Case Law Details
Joint Commissioner of State Tax (I&E) Vs Sasi Pathirakunnath (Kerala High Court)
In the case of Joint Commissioner of State Tax (I&E) Vs. Sasi Pathirakunnath, the Kerala High Court deliberated on whether the discretion exercised by the appellate authority under Section 107(11) of the CGST/SGST Act was arbitrary, unreasonable, or based on irrelevant considerations. The court also examined the extent of the powers conferred on the appellate authority to modify orders passed by the adjudicating authority under Section 130(2) of the GST Act.
The court observed that Section 107(11) provides wide-ranging powers to the appellate authority to modify orders passed under Section 130(2) by the adjudicating authority. It emphasized that as long as the appellate authority’s decision is based on relevant considerations and is not manifestly unjust or unreasonable, the court has limited scope to interfere with its discretion.
Referring to the judgment in Gunwant Lal Godawat’s case, the court noted that it interpreted the provisions of the Gold Control Act, 1968, and did not directly apply to the present case concerning the powers of the appellate authority under the CGST/SGST Act.
The court further examined the provisions of Section 73 of the Gold Control Act, which deals with giving the option to pay a fine in lieu of confiscation. It clarified that Section 73 applies only to confiscations authorized by the Gold Act and not those adjudged under the rules preceding the Gold Act. Therefore, the value of gold for determining the fine in lieu of confiscation should be assessed based on the date of the option exercised by the owner, not the date of seizure.
The court also addressed precedents from other statutes, such as the Essential Commodities Act and the Customs Act, to highlight differences in the provisions related to fines and confiscations. It emphasized that each statute has its own guidelines and considerations for imposing fines in lieu of confiscation.
Regarding Section 130 of the GST Act, the court discussed its provisions related to confiscation of goods or conveyances and the imposition of fines. It noted that the amendment made by the Finance Act, 2021, delinked proceedings under Section 130 from those under Section 129, providing more independence to initiate confiscation proceedings.
The court highlighted the importance of strict interpretation of confiscation provisions as they interfere with the right to property under Article 300A of the Constitution of India. It also discussed the need for adjudicating officers to justify the imposition of fines based on the seriousness of contraventions and the application of mind.
In conclusion, the court held that the appellate authority’s orders did not suffer from unreasonableness or legal infirmity warranting interference. It emphasized the broad powers conferred on the appellate authority under Section 107(11) and dismissed the writ petitions accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The present writ petition has been filed challenging Ext.P2 appellate order passed by the Joint Commissioner (appeals) under the provisions of Central Goods and Services Tax / State Goods and Service Tax Act 2017 (‘the CGST / SGST Act’ for short) and Rules made thereunder. The State Tax Officer, Squad No.1 SGST Department Ernakulam, while conducting vehicle checking on 07.09.2021, received intimation from the Railway Protection Force, Ernakulam regarding the transport of gold by Mr. Nikhil Suresh without any documents as required under the provisions of CGST / SGST Act. On inspection, the carrier failed to produce documents to prove the genuineness of the gold ornaments under the transportation.
2. The railway protection team handed over the gold ornaments to the State Tax Officer and issued a summons. The statement of the carrier was recorded. After knowing the detention of the gold ornaments and issuance of notices to the respondent, the respondent appeared before the adjudicating officer and filed objections. However, the respondent failed to produce any documents. Hence, the State Tax Officer issued notices proposing to confiscate the gold ornaments transported without any document and impose the penalty as provided under Section 130 of the GST Act.
3. The State Tax Officer finalised the order of confiscation under Section 130 of the GST Act. The State Tax Officer held that there were no valid documents in respect of the gold ornaments transported at the time of detention. The State Tax Officer rejected the argument of the respondent that the soft copies of the bills were available with the carrier. It was also held that even the soft copies sent through whatsapp said to be accompanied with the gold ornaments was for 825 grams only, whereas the actually transported gold ornaments quantity was 724.99 grams, which would show that the documents produced had no connection with the gold ornaments transported. The State Tax Officer rejected the books of accounts produced, and held that same would not be treated as the reasons for regularizing the offfence. The order of confiscation was therefore, passed under Section 130 of the CGST / SGST Act, 2017. The respondent was also conveyed that the seized gold items will be released on payment of redemption fine equal to the market value of the goods seized with the penalty and fines as mentioned in the said order.
