Facts of the case:
- The petitioner is a transporter and operates under a GST registration. The petitioner's case is that it was approached by M/s MK Enterprises, Delhi (the Consignor) for transportation of certain tobacco products (the Goods) to M/s SKB Trading, Salem (the Consignee). The petitioner arranged for transportation of the Goods from Delhi to Salem with appropriate Tax Invoices/e-Way Bills.
- The petitioner's vehicle was intercepted on 10-8-2020 at Bengaluru, and the driver/person-in-charge of the Conveyance furnished Lorry receipt, e-Way Bills and Tax Invoices. The respondent passed an order for physical verification of the Goods, Conveyance and documents on 10-8-2020 and drew up a physical verification report.
- The respondent also passed the Order of detention dated 10-8-2020 under section 129(1) of the Act and Section 20 of IGST Act/Section 11 of the Compensation to States Act.
- The respondent has ordered detention of conveyance stating that Consignor has procured the goods under Two Invoices/e-Way Bills but Eight Invoices/e-Way Bills are generated in favour of the Consignee and there is mismatch in the weight of the pouches in the Tax Invoices.
- The respondent has reasoned the Goods are brought into the State of Karnataka with the documents raised in favour of taxpayers in Salem, Tamil Nadu with ulterior motive and mala fide intent to evade taxes because high value and high evasion prone tobacco goods and copper scraps are transported only through the petitioner.
- The Respondent has recorded that even as per the information available in the e-way Bill System there is huge mismatch between the Inward and Outward Supply turnover of tobacco products by the Consignor and the Consignee.
- Sri Arvind Kamath, learned Senior counsel arguing for the petitioner has argued to persuade this Court to accept his submission that insofar as Detention, Seizure and Confiscation of Goods/Conveyance in Transit, the procedure and the consequences are contained in Section 129 of the Act.
- In terms of Section 129 of the Act, if any person transports any goods, or stores any goods while they are in transit, in contravention of the provisions of the Act or the Rules made thereunder, such goods and conveyance would be liable for seizure and detention, but should be released on payment of the applicable tax and penalty.
- If the mandated applicable tax and penalty as aforementioned are not paid within a period of [fourteen] 14 days of detention or seizure, further proceedings for confiscation, as provided under section 129(6), shall be initiated in accordance with the provisions of Section 130 of the Act.
- In the case of interception of goods in transit there cannot be two separate proceedings: one under section 129 and another under section 130 of the Act.
- Sri Dyan Chinnappa, learned Additional Advocate General submits that the purposes of the provisions of Section 129 and Section 130 of the Act are distinct with undeniable differences in the consequences, even in the case of a transporter, when there is contravention of breach of the provisions of the Act/Rules and there is intent to evade taxes.
- Therefore, when a conveyance transporting goods is intercepted in transit, and there is reason for detention/seizure, recourse could be had to the provisions of Section 129 of the Act.
- Upon scrutiny of the response to the Show Cause Notice issued thereunder and upon ascertaining further information, it comes out that there is evasion of tax, it would be open to the authorities to initiate proceedings for confiscation with the initial notice under section 129 of the Act abating.
- The Court, considering these circumstances has opined that it was incumbent on the part of the authority to consider the objections and pass a speaking order quantifying the tax and penalty and thereafter to release the goods subject to payment of tax and penalty or to confiscate the goods.
- The authorities, when they intercept a conveyance carrying goods or in which goods are stored, the authorities may not immediately know whether there is any intent to evade payment of tax.
- In the light of the above discussion it is held that if after interception of conveyance with goods in transit and detention of the conveyance and seizure of the Goods with issuance of notice under section 129(3) of the Act, and when there is information about the intent to evade payment of tax, the officer shall not treat notice under Section 129 has baseless and initiate the proceedings under Section 130.
- The proper officer, who has detained the conveyance and seized the goods, when he is able to form opinion that there is an attempt to evade payment of tax, will have to determine the applicable tax and penalty under section 129 of the Act while simultaneously initiating proceedings for adjudging confiscation under section 130 of the Act.
- If during the pendency of these proceedings, a request for provisional release as contemplated under sub-clause (3) of Section 129 of the Act, is submitted, the same will have to be considered in the light of the provisions of Section 129 read with sub-clause (6) of Section 67 of the Act.
- For the foregoing, the writ petition is disposed of restoring the Show Cause Notice directing the respondent to decide, in accordance with law, on the implications as proposed therein with reasonable opportunity of hearing to the petitioner, who shall have the right to seek provisional release of goods/conveyance as provided for under sub-clause (2) of Section 129 of the Act.
- The respondent is also directed to contemporaneously decide on the impugned Show Cause Notice in accordance with the provisions of Section 130 of the Act.
Judgement:
The Honorable High court of Karnataka held the case as follows:
1. If after interception of conveyance with goods in transit and detention of conveyance and seizure of goods with issuance of notice under section 129(3), and when there is information about intent to evade payment of tax, it is not open to proper officer to treat notice under section 129(3) as having abated or truncate such proceedings and initiate proceedings under section 130 for confiscation withissuance of notice thereunder.
2. ProperOfficer, who hasdetained conveyance and seized goods, when he is able to form opinions that there is an attempt to evade payment of tax, will have to determine applicable tax and penalty under section 129 while simultaneously initiating proceedings for adjudging confiscation under section 130.
3. If during pendency of these proceedings, a request for provisional release as contemplated under section 129(3) is submitted, same will have to be considered in light of provisions of section 129, read with section 67(6).