Case Law Details
Kanchan Supplier through its Proprietor Vs State of Punjab (Punjab and Haryana High Court)
Confiscated goods and vehicles can be released by depositing 25% of the amount mentioned in the Order in cash and furnishing a bank guarantee for the balance
Introduction: The Punjab and Haryana High Court, in the case of M/s. Kanchan Supplier v. State of Punjab and Ors., clarified significant aspects related to tax disputes and the rights of the assessee. This article delves into the details of the case, the court’s findings, and the implications of the judgment.
The Hon’ble Punjab and Haryana High Court in the case of M/s. Kanchan Supplier v. State of Punjab and Ors. [Civil Writ Petition No. 1629 of 2024 dated January 24, 2024] held that the Assessee has the right to appeal against the Order. Further, the vehicle and the goods confiscated shall be released upon furnishing 25% of the amount mentioned in the Impugned Order, and the outstanding balance shall be secured by furnishing a bank guarantee.
Facts:
M/s. Kanchan Supplier (“the Petitioner”) was a proprietorship concern situated in the State of Uttar Pradesh. They were issued a Notice in FORM GST MOV-02 dated December 26, 2023 (“the Impugned Notice-1”) and FORM GSTR MOV-10 dated January 02, 2024 (“the Impugned Notice-2”) without jurisdiction. The Impugned Notices were issued because it was found that the Petitioner’s supply chain had been verified to be ingenuine, and the purchases had been made at an earlier point in time. The said persons did not pay any tax, and it was found that bogus transactions were made to defraud the government exchequer.
The Petitioner did not appear before the Bench on January 16, 2024. After that, the matter was decided on the next date, and an Order was passed on January 18, 2024, under the FORM MOV-11 (“the Impugned Order”) to confiscate the goods and the vehicle. Further, penalty and fine were imposed under the Sections 130(1) and 130(2) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). The liability of penalty and fine was assessed at Rs. 5,33,004/- against the value of goods of Rs. 9,87,044/-.
Hence, aggrieved by the Impugned Order, the Petitioner has filed the present writ petition.
Issue:
Whether goods and vehicles can be released by depositing 25% of the amount mentioned in the Order in cash and furnishing a bank guarantee for the balance?
Held:
The Hon’ble Punjab and Haryana High Court in Civil Writ Petition No. 1629 of 2024-DB held as under:
- Relied on, the case of the State of Punjab vs. M/s. Shiv Enterprises and others [2023 (96) GST 120], wherein the Hon’ble Apex Court set aside an order passed by the High Court on the ground that it was premature for the High Court to quash the show cause notice issued under Section 130 of the CGST Act by invoking Article 226 of Constitution of India.
- Held that the vehicle and the goods shall be released upon furnishing 25% of the amount mentioned in the Impugned Order, and the outstanding balance shall be secured by furnishing a bank guarantee. Further, the contention raised that the consignee, being local as such, would furnish the surety bonds is not liable to be accepted since the consignee is not before the bench and they cannot direct the said person to furnish any surety bonds. Hence, the writ petition was disposed of with the liberty to challenge the Impugned Order.
Our Comments:
Section 130 of the CGST Act talks about “Confiscation of goods or conveyances and levy of penalty”. According to Section 130 (2) of the CGST Act, whenever confiscation of any goods or conveyance is authorized by the CGST 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 and 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. If any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given the option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon.
Conclusion: The judgment of the Punjab and Haryana High Court in M/s. Kanchan Supplier v. State of Punjab and Ors. underscores the significance of due process and balancing the interests of all parties involved in tax disputes. The court’s decision to allow the release of goods and vehicles under specific conditions provides clarity on procedural matters in such cases. This ruling serves as a precedent for similar disputes and reaffirms the rights of the assessee in challenging adverse orders under the CGST Act.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
1. The petitioner, in the present petition filed under Articles 226 and 227 of the Constitution of India seeks quashing of the notice in Form GST MOV-02 dated 26.12.2023 (Annexure P-2) and Form GST MOV-10 dated 02.01.2024 passed by respondent No.2 (Annexure P-3) under Section 130 of the Central Goods Service Tax/Punjab Goods Service Tax Act, 2017 (in short ‘the Act’) by respondent No.3 being without jurisdiction.