4. Challenging the said Ext.P1 order of confiscation, the respondent filed an appeal before the Joint Commissioner Appeals, the first appellate authority under Section 107 of the CGST / SGST Act. The appellate authority reduced the amount of fine in lieu of confiscation for release of gold to Rs. 4,03,672/- against Rs. 33,63,954/- on the premise that the respondent is a registered person who maintains proper books of accounts and files regular returns.
5. Mr. Mohammed Rafiq, Learned Special Government Pleader submits that Ext.P2 order is based on an irrelevant premise that the respondent is a registered person who maintains proper books of accounts and files returns. The reliance placed by the appellate authority upon an order of this court in State of Kerala v. Y Balakrishna, RP No. 630/2021, is wholly misplaced, inasmuch as the said order has not attained finality as W.A No. 1721/2021 filed against the same is pending before the division bench of this court. It is also submitted that Section 109 of the CGST/ SGST Act provides for the setting up of Tribunal to entertain appeals that can be filed under Section 112 from the first appellate orders. However, such a Tribunal is not yet constituted, and therefore, the petitioner has no other remedy than to approach this Court seeking to invoke its powers under Article 226 of the Constitution of India.
6. It is further submitted that the first appellate authority has failed to note that once the goods are confiscated, it become the property of the Government, and it is only the adjudicating authority who is empowered to decide the quantum of fine payable in lieu of the release of the goods so confiscated. The first appellate authority has no power or jurisdiction to substitute his own judgment on the discretion as to the quantum of fine payable in lieu of confiscation so long as the discretion exercised by the adjudicating officer is not hit by any of the proviso to Section 130 of the CGST / SGST Act, 2017.
7. Proviso 1 of Section 130 of the Act puts fetter on the absolute discretion conferred on the adjudicating officer to fix a fine. The adjudicating officer cannot impose a fine beyond the market value of the goods confiscated. It is within the realm of power vested in the adjudicating authority to impose the fine upto the market value of the goods confiscated. Unless it is said that the discretion exercised by the adjudicating authority is arbitrary or unreasonable, the appellate authority should not interfere with the powers of discretion of the adjudicating authority to impose the quantum of fine in lieu of the confiscation of the goods seized.
8. It is further submitted that without coming to the conclusion that the discretion exercised by the adjudicating authority in imposing the fine in lieu of confiscation at the rate of the market value is arbitrary or against the provisions of the CGST/ SGST Act 2017, the interference by the appellate authority in such a discretion of the adjudicating authority in reducing the fine substantially to four times the tax payable is unjustified and liable to be set aside.
9. On the other hand Mr. Tomson T Emmanuel, learned counsel for the respondent submits that the phrase ‘pay in lieu of confiscation’ indicates an alternative to confiscation offering the option to pay instead. It is also submitted that the phrase ‘ such fine as the said officer thinks fit’ specifies the nature of the fine which is determined at the discretion of the officer. In English grammar, commas are used to separate clauses, phrases, or items in a list. The comma before the phrase ‘such fine as the said officer thinks fit’ could be seen as the setting of a non-restrictive or parenthetical element. Omitting the comma treats the entire phrase ‘To pay in lieu of confiscation such fine as the said officer thinks fit’ as a single and cohesive unit. This approach suggest that the discretionary nature of the fine is directly and inseparably linked to the option to pay a fine instead of undergoing confiscation. The sentence without the comma is more streamlined and does not emphasize the discretionary aspect as an additional piece of information; it is simply part of the offer made to the owner of goods.
10. Section 129 empowers the officer to return, seized and release the goods and conveyances in transit of any goods or stores while they are in transit in contravention of the provisions of this CGST / SGST Act or the rules made thereunder. The goods and conveyances used as a means of transport for carrying the said goods and documents relating to such goods and conveyance are liable to detention or seizure and the same have to be released in the manner prescribed in the section.
Section 129 of the CGST / GST Act is extracted hereunder:-
“129. (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 seven 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 seven days may be reduced by the proper officer.”
11. Section 130 empowers the competent authority to pass an order for confiscation of the goods or conveyance and levy of penalty . The conditions for confiscation are provided in Clauses i to v of Section 130(1). Thus, if the goods or conveyance are supplied or received in contravention of any of the provisions of the CGST/ SGST Act and rules made thereunder with the intention to avoid payment of tax or does not account for any such on which the person is liable to pay tax under the Act or supply of any goods liable to tax under the Act without having applied for registration etc; then all such goods and conveyances are liable to confiscation and the person supplying or receiving the goods is liable for penalty under Section 122.
