Case Law Details

Case Name : Rajeev Traders Vs Union of India (Karnataka High Court)
Appeal Number : Writ Petition No. 100849 of 2022 (T-RES)
Date of Judgement/Order : 16/08/2022
Related Assessment Year :

Rajeev Traders Vs Union of India (Karnataka High Court)

Held that the proper officer cannot transform the detention proceedings into a confiscatory proceeding. Further, power of confiscation can be invoked only in extraordinary circumstances.

Facts-

Post physical verification of the goods and conveyance, conducted on 14.09.2021, on 28.09.2021 the officer passed order of detention u/s 129. On 29.09.2021, the Deputy Director DGGI Zonal Unit proceeded to issue a notice for confiscation of goods and conveyance and levy of penalty u/s 130 in Form GST MOV-10.

The Deputy Director passed an order of confiscation u/s 130 of CGST Act on 24.11.2021. Being aggrieved, appeal was filed to the Joint Commissioner. The same was dismissed.

As against the said order passed in appeal, though an appeal is provided to the appellate authority under sub-section (1) of Section 112 of the CGST Act, since the Appellate Tribunal has not been constituted, the petitioner is before this Court by way of this writ petition.

Conclusion-

The proper officer, at the time of detention of the goods, cannot obviously convert the power to detain the goods and proceed to exercise of his power to confiscate, especially, when the proper officer has been conferred the power to determine the tax in a specified manner under Sections 73 and 74 of the Act. In other words, the proper officer cannot transform the detention proceedings into a confiscatory proceeding.

The power of confiscation being the ultimate and the most extreme punishment can only be invoked in extraordinary circumstances, and definitely not when the goods are detained in transit, given the design of the statutory framework. It is to be noticed here that the statute consciously leans towards giving an opportunity to the wrongdoer to rectify his wrongs voluntarily.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

1. On the 13th of September 2021, at 5:00 PM, at Yamanuru, the Inspector of Hubballi-Dharwad Division (Proper Officer) intercepted seven trucks while they were in transit and transporting Areca nuts on behalf of the petitioner. The Proper Officer intended to inspect the conveyance, goods and documents, and he accordingly passed an order for physical verification/inspection of the conveyance, Goods and documents on the same day and issued Form GST MOV-02.

2. In the said order, it was stated that the person in charge of the conveyance had not tendered any documents for the goods in movement and prima facie the documents tendered were found to be defective. The order also stated that the genuineness of the goods in transit, their quantity, etc., and/or the tendered documents required further verification. It was stated that the E-Way bill had not been tendered for the goods in movement and therefore, the vehicle was to be stationed at Belagavi and allow the physical verification and inspection of the goods in movement.

3. On the 14.09.2021, the physical verification of the goods and conveyance was conducted in the presence of the person in charge of the goods vehicle and it was stated that the conveyance was carrying Areca nuts and there was a difference in the quantity mentioned in the invoice and the quantity found upon physical verification.

4. On the 28.09.2021, the officer passed an order of detention under Section 129 of the Central Goods and Service Tax Act, 2017 (for short ‘CGST Act’ / ‘the Act’ ) in Form GST MOV-06.

5. On the following day, i.e., on 29.09.2021, the Deputy Director, DGGI, Zonal Unit, Belagavi, proceeded to issue a notice for confiscation of goods, conveyances and levy of penalty under Section 130 of the CGST Act, in Form GST MOV-10.

6. To this notice, the petitioner submitted a reply dated 27.10.2021.

7. The Deputy Director after granting a personal hearing to the authorised representative of the petitioner, proceeded to pass an order of confiscation under Section 130 of the CGST Act on 24.11.2021 by issuing Form GST MOV-11.

8. Being aggrieved by the order of confiscation, the petitioner preferred an appeal to the Joint Commissioner, Office of the Commissioner of GST & Central Excise (Appeals), Belagavi, under sub-section (11) of Section 107 of the CGST Act.

9. The Appellate Authority, on consideration of the appeal, concurred with the view taken by the Deputy Director and proceeded to dismiss the appeal.

10. As against the said order passed in appeal, though an appeal is provided to the appellate authority under sub-section (1) of Section 112 of the CGST Act, since the Appellate Tribunal has not been constituted, the petitioner is before this Court by way of this writ petition.

11. The petitioner contends that once the goods in transit were detained under Section 129 of the CGST Act, the proper officer did not possess the power to initiate confiscation proceedings under Section 130 of the Act. It was submitted that once proceedings for the detention of the goods was initiated under Section 129 of the CGST Act, the same could not be transformed into a proceeding under Section 130 of the CGST Act. It was stated that the power of detaining the goods under Section 129 of the CGST Act is only for a limited period and if the owner of the goods or the person in-charge of the goods comes forward to pay the tax and penalty, the proper officer was bound to release the detained goods and conveyance.

12. It was contended that the proper officer was required to issue a notice specifying the tax and penalty payable and thereafter pass the order for payment of tax and penalty and if such payment was made, the proceedings, in fact, are deemed to have been concluded. It was stated that only if the person transporting the goods or the owner of the goods fails to pay the tax and penalty as provided under Section 129(1) of the CGST Act, within 14 days, would the proper officer possess the power to initiate proceedings under Section 130 of the CGST Act.

13. It is submitted the power of confiscation could not be initiated against the petitioner who was a taxable person and who was supplying the goods to a person registered under the CGST Act. It was submitted that the power of confiscation would apply only in respect of those persons who were neither taxable persons nor persons chargeable to tax under the CGST Act. He, therefore, submitted that the entire proceedings were one without jurisdiction and were liable to be quashed.

14. Sri. G.S.Hulmani, learned counsel appearing for the Revenue, on the other hand, contended that admittedly the person transporting the goods did not possess any E-way bill nor had an E-way bill been generated and this was, therefore, a clear contravention of the provisions of the CGST Act and the Central Goods and Services Tax Rules, 2017 (for short ‘the Rules’), and for this glaring contravention, the proper officer possessed the power not only to detain but also to confiscate.

