themselves must be subject matter of violation/contravention of the statutory provision.
- As far as applicable tax on the goods under consideration is concerned, the same has admittedly been appropriately charged and the goods and vehicle in transit are accompanied with the prescribed documents. Thus, in the prima-facie opinion of this Court, provision of section 129 cannot be resorted to. It is more so, when the allegation is, that the seller/consigner is seeking to avail wrong input tax credit. The incident or occasion of availing input tax credit is an event preceding the transaction in question and completely divorced from the movement/transit in question.
- The final orders passed by Coordinate Benches of this Court requiring the concerned petitioners to furnish bank guarantee have also been placed for perusal of this Court; upon perusal of the same, this Court finds that neither the jurisdiction of the respondent – authority nor the question relating to scope of powers of the empowered officer while goods in transit was brought for consideration of the Court.
- The Court, upon perusal of the record and reply, recorded a categorical finding of evasion of tax and discrepancy in the documents, whereas, such is not the position, when it comes to the case in hands.
- All stake holders are treading in the new GST regime with uncertainties as the path is comparatively unfamiliar, unmarked and unpaved. The parameters of the authorities’ powers and dealers’ duties/responsibilities/liabilities are yet to be demarcated. Notice issued in the case is an example of such uncertainty. A perusal of the said notice issued in MOV-07 shows that the officer has jumped to propose penalty under clause (b) of section 129(1)(a) on the pretext that as per Petitioner, no-one has appeared for the owner of goods and proposed penalty as high as 50% of the value of goods. As against this, he was firstly required to propose penalty under clause (a) of section 129(1), which would have been equal to the amount of tax. Given that the penalty under clause (a) would have been Rs. 1,93,460/-and proposed penalty under clause (b) is Rs. 10,74,780/-, in the opinion of this Court, the statutory remedies will be inefficacious. Even, remedy relating to release of goods under section 129(1)(c) of the Act of 2017 would be illusory.
- Having regard to the fact that goods and vehicle are lying stationed/detained with the officer; inspection and physical verification of the goods including its weighment has already been done. Hence, goods and vehicle are not required, at least for the purpose of inquiry. Besides this, the kind of interim order, which this Court proposes to pass, would not amount to final relief, hence, the judgment cited by learned counsel for the respondents does not apply in the facts of the present case.
- In view of what has been stated hereinabove and in the interest of justice it is deemed expedient and hence, the officer is directed to release the goods and vehicle in question forthwith, furnishes two solvent sureties to the tune of Rs. 15 lakhs executed by dealers registered in the State of Rajasthan. He shall not insist upon furnishing of bank guarantee or cash security.
- The petitioner shall further be required to file an undertaking before this Court that in the event of dismissal of the writ petition and/or upon final determination of liability (if any), subject of course to their rights of availing appropriate remedies, the amount would be paid.
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