2. Mr. Saurabh Kapoor, Addl. A.G., Punjab, on account of having advance copy, puts in appearance and has brought to our notice that in pursuance of the proceedings, order dated 18.01.2024 has been passed in Form GST MOV-11 after giving a notice as such to the petitioner who had not appeared on 16.01.2024 and thereafter, the matter was decided on the next date. The said order is taken on record. Resultantly, order has been passed to confiscate the goods, vehicle and penalty and fine was imposed under Sections 130(1) and 130(2) of the Act. The liability of penalty and fine has been assessed at Rs.5,33,004/- against the value of goods of Rs.9,87,044/-
3. It is not disputed that an appeal would lie under the provisions of the Act before the Appellate Authority and, therefore, the petitioner has a remedy as such against the said order. Counsel has referred to the order dated 20.10.2023 passed by the Apex Court in SLP (C) No. 19535 of 2023, Garg Oil Traders through its Proprietor vs. The State of Punjab and others (Annexure P-13), wherein the Apex Court has accepted the view of depositing 25% of the total amount by cash and for the remaining amount, the petitioner can furnish personal surety bond.
4. We have perused the said order. Apparently, the State of Punjab was un-represented in the said order and the SLP was directed against the interim order passed by the co-ordinate Bench on 25.05.2022 in CWP-4504 of 2022, Garg Oil Traders vs. State of Punjab and others, wherein vide interim order, the respondents were directed to provisionally release the goods/conveyance. The relevant directions read thus:-
“In order to secure the interest of Revenue, bank guarantee in terms of following provision as contained in Section 130 (2) of the Act, is ordered to be furnished:-
“(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….”
5. Accordingly, the respondents were directed provisionally to release the goods/conveyance involved in the writ petitions subject to the petitioners depositing tax chargeable on the goods and furnishing bank guarantee which shall be :-
(i) In case the goods, of amount equivalent to the market value of the goods (under proceedings of Section 130); and
(ii) In case where conveyance is being proceeded against, for an amount equal to tax payable on the goods being transported thereon while apprehended in the present case(s).
6. Counsel for the petitioner has accordingly submitted that he would furnish the personal surety bonds.
7. It is not disputed that the petitioner as such is a proprietorship concern which is situated in the State of Uttar Pradesh. Vide the order dated 18.01.2024 passed by the authorities, a specific finding has been recorded that the supply chain of the petitioner-firm has been verified to be ingenuine and on the purchases which they have made at an earlier point of time, the said persons have not paid any tax. In such circumstances, a finding has been recorded that there are bogus transactions made for defrauding the exchequer.
8. In view of the fact that a prima facie finding has already been recorded, which the petitioner is free to challenge, we are of the considered opinion that deposit of 25% of the amount by cash and for balance furnishing of bank guarantee would be the adequate remedy as such to ensure that the interest of the State is secured as it would be almost impossible to enforce the surety bonds of a person who does not belong to this State.
9. Keeping in view the law laid down by the Apex Court in The State of Punjab vs. M/s. Shiv Enterprises and others, 2023 (96) GST 120, we dispose of the writ petition with liberty to the petitioner to challenge order dated 18.01.2024 passed in Form GST MOV-11. The vehicle and the goods shall be released on furnishing of 25% of the amount mentioned in MOV-11 order and the balance outstanding amount shall be secured by furnishing of a bank guarantee. The contention which has been raised that the consignee being local as such would furnish the surety bonds is not liable to be accepted since the consignee is not before us and we cannot as such direct the said person to furnish any surety bonds.
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Author Bio
Law is simple, if the aggrieved parties i.e goods owner and vehicle owner do not file any reply or apper before the proper officer, the rigours of section 130 has to be endured. So reply to notice MOV-07 and MOV-09, otherwise i goods and vehicle will be conficated u/s 130.