15. He submitted that as per the circular dated 13th of April 2018, it was permissible for the Proper Officer to directly invoke Section 130 of the CGST Act if he was of the opinion that the movement of goods was being effected with the intent to evade payment of tax. He submitted that initially the proper officer did initiate proceedings for detention only, however, on noticing the intent to evade payment of tax, the proper officer decided to invoke his power under Section 130 of the CGST Act and confiscate the goods and conveyances.

16. He contended that in the instant case, the intent to evade payment of tax was manifestly clear and therefore the proceedings initiated for confiscation cannot be found fault with. To support this argument, the learned counsel sought to rely upon the fact that the E-way bill had not been generated and the goods appeared to be grossly undervalued when compared with the Valuation Report submitted by CAMPCO, which indicated the intent to evade the payment of tax. He also stated that the weight of the goods had been mis-declared and there was a non-declaration of grade and quality of Areca nuts in the Invoice with an intent to undervalue the goods for evasion of tax. He also submitted that this was a case of a non-existent dummy supplier and a recipient, and therefore the proceedings invoked under Section 130 of the CGST Act could not be found fault with.

17. He lastly submitted that the petitioner had been given an opportunity of hearing and after it was established that the goods were undervalued and misdeclared, the proper officer had rightly come to the conclusion that this was a fit case for passing an order of confiscation. He submitted that the appellate authority after considering all these factors had rightly dismissed the Appeal and there was no justification for entertaining this Writ petition.

18. Having heard the learned counsel for the parties the question that arises for consideration is:

“Whether the Proper officer, while detaining the goods which are in transit in the exercise of his power under Section 129 of the Act, possess the power to initiate proceedings to confiscate under Section 130 of the Act and thereafter conduct an enquiry and proceed to order confiscation of the goods?”

GST Detention proceedings cannot be transformed into confiscatory proceedings

19. In order to address this issue, an overview of the CGST Act would be necessary.

20. The objective of the Act is to facilitate the levy and collection of tax on intra-state supply of goods and services or both by the Central Government and the charging section provides for the levy of a tax on the supply of goods and services or both on the value of the taxable supply (transaction value) at rates which are notified by the Government on the recommendation of the Council, which should not, however, exceed twenty percent.

21. The tax is required to be collected in the manner prescribed and shall be payable by the taxable person (a person liable to be registered and a person who is required to register himself compulsorily under the Act).

22. However, the supply of alcoholic liquor for human consumption is not leviable under the Act and the levy on petroleum crude, high-speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel, shall only be from a date notified by the Government on the recommendation of the Council.

23. The charging section also provides for facilitating a levy on reverse charge mechanism in respect of specified category of supply of goods or services or both and also payment of tax on reverse charge mechanism in respect of specified categories of supply of goods or service or both which are received from an unregistered supplier. A provision is also made for payment of tax by an electronic commerce aggregator, in case, the supplies are made through it.

24. Under the Act, the time of supply of goods or services is defined and so also the value of the taxable supply under the provisions of Chapter IV. The Act also provides for availing input tax credit with the objective of eliminating the cascading effect of taxes.

25. The Act, to order facilitate the levy, stipulates the persons liable for registration, the persons not liable for registration and persons who are required to get themselves compulsorily registered and also for deemed registration. It also prescribes the procedure for such registration under Chapter VI.

26. The Act mandates that a registered person supplying goods or services is required to issue a tax invoice before or at the time of removal of goods or providing of service and the said tax invoice is required to contain a description, quantity and value of the goods or the service. A facility for digital payment is also made. A person who is not registered is prohibited from collection of tax in respect of the supply of goods or services or both.

27. In order to ensure the supply is accounted for and documented, the Act mandates that every registered person should maintain a true and correct account of the matters prescribed under Section 35 of the Act and also prescribes the length of time for which the records are to be maintained.

28. In furtherance of this objective, the provisions of Chapter IX of the Act provide for an elaborate and detailed mechanism requiring the supply to be not only documented but also verified and thereafter returns to be filed detailing the supply and the tax payable.

29. The provisions of Chapter X deal with the payment of tax and also interest on any late payment and other matters connected with the payment of the tax, while the provisions of Chapter XI deal with refunds of the tax paid.

30. Chapter XII of the Act provides for assessment. The provisions contained therein envisage self-assessment by the taxable person i.e., supplier of the goods or services and also provides for provisional assessment if the taxable person is unable to determine the value of the goods or services or the rate of tax.

31. The scrutiny of such returns filed by the taxable person is also permitted by the proper officer in order to verify the correctness of the returns and if the proper officer were to notice discrepancies, he is obliged to notify the same to the taxable person for rectification and if it is not rectified, he is empowered to initiate action for an audit or a special audit or for determination of tax which is not paid either by reason of error or by practicing fraud or making any wilful statement or suppression of facts, with the intent to evade payment of tax.

32. It is also provided therein for the proper officer to assess in respect of taxable persons who have not filed returns and against unregistered persons and the provision also enables conducting a special assessment in certain cases. Provisions are also made for conducting an audit and a special audit under Chapter XIII.

33. Thus, the provisions of the Act from Chapter III to XII provide for the levy on supply of goods or services or both and a detailed mechanism is also provided to ensure the levy is collected for the supply. This detailed mechanism to monitor the manner in which the levy is imposed and realised is ensured by making the entire process online thereby taking advantage of the technological advances in information technology. This is obviously to streamline the entire process of taxation with minimal disruption to the business of the taxable person.

34. The underlying objective that can be discerned from these provisions is that the Act fundamentally envisages the taxable person to be self compliant and encourages the taxable person to be voluntarily tax compliant. The provisions are framed in such a manner that it rewards compliance by the taxable person at every stage of the levy being collected and the revenue steps in only when there is a default.

