Case Law Details
Deepam Roadways Vs Deputy State Tax Officer (Madras High Court)
Demand order u/s 129 of the CGST Act can’t be passed beyond the period of 7 days from the date of service of notice
The Hon’ble Madras High Court in the matter of Deepam Roadways v. the Deputy State Tax Officer and Ors. [W.P. No. 476 of 2023 and Ors. dated January 23, 2023] quashed the notice of detention of goods and the consequential demand order issued to the assessee, on the grounds that they were not in accordance with Section 129(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). Held that, the demand order passed beyond the period of seven days from the date of service of the notice, is contrary to Section 129(3) of the CGST Act.
Facts:
This writ petition has been filed by Deepam Roadways (“the Petitioner”), challenging the detention of its vehicle and goods by the Revenue Department (“the Respondent”) on October 26, 2022.
Further, within seven days of the detention, a Notice dated October 31, 2022 (“the Impugned Notice”) was issued to the Petitioner. Consequently, an order dated November 10, 2022 (“the Impugned Demand Order”) was passed under Section 129 of the CGST Act demanding an amount of INR 8,33,724/- towards payment of GST and penalty, after the expiry of seven days from the issuance of the Impugned Notice.
The Petitioner contended that the Impugned Notice and the Impugned Demand Order were without jurisdiction and authority of law. Further, sought a direction to the Respondent to release the detained vehicle and goods.
Issue:
Whether the Respondent adhered to Section 129(3) of the CGST Act while passing the Impugned Notice and the Impugned Demand Order?
Held:
The Hon’ble Madras High Court in W.P. No. 476 of 2023 and Ors. held as under:
- Analyzed Section 129(3) of the CGST Act and noted that a notice of detention goods must be served by the proper officer within seven days of such detention and an order for payment of penalty must be passed within seven days of service of such notice.
- Observed that, the Impugned Notice was served within seven days of the detention of the vehicle and goods of the Petitioner, but the Impugned Order was passed after seven days of service of the Impugned Notice.
- Relied on its earlier judgments in a similar matter in the case of Udhayan Steels Private Limited v. Deputy Tax Officer (Int.) & Anr. [W.P.No.34268 of 2022 dated December 28, 2022] and in the case of K. Enterprises v. the Assistant/Deputy Commissioner & Anr. [W.P.No.22646 of 2022 dated August 29, 2022] wherein, the Court set aside the proceedings and directed the release the vehicle/goods for being contrary to statutory requirements. Further, it was held that the order of detention passed beyond the time lines stipulated under Section 129(3) of the CGST Act, is a serious flaw, which vitiates the proceedings for interception in full and in entirety.
- Held that, the Impugned Demand Order passed beyond the period of seven days from the date of service of the Impugned Notice is contrary to Section 129(3) of the CGST Act.
- Quashed the Impugned Notice and the Impugned Demand Order.
- Directed the Respondent to release the detained vehicle and goods of the Petitioner within one week.
Relevant Provisions:
Section 129 (3) of the CGST Act:
“ 129. Detention, seizure and release of goods and conveyances in transit.–
…
(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The issue that arises for consideration in these writ petition is whether section 129(3) of the Central Goods and Services Tax Act, 2017 was adhered to by the respondents or not.
2. Heard Mr.R.Senniappan, learned counsel for the petitioner and Mr.M.Venkateswaran, learned Special Government Pleader appearing for the respondents.
3. The petitioner has challenged the detention order dated 31.10.2022 as well as the consequential order dated 10.11.2022 calling upon the petitioner to pay a sum of Rs.4,16,862 towards CGST and another sum of Rs.4,16,862/- towards SGST as penalty, totalling Rs.8,33,724/-. Both the orders were passed as per the provisions of section 129 of the CGST Act, 2017. Section 129 of the CGST Act reads as follows:
“129. Detention, seizure and release of goods and conveyances in transit.–
(1) Notwithstanding anything contained in this Act, 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 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 penalty equal to two 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 penalty;
(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, 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 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 be detained or seized without serving an order of detention or seizure on the person transporting the goods.
(2) (omitted)
(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).
(4) No penalty shall be determined under subsection (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 such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3): Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:
Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.”
4. As seen from section 129(3) of the Central Goods and Services Tax Act, 2017, the proper officer after detaining the goods or conveyance shall issue a notice of such detention or seizure specifying the penalty payable and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of Sub-Section (1) of Section 129.
5. In the instant case, after detaining the petitioner’s vehicle and the goods on 26.10.2022, notice was issued by the respondents on 31.10.2022 within seven days from the date of detention. However, the consequential order for payment of penalty was passed only on 10.11.2022 which is beyond the period of seven days from the date of service of notice on the petitioner. Having passed the impugned order beyond the period of seven days from the date of service of notice on the petitioner which is contrary to section 129(3) of the CGST Act, 2017, the impugned orders have to be necessarily quashed and the writ petitions will have to be allowed.
6. The very same view was taken by two other learned Single Judges of this Court in the case of Udhayam Steels Private Limited vs. Deputy Tax Officer (Int.) and another dated 28.12.2022 in W.P.No.34268 of 2022 and in the case of D. K. Enterprises vs. The Assistant/Deputy Commissioner and another dated 29.08.2022 in W.P.No.22646 of 2022. It is brought to the notice of this Court by the learned Special Government Pleader appearing for the respondents that no appeals have been filed against the aforesaid orders passed by two learned Single Judges of this Court and therefore, the said orders have also attained finality.
7. For the foregoing reasons, the impugned detention order dated 31.10.2022 as well as the impugned consequential order dated 10.11.2022 are hereby quashed and the writ petitions are allowed and a direction is issued to the respondents to release the detained goods and conveyances of the petitioner within a period of one week from the date of receipt of a copy of this Order. No costs. Consequently, connected miscellaneous petitions are closed.
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