35. In fact, what is to be noticed here is that when there is a default noticed on scrutiny, the proper officer is required to take recourse to an audit or a special audit or a proceeding for determination of tax not paid, either due to an error or due to a fraudulent intention with the intent to evade payment of tax.

36. Chapter XIV and XV provide for the manner in which the default, if any is to be dealt with. The provisions of Chapter XIV empower the proper officer to conduct an inspection, search or seizure. This power of inspection can be exercised by a proper officer only against two persons. Firstly, on a taxable person who has suppressed any transaction relating to supply of goods or services or both and Secondly, on a person engaged in the business of transporting of goods or on the owner of the place where the goods are kept which have escaped payment of tax or where the accounts or goods have been kept in such a manner so as to cause evasion of tax.

37. If the proper officer conducting the inspection has reasons to believe that any goods are liable for confiscation or has reason to believe that the documents or goods which would be relevant for any proceedings are secreted away he can either search and seize such goods or documents or books or things or authorise any other officer to do so.

38. An important aspect that is required to be noticed in this section is that on a seizure of the goods being made by the proper officer, the seized goods are required to be released on a provisional basis on the execution of a bond and furnishing of security for a quantum as prescribed or on the payment of applicable tax, interest and penalty. Thus, even when a property is seized during the course of an inspection, if, the person in whose possession the goods are found offers to pay the applicable tax, interest and penalty, the officer is bound to release the goods which had been seized by him.

39. Section 68 empowers the Government to require the person in charge of a conveyance carrying any consignment of goods of certain value to carry with him such documents and devices as may be prescribed.

40. Chapter XV of the Act provides for Demands and Recovery. The provisions contained therein provide for the determination of tax which is not paid either by error or by way of fraud and also enumerates general provisions relating to the determination of tax. Provisions are also made casting a duty on persons who have collected tax either rightly or wrongfully to remit the tax and provisions are also made for facilitating the recovery of tax.

41. Section 73 of the Act provides for the determination of tax that is not paid or short paid, in cases where fraud or any wilful misstatement or suppression of facts is not involved, while, Section 74 provides for the determination of tax that is not paid by reasons of fraud or any wilful statement or suppression of facts. The procedure envisaged in cases of determination of tax in cases of fraud and in cases where fraud is not involved is examined as they would be relevant in the context of this case.

42. In cases where fraud or wilful misstatement is not involved, the proper officer is empowered to issue a notice calling upon the person chargeable with tax to show cause as to why the amount specified in the notice along with applicable interest and a penalty leviable under the Act should not be paid.

43. In cases where fraud or wilful misstatement is involved, the officer is empowered to issue a notice calling upon the person chargeable with tax to show cause as to why the amount specified in the notice along with applicable interest and a penalty equivalent to the tax specified in the notice should not be paid by him.

44. It is to be noticed here that, in proceedings for the determination of tax, in cases other than fraud, the person chargeable with tax is called upon to pay the penalty leviable under the Act while in proceedings for determination of tax in cases where fraud is involved, the person chargeable with tax is called upon to pay penalty equivalent to the amount of tax specified in the notice. Thus, there is a marked difference in the matter of imposition of penalty when it comes to a proceeding for determination of tax based on the fraudulent conduct of the person chargeable with tax.

45. A person charged with fraudulent conduct is required to pay the entire amount of tax as a penalty whereas a person who is not charged with a fraudulent conduct is required to pay only the penalty prescribed (i.e., as provided under Section 122). In other words, the person charged with fraudulent conduct would, essentially be paying twice the applicable tax on the supply of goods as a penalty.

46. There is also a distinct difference in the proceedings initiated for the determination of tax under Section 73 and Section 74.

47. In a proceeding under Section 73 i.e., in cases where an element of moral impropriety is not involved, if the person chargeable with tax decides to pay the applicable tax along with interest even before a show cause notice is served on him, that person is conferred the benefit of paying just the tax and applicable interest and that too on the basis of his own ascertainment of the tax and the liability to pay the penalty is avoided.

48. If the person chargeable to tax pays the applicable tax and interest as aforesaid and informs the proper officer of his payment, the proper officer is required to verify whether the actual amount of tax payable has been paid. If it is found that the actual amount of tax payable has been paid, the proceedings are deemed to have concluded.

49. If, however, the proper officer is of the view that the actual tax payable has not been paid, he is empowered to issue a notice calling upon the person to pay the shortfall. If this demand is complied with, the proceedings stand concluded.

50. Thus, the person chargeable with tax is given an option of exonerating himself of any wrongdoing if he acts with promptitude and voluntarily pays the tax and the applicable interest.

51. If, however, the person chargeable with tax, chooses to contest the proceedings and submits a representation, the proper officer would be required to consider the representation and determine the tax and interest. In such an event, the person chargeable with tax also invites a liability to pay a penalty of 10% of the tax or Rs.10,000/- whichever is higher. This element of a penalty imposed is obviously because the person chargeable with tax forced the proper officer to embark on the process of determination of tax.

52. Thus, there is a clear element of incentivising and also disincentivising persons chargeable with tax which is built into the statutory scheme, when it comes to the determination of tax.

53. In cases of proceedings initiated for determination of tax for non-payment of tax not on account of a moral impropriety i.e., fraud, wilful misstatement and suppression of facts, the same statutory scheme is replicated, however, with a notable difference in penalising the wrongdoing.

54. In fact, at the very stage of issuing a show cause notice, the person chargeable with a tax who is alleged to have acted with a fraudulent intention is called upon to pay the same sum of money equivalent to the applicable tax apart from the applicable tax and the interest as a penalty. Thus, the show-cause notice itself signifies that for an immoral conduct, the person chargeable with tax is saddled with the liability to pay twice the applicable tax, apart from interest.

55. If, however, the person chargeable with tax, wishes to pre-empt this notice and pays the applicable tax along with interest and a penalty of 15% of the tax payable, before he is served with the show cause notice, the matter comes to an end. He is essentially let off the hook by receiving a relatively minor penalty of 15% of the applicable tax as a penalty.

56. Thus, even in cases where an element of fraud or wilful misstatement or suppression is involved, the law treats the offender with lenience by imposing a penalty of just 15%, if the offender voluntarily acknowledges his impropriety and pays the applicable tax and interest before he receives a notice in that regard.

57. If the proper officer, on verification, finds that there is a shortfall in the payment of actual tax payable, he is obliged to issue a show cause notice. If this event of making a shortfall in the payment of tax, is invited upon himself by the offender, he becomes liable to pay not only the shortfall but also an increased penalty of 25% of the tax. If the person chargeable pays this shortfall along with the applicable interest and the penalty of 25% of the applicable tax, then, the proceedings come to an end.

58. However, if he contests the show cause notice by submitting a representation against it and thereby constrains the proper officer to embark on an exercise of determination of the tax payable and causes the passing of an order, the person chargeable with tax becomes liable to pay a higher penalty of 50% of the tax payable.

59. Thus, even in cases where an element of fraud or wilful misstatement or suppression is involved, the statutory intent is to collect the tax along with interest and a penalty, which progressively gets higher. It is to be noticed that the penalty payable is entirely dependent on the conduct of the person chargeable with tax. If he chooses to make immediate amends and pays the applicable tax along with interest, the rate of the penalty imposed would be lighter. If, however, he wishes to compound his wrongdoing by not paying the actual tax, the rate of penalty gets increased and if this penalty is paid, the matter rests. However, if he chooses to contest the proceedings further and forces the proper officer to make a determination of the tax and interest, he is burdened with the payment of 50% of the tax as a penalty.

60. What is to be discerned from this statutory framework is that the law showers a certain amount of leniency even if there is a wrongdoing. If the wrongdoing is on account of error and is acknowledged and immediate amends are made by paying the tax even before a show cause notice is served, the person does not suffer a penalty. If the wrongdoing is on account of an immoral conduct, even then, if the wrongdoer acknowledges his error and makes amends before receipt of a show cause notice, he is saddled with a penalty of just 15% and if he chooses not to pay the actual tax payable, he is saddled with a larger penalty of 25%. If he desists further and contests the proceedings and forces a determination of the tax payable, he is saddled with a penalty of 50% of the applicable tax.

61. In both the above-mentioned cases, it is to be observed that the law does not intend to confiscate the goods itself as a penal measure and the law only ensures that the applicable tax with interest and penalty is recovered from the wrongdoer.

62. The other provisions in Chapter XV deal with the recovery of tax, which would not be relevant for this case. Similarly, Chapters XVI, XVII and XVIII contain provisions relating to the liability to pay in certain cases, Advance Tax Ruling and Appeals and revisions, which would also not be relevant for the issues involved in this case.

63. Chapter XIX provides for dealing with offences and penalties. Section 122 to Section 128 provides for the imposition of penalty for various offences, which would be considered at a later stage in this judgment.

64. Section 129 provides for detention, seizure and release of goods and conveyances in transit. This is a provision that is enacted solely to empower the authorities to detain goods and conveyances while they are in transit and thus differs with the power conferred to conduct an inspection, search and seizure under Section 67 of the Act.

65. Under Section 67, the business premises of a taxable person or any person engaged in the business of transport of goods or the owner of a storehouse can be inspected, searched by the proper officer and the goods or documents can be seized by him. However, under Section 129, the proper officer is empowered to detain only the goods or conveyances while they are in transit.

66. Section 1291 is in two parts. The first part of this provision declares that if any person transports goods or stores the goods while they are in transit, in contravention of the provisions of the Act, such goods and conveyances which are used as a means of transport for carrying the goods and the documents relating to such goods and conveyances, are liable to be detained or seized. The first part of the provision thus basically empowers the officers to detain or seize goods while they are in transit, if the transport of the goods contravenes the provisions of the Act.

67. The second part of Section 129, however, casts a positive obligation on the proper officer for the release the goods and conveyances and the documents related to them which have been detained or seized, if the owner of the goods comes forward to pay the applicable tax on such goods and a penalty equal to 100% of the tax payable on such tax. Thus, if the owner comes forward and pays the applicable tax and also an equivalent amount of tax as a penalty, the owner is entitled, as a matter of right, to get the goods released to his custody.

68. If, however, a person other than the owner comes forward to pay the applicable tax and also a penalty equal to 50% of the value of goods reduced by the tax amount paid, that person also, as a matter of right, is entitled to get the detained goods, conveyances and the documents related thereto released to his custody.

69. In both cases, however, the penalty payable is lesser if the goods are exempted goods, with which we are not however concerned in this case.

70. The goods detained or seized are also liable to be released if a security equivalent to the amount payable as prescribed in clause (a) or clause (b). In other words, if the owner of the goods furnishes a security equivalent to the applicable tax and a penalty equivalent to the applicable tax, the goods, conveyances and the documents related to them are bound to be released.

71. Similarly, if a person other than the owner furnishes security for an amount equivalent to the applicable tax and 50% of the value of the goods reduced by the applicable tax, the goods, conveyances and documents related to them are bound to be released in favour of that person.

72. The proviso attached to Section 129 (1) bars the detention of the goods and conveyances unless an order of detention is served on the person transporting the goods.

73. Sub-section (2) of Section 129 makes the provisions of Section 67 (6) applicable to detentions or seizures made. Section 67 (6) states that the goods seized during the course of an inspection are required to be released on a provisional basis either upon execution of a bond and furnishing a security as prescribed or if the applicable tax, interest and penalty is paid.

74. Sub-section (3) of Section 129 mandates that the officer detaining or seizing the goods or conveyances is required to issue a notice specifying the payment of tax and penalty and thereafter pass an order for payment of the tax, interest and penalty. The officer is however required to hear the concerned person before passing such an order.

75. Sub-section (5) of Section 129 declares that if the concerned person pays the tax, interest and penalty, all proceedings for payment of tax, interest and penalty provided under sub-section (3) are deemed to have concluded.

76. If, however, the person does not pay the tax, interest and penalty as ordered in sub-section (5) within a period of 14 days, further proceedings for confiscation as contemplated under Section 130 is required to be initiated.

77. Thus, under Section 129, the authorities are given the power to seize the goods and conveyances which are used to transport the goods while they are in transit, if the provisions of the Act are contravened. However, if the owner comes forward and pays the applicable tax, interest or penalty equivalent to the tax, the proper officer is bound to realise the goods and the conveyances. If a person other than the owner comes forward and pays the applicable tax and 50% of the value of the goods (reduced by the tax paid), the authorities are bound to release the goods and conveyances.

78. In other words, the owner of the goods or a person other than the owner gets a statutory right to obtain the release of the goods and conveyances detained under Section 129 if they comply with the conditions specified in clauses (a), (b) or (c) of Section 129(1).

79. To put it differently, the proper officer does not possess the power to refuse the release of the detained goods and conveyances:

a. if the applicable tax and penalty of 100% of the tax is paid by the owner or

b. if 50% of the value of the goods reduced by the applicable tax, is paid by a person other than the owner or

c. if security equivalent to the aforesaid sums are furnished.

80. This indicates that the true intent to detain the goods or the conveyances is to ultimately facilitate the recovery of the applicable tax and if the same is paid along with the penalty, the goods and conveyances are bound to be released.

81. In fact, by virtue of sub-section (5) of Section 129, if the owner or any other person complies with the order passed by the officer by paying the applicable tax, interest and penalty, the entire detention and seizure proceedings are deemed to have been concluded.

82. It is only if the order is not complied within 14 days, do the authorities secure a right to initiate confiscation proceedings under Section 130 of the Act.

Thus, the power of confiscation when goods and conveyances are seized would be available only when the applicable tax and penalty is not paid. This once again establishes that the primary intent of the law is to recover the applicable tax and penalty and only if this is not achieved, the power of confiscation is required to come into play.

83. It is to be emphasised here that the power available under Section 129 to detain and seize is only when the goods and conveyances are in transit. In other words, under Section 129, the proper officer would not have the power to detain goods or conveyances which are not in transit i.e., when they are found in the registered place of business of the taxable person.

84. Section 1302 of the Act provides for confiscation of the goods. This provision also starts with a non-obstante clause and provides for confiscation of goods and conveyances in 5 specified cases.

a. Firstly, if any person supplies or receives goods in contravention of the provisions of the Act and Rules with the intent to evade payment of tax.

b. Secondly, if any person does not account for any goods on which he is liable to pay tax.

c. Thirdly, if any person supplies any goods liable to tax under the Act without applying for registration.

d. Fourthly, if any person contravenes any of the provisions of the Act and Rules with the intent to evade payment of tax.

e. Fifthly, if any person uses any conveyance as a means for carriage of goods in contravention of the Act or the Rules, unless he is able to establish that he was unaware of the use of the conveyance.

85. In all the above-mentioned five specified cases, the goods, apart from being liable for confiscation, would also be liable for payment of penalty as specified under Section 122 of the Act.

86. However, the proper officer adjudging the confiscation is obliged to give the owner of the goods an option to pay, in lieu of confiscation, a fine which he deems fit. This power to impose a fine by the proper officer is however not unbridled.

87. This fine imposed by the proper officer is subject to an upper limit and a lower limit. The upper limit is that the fine shall not exceed the market value of the goods less the applicable tax, while the lower limit is that the fine shall not be less than the aggregate of the fine and penalty payable under Section 129 (1) of the Act (applicable tax and penalty of 100% of the applicable tax, in case of owner of the goods; or in case of a non-owner, the applicable tax and penalty equal to 50% of the market value of the goods reduced by the tax paid thereon).

88. In cases relating to the confiscation of the conveyance, the proper officer is obliged to give the owner of the conveyance an option of paying a fine equal to the tax payable on the goods in lieu of the confiscation of the conveyance.

89. In cases where a fine in lieu of confiscation is imposed, the owner of the goods or the conveyances is also required to pay in addition to the fine, the tax and penalty and other charges. However, an order of confiscation cannot be made unless an opportunity of being heard is afforded to the person. On such confiscation being made, the title to the goods and conveyances would vest in the Government and the proper officer adjudging the confiscation is entitled to take possession of the confiscated things and he is also empowered to dispose off the goods or conveyance if the fine in lieu of confiscation is not paid within three months.

90. As could be seen from the statutory framework, the power to inspect and seize the goods is granted to the proper officer under Section 67 and under Section 129 of the Act.

91. Under Section 67, if (a) the taxable person has suppressed any transaction relating to the supply of goods or services or both or (b) a person engaged in the business of transporting the goods or the owner of a warehouse or godown is keeping goods which have escaped payment of tax, the proper officer can inspect and seize the goods and documents. This inspection and seizure can be carried out at any place of businesses of the taxable person or the person engaged in the business of transporting goods or storage of goods. However, when such goods or documents are seized, the proper officer is bound to release them on a provisional basis if a bond is executed and security furnished as prescribed or if the applicable tax, penalty and interest are paid.

92. Under Section 129, the proper officer has been conferred with the power to detain and seize the goods and conveyances used to transport the goods while they are in transit, if they are being transported in contravention of the provisions of the Act and rules. However, the proper officer, even in such a case is nevertheless bound to release the goods and conveyances to the owner of the goods or the owner of the conveyances if the penalty prescribed and the applicable tax under Section 129 is paid.

93. Thus, in both cases, the proper officer is bound to release the goods or conveyances if the applicable tax and penalty prescribed is paid. The statutory framework, thus, indicates that the power to detain and seize is only designed to ensure that the applicable tax and penalty is collected and on such payment being made, the goods or conveyances cannot be detained or seized and they are required to be released.

94. If either on a scrutiny of the returns filed by the taxable person or if it appears that the tax has not been paid either by reason of error or by practising fraud with the intent to evade payment of tax, the statutory framework is to facilitate the proper officer to embark upon a process to determine the tax payable as envisaged under Sections 73 and 74 with the ultimate intent to ensure that the applicable tax is realised with penalty and interest.

95. If there is no element of moral impropriety, the person chargeable with tax is treated lightly and if there is an element of moral impropriety, the person chargeable with tax suffers a higher monetary loss. In other words, even in cases where tax was not paid either by reason of error or with the intent to pay the tax, the objective is to realise the tax, interest and penalty and not to confiscate the goods.

96. Viewed from this background, it becomes clear that the power to confiscate is the ultimate penal measure provided under the Act and is, therefore, to be exercised with great care and caution and as a last measure. This power to confiscate, given the statutory framework, is a distinct and independent power conferred under the Act which can be exercised only in cases where the power to detain and seize has not been invoked. Once the power to inspect, seize or detain the goods and conveyances is invoked either under Section 67 of the Act or under Section 129 of the Act, the power to confiscate under Section 130 would not be available. This is evident from Section 129 (6) which states that proceedings under Section 130 can be invoked only if the applicable tax and penalty are not paid despite an order being passed in that regard.

97. Thus, the procedure adopted by the proper officer, in this case, to embark on confiscation proceedings after invoking his power under Section 129 to detain and seize the goods is contrary to the statutory scheme.

98. However, the Learned Counsel for respondents contends that a Circular has been issued on 13.04.2018 by the Commissioner in exercise of the powers conferred under Section 168 of the Act and as per Instruction No.2(l) of the said Circular, if the proper officer is of the opinion that the movement of the goods is being effected to evade payment of tax, he could directly invoke confiscation proceedings under Section 130. This argument cannot be accepted for more than one reason.

99. Firstly, the statutory framework, as explained above does not permit confiscation proceedings merely because it is found by the proper officer that applicable tax has not been paid on the goods and he exercises his power to detain the goods and conveyances. If, the owner of the goods or a person other than the owner comes forward to abide by the stipulations contained in Section 129, he is bound to release the goods and the conveyances. Thus, the positive obligation to release the detained goods cannot be bypassed or overridden by permitting the proper officer to invoke confiscatory proceedings under Section 130 of the Act. It is also to be kept in mind that on goods and conveyances being detained under Section 129, there is a right vested in the owner of the goods and the owner of the conveyances to get the goods and the conveyances released subject to the fulfilment of the conditions prescribed in Section 129 and this vested right cannot be nullified by invoking confiscation proceedings under Section 130 of the Act.

100. Secondly, by virtue of Section 129(6), the power available to initiate confiscation proceedings would be available to the proper officer only if the owner of the goods or the conveyances fail to pay the applicable tax and penalty within 14 days. In the light of this provision, it would simply not be open for the proper officer to invoke the distinct power under Section 130 after he has invoked the power to detain the goods and conveyances under Section 129.

101. Thirdly, the proper officer cannot be given the discretion to choose the manner in which he would penalise the wrongdoer when the statutory framework has been designed in such a way that even a wrongdoer is treated leniently, if he chooses to acknowledge his wrongdoing by paying the applicable tax and the penalty even in the event he is found transporting the goods in contravention of the provisions of the Act. If the proper officer is given the option of imposing the extreme measure of confiscation for transporting the goods in contravention of the provisions of the Act, the true intent of the law which is only to collect the tax with penalty would be defeated and the proper officer would basically ensure that the entire goods vest in the Government apart from the imposition of the liability to pay the applicable tax and penalty.

102. Fourthly, the power conferred under Section 168 on the Commissioner to issue a Circular is to basically ensure that there are clear instructions laid out for the uniform implementation of the provisions of the Act. This power to issue instructions for the uniform implementation of the Act cannot vest the Commissioner to prescribe a set of instructions which go against the grain of the statutory provisions. The instructions in the Circular empowering the proper officer to invoke the power of confiscation under Section 130 of the Act after he has invoked the power of detention under Section 129 amounts to nullifying the right available to the owner of the goods or the owner of the conveyances to get the goods and conveyances released and such a power is not available to the Commissioner under Section 168. If this argument were to be accepted, it would essentially mean that the Commissioner can issue instructions which virtually amount to amending the statutory provisions or at least enable the officers to distort and defeat the statutory framework.

103. It is to be stated that the power to detain under Section 129 cannot be converted to a proceeding under Section 130 of the Act since both these provisions operate independently of each other and in completely different contexts. The power to detain is only to stop the transit of the goods and thereby prevent its movement till the tax and penalty is paid. However, the power to confiscate is the process of divesting the owner of the goods of all title to the goods for a contravention of the provisions of the Act and Rules. The intent behind conferring power to detain the goods under Section 129 is fundamentally to ensure that the applicable tax and penalty is recovered whereas the intent behind confiscation under Section 130 is to divest the owner of the goods itself and also impose liability of payment of the applicable tax and penalty.

104. As noticed above, even in cases where proceedings are initiated for determination of tax against a person who had a fraudulent intent of evading payment of tax under Section 74, the provisions permit the person who had exhibited the fraudulent intent to pay a maximum penalty of 50% and be absolved of his wrongdoing. Given this statutory framework, it would not be proper for the Commissioner to permit the proper officer to initiate confiscation proceedings under Section 130 after the power of detention had already been invoked under Section 129 of the Act.

105. In the scheme of the statute, when goods are detained under Section 129, the proper officer would be obliged to release the goods upon fulfillment of the conditions laid down therein by the owner of the goods or the owner of the conveyance. It is however to be stated here that merely because he has released the goods, that would not come in the way of proceedings being initiated under Section 73 or Section 74 of the Act for determination of tax.

106. However, it is to be stated here that when goods are detained while in transit, the proper officer cannot embark on an enquiry which is contemplated under Section 73 or Section 74 or Section 130. It is to be kept in mind when a specific provision is enacted for dealing with a specified situation such as the goods being in transit and that very provision demarcates the extent of the power that the proper officer can exercise, that provision cannot be sidestepped and resort be had to some other provision which enables the very confiscation of the goods.

107. It is also to be kept in mind that the power of confiscation, under the scheme of the statute, would only be the power conferred on the proper officer in situations other than when the goods are in transit. This is simply because the statute has specifically provided for the power that is available to a proper officer when the goods are in transit and obviously when the goods in transit are detained, only that procedure prescribed can be applied and not any other provision. The Commissioner by issuing a circular has basically devised a new procedure contrary to the one provided under the statute, which is impermissible. Thus, the reliance placed on the Circular can be of no avail and the power to switch over to the confiscatory proceedings midway when the goods are detained in transit would not be available to the proper officer.

108. In this case, the goods were intercepted while in transit on 13.09.2021 and the proper officer also passed an order of detention on 28.09.2021 (MOV-6) and on the passing of this order, the owner of the goods or the owner of the conveyance secured a right under Section 129 to get the goods released. However, the proper officer, thereafter proceeded to issue a notice of confiscation (MOV-10). Thus, the proper officer basically nullified the statutory right of the owner of the goods or the non-owner to get the goods released on compliance with the conditions specified in Section 129(1) (a) to (c), which would render the entire confiscatory proceedings illegal.

109. The proper officer has thereafter proceeded to issue a notice of confiscation of both the goods and conveyances on five grounds, which were:

a. An e-way bill had not been generated with the intent to evade payment of tax

b. The goods appeared to be grossly undervalued (when compared to the valuation report submitted by CAMPCO) with the intent to evade payment of tax

c. The weight of the goods was mis-declared with the intent to evade payment of tax

d. The grade and quality of areca nuts were not mentioned in the invoice with the intent to evade payment of tax and

e. There were non-existent suppliers and recipient which was discovered during the investigation and follow-up searches.

110. As far as the first ground is concerned, it cannot be in dispute that under Section 68 of the Act, the Government can prescribe the documents and the devices that the person in charge of the conveyance carrying the consignment of goods are required to be carried. It is to be stated here that in this regard Rules have also been framed, which require that every registered person who causes the movement of goods is required to furnish, before the movement of the goods, information electronically regarding the movement of the Goods and on the furnishing of the same, a unique number would be generated (Rule 138) and the person in charge of a conveyance is required to carry the invoice and a copy of the E-way bill in physical form or electronic form (Rule 138A).

111. In case there is a contravention of the requirement of the Rules, Section 122 (1) (xiv)3 of the Act prescribes a penalty of ten thousand rupees or an amount equivalent to the tax evaded, whichever is higher on the taxable person.

112. Sub-section (2) of Section 1224 states that every registered person who supplies any goods on which tax has not been paid or short paid for any reason other than fraud shall be liable to a penalty of ten thousand rupees or ten percent of the tax due, whichever is higher. If on the other hand, it is by reason of fraud, the registered person would be liable to a penalty of ten thousand rupees or the tax due, whichever is higher.

113. Thus, if the taxable person transports goods without the cover of the documents prescribed, a penalty of ten thousand rupees or an amount equivalent to the tax is payable and if a registered person supplies goods on which tax is not paid or short paid, he is required to pay a penalty of ten thousand rupees or ten percent of the tax, if it is by error and a penalty of ten thousand rupees or the tax due, if it is by reason of fraud.

114. In other words, for transporting the goods without an e-way bill (it is admitted in this case that the consignment was accompanied by a tax invoice), the taxable person (i.e., a person who is registered under Section 22 of the Act) would be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded.

115. In respect of the act of supplying the goods without paying tax or with a shortfall, the registered person would be liable to pay a penalty of ten thousand rupees or ten percent of the tax due (if it was by error) or a penalty of ten thousand rupees or the tax due (if it was by fraud).

116. Thus, in the instant case, the proper officer possessed the power to impose a penalty for transporting the goods without the cover of documents and also impose a penalty for supplying the goods without payment of tax.

117. As stated above, the goods were accompanied by a tax invoice, which indicated payment of tax but an E-way bill had not been generated. Thus, the proper officer could have only imposed a penalty of ten thousand rupees or the amount equivalent to the tax evaded.

118. It may be pertinent to state here that under Section 31 of the Act, a registered person is required to issue a tax invoice showing the description, quantity and value of goods, the tax charged therein and such other particulars as may be specified. Rule 46 of the Rules prescribes the 17 particulars to be mentioned in the tax invoice. Rule 46 (g) to (m)5, which would be relevant to this case, require the Harmonised System of Nomenclature Code (HSN Code), description of goods, the quantity of goods, the total value of supply of goods, taxable value of the supply of goods, the rate of tax and amount of tax charged in respect of the goods. It is not in dispute that the tax invoice did contain those particulars. Thus, the requirement of the law that a tax invoice is required to be issued containing the particulars was complied with.

119. However, the proper officer, has proceeded to state that the goods appear to be undervalued and the weight of the goods were mis-declared and the grade and quality of the areca nuts were not mentioned. As noticed above, Rule 46 does not mandate the market value of the goods or a prescribed value of the goods is required to be mentioned in the Tax invoice and the Rule also does not state the grade or quality of the goods are required to be mentioned.

120. Thus, if the proper officer, had reason to believe that the applicable tax has not been paid either by mistake or by reason of fraud, such as undervaluation of the goods, it would be open for him to initiate proceedings under Section 73 and Section 74 of the Act. The proper officer, at the time of detention of the goods, cannot obviously convert the power to detain the goods and proceed to exercise of his power to confiscate, especially, when the proper officer has been conferred the power to determine the tax in a specified manner under Sections 73 and 74 of the Act. In other words, the proper officer cannot transform the detention proceedings into a confiscatory proceeding.

121. As far as the mis-declaration of the weights of the goods is concerned, as the same amounted to an offence as prescribed under Section 122(1)(i)6, the proper officer could impose the penalty as prescribed in Section 122 and that could not entitle him to invoke his power to confiscate the goods itself.

122. It is to be kept in mind the predominant principle under the Act is to ensure that the registered person is given a chance to rectify his wrongdoing whenever the wrongdoing is noticed and pay the applicable tax and penalty or interest as the case may be. The proper officer cannot snatch away that right conferred on the registered person by invoking proceedings to confiscate the goods itself. The power of confiscation being the ultimate and the most extreme punishment can only be invoked in extraordinary circumstances, and definitely not when the goods are detained in transit, given the design of the statutory framework. It is to be noticed here that the statute consciously leans towards giving an opportunity to the wrongdoer to rectify his wrongs voluntarily.

123. As far as the allegation that the goods appear to be grossly under-valued, it is to be stated that the basis for this allegation was a valuation report given by CAMPCO.

124. Under Section 15 of the Act, the value of the supply of goods would be the transaction value and a transaction value would be the price that is paid or payable for the supply of goods. When the supplier and recipient are not related and the price is the sole consideration of the supply, then for the purpose of the Act, the transaction value i.e., the price actually paid would be the value of the goods that is sought to be supplied. In the light of this particular definition of the value of taxable supply in Section 15, the authorities could not have proceeded on the assumption that there was an undervaluation.

125. In fact, in confiscation proceedings, the concept of determining the under-valuation of the goods would not really arise since that is an exercise which has to be undertaken under Section 74 of the Act against the registered person.

126. It is also to be stated here that in the notification which notified the rates of tax, the description of the goods was only stated as ‘areca nuts’. The notification did specify different rates of tax for different kinds of areca nuts and the Rules also did not require the grade or quality of the areca nuts to be mentioned in the invoice. In other words, when the statutory notification prescribes a particular rate of tax for areca nuts and as described therein, it was not permissible for the authorities to take the view that the grade and quality of areca nuts had also to be declared. In fact, the entire basis for the under-valuation stems from the allegation that the grade of the areca nuts being carried had a higher value in the market.

127. In a proceeding under the Act, the market value of the goods are not relevant unless in certain specified circumstances. For all normal purposes, the value would have to be determined as per Section 15 of the Act which would be the price actually paid or payable. It is to be borne in mind that there is no law which demands that the supply of goods should be made only at a market value. In fact, in business, the rate at which the goods are supplied could vary depending on the various factors and could not be determined uniformly. Therefore, the entire basis that there was undervaluation was completely incorrect and the consequential conclusion that there was under-valuation with an intent to evade payment of tax, cannot also be accepted.

128. The fifth ground that there was a non-existent/dummy supplier and a recipient can only be a ground for determination of tax under Section 74 and cannot really be raised and determined in a confiscatory proceeding, given the fact that the petitioner was a registered person and its registration had been accepted by the Department.

129. In my view, the entire procedure adopted by the proper officer from converting the detention proceedings into a confiscatory proceeding, ultimately leading to the order of confiscation is wholly illegal and contrary to the statutory scheme of the Act. The Appellate Authority has mechanically accepted the reasoning of the order of the proper officer and has dismissed the appeal without examining the statutory scheme of the Act. I am therefore of the view that impugned orders cannot be sustained and the same are quashed. The question that is framed is accordingly answered in the negative.

130. Since it is stated that the confiscated goods are already sold in a public auction, the respondents are directed to pay the petitioners (the owner of the goods), the sale proceeds of the auction after deducting the penalty prescribed under Section 129(1)(a) of the Act, within a period of four weeks from the date of receipt of a certified copy of this order.

131. As a consequence, the proper officer shall also release the conveyance, if it is not already released.

132. It is however made clear that the proper officer would be at liberty to initiate proceedings for the determination of tax as provided under Section 73 or Section 74 of the Act and the passing of this order will not in any way be construed as an opinion rendered on the merits of any of the allegations made against the petitioner.

133. Writ petition is accordingly allowed.

Notes:-

1 129. 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 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 be detained or seized without serving an order of detention or seizure on the person transporting the goods.

(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.

(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).

(4) No tax, interest or penalty shall be determined under sub-section (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 the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:

Provided 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 fourteen days may be reduced by the proper officer.

2 130. Confiscation of goods or conveyances and levy of penalty.

(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 he is liable to pay tax under this Act; or

(iii) supplies any goods liable to tax under this Act without having applied for registration; or

(iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or

(v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.

(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 amount of penalty leviable under sub-section (1) of section 129:

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.

(3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

(4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard.

(5) Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government.

(6) The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession.

(7) The proper officer may, after 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.

3 122. Penalty for certain offences. (1) Where a taxable person who––(i) x x x

(xiv) transports any taxable goods without the cover of documents as may be specified in this behalf;

x x x

he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.

4 122. Penalty for certain offences. (1) x x x

(2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,—

(a) for any reason, other than the reason of fraud or any willful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher;

(b) for reason of fraud or any willful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher.

5 46. Tax invoice.-Subject to rule 54, a tax invoice referred to in section 31 shall be issued by the registered person containing the following particulars, namely,—

(a) x x x

(g) Harmonised System of Nomenclature code for goods or services;

(h) description of goods or services;

(i)quantity in case of goods and unit or Unique Quantity Code thereof;

(j)total value of supply of goods or services or both;

(k) taxable value of the supply of goods or services or both taking into account discount or abatement, if any;

(l)rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

(m) amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess)

x x x

6 122. Penalty for certain offences. (1) Where a taxable person who––

(i)supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii) x x x

he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.

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