12. Section 130(2) provides that where the order of confiscation of any goods or conveyance is passed, the adjudicating officer shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit. There is a fetter created for levying the fine i,e., it shall not exceed the market value of the goods confiscated and not less than the tax chargeable thereon. It further provides that the aggregate of such fine and penalty leviable shall not be less than the penalty equal to hundred percent of the tax payable on such goods. Section 130(3) also provides that in addition to penalty as maybe imposed under Section 130(2) in lieu of the confiscation of the goods or conveyance, the person supplying or receiving any goods will also be liable to any tax, penalty and charges payable in respect of such goods or conveyance. Before passing the order of confiscation of goods or conveyance or for imposition of penalty, an opportunity of hearing is contemplated under Section 130(4). Section 130(5) provides that whether any goods or conveyance are confiscated under the Acts, the title of such goods are convinced vest in the Government.
Section 130 which is relevant for taking decision in the present case is extracted hereunder:-.
“130.(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.”
13. Section 107 of the CGST / SGST Acts is an appeal provision to the appellate authority. Section 107(1) provides that any person aggrieved by any decision or order passed under this CGST / SGST Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.
14. Section 107(11) empowers the appellate authority that after making such further enquiry as maybe necessary, the appellate authority may pass such order as it thinks fit and proper, confirming, modifying or annulling the decision or order appealed against but the appellate authority shall not refer the case back to the adjudicating authority that has passed the said decision or order. First proviso to Section 107(11) provides that an order enhancing any fee or penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund or input tax credit shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order.
Section 107(1) and (11) of the CGST / SGST Act are reproduced hereunder:—
“107. (1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.
xxxxxx xxxxxxx xxxxxx xxxxxx
(11) The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against but shall not refer the case back to the adjudicating authority that passed the said decision or order.”
15. The question which falls for consideration in the present case is that when the adjudicating authority in exercise of the powers under Section 130(2) has imposed the maximum fine i,e., the market value of the goods seized in lieu of confiscation, the appellate authority does not or does have power to vary the fine imposed by the adjudicating authority?
16. Sri. Mohammed Rafiq, the learned Special Government Pleader has strenuously argued that the discretion of imposing the maximum penalty of fine equal to the market value of the goods or less in lieu of confiscation is solely vested in the adjudicating authority. Unless the appellate authority finds the discretion exercised by the adjudicating authority is arbitrary or against the law or in violation of the mandatory requirement of hearing, the appellate authority should not interfere with the discretion of the adjudicating authority.
17. Learned Special Government Pleader has submitted that looking at the facts and circumstances of the case, the adjudicating authority decided to impose the maximum penalty / fine i.e., market value of the goods seized in lieu of confiscation, the order passed by the appellate authority reducing the fine to the four times of the tax payable is unjustified and liable to be set aside.
Sri. Mohammed Rafiq, in support of the submission has placed reliance on the following judgments:-
a) Collector of Customs v. Gunwant Lal Godawat [(2010) I RLW 764]
b) Gunwat Lal Godawat v. Union of India,[ (2018) 12 SCC 309], Kantaru Rajeevaru v. c)Indian Young Lawyers Association, [(2020) 9 SCC 121]
d) Deputy Commissioner, Dakshina Kannada District v. Rudolp Fernandes, [(2020) 3 SCC 306]
e) Union of India v. Kuldeep Sing, [(2004) 2 SCC 590]
f) The Commissioner of Customs v. Mansi Impex [(2011) 270 ELT 631 SC]
18. Sri. Tomson T Emmanuel, the learned counsel for the respondent has however submitted that the appeal under Section 107 against an order passed under Section 130 of the CGST / SGST Act lies on facts, evidence and law. Section 107(11) empowers the appellate authority to pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against. If the appeal before the appellate authority was only on point of law, then there was no scope for the appellate authority against an exercise of discretion by the adjudicating authority in imposing the redemption fine, in lieu of the confiscation of the seized goods, unless the discretion exercised by the adjudicating authority was vitiated by unreasonableness, self misdirection, irrelevant consideration or some other legal error. Even in the case where the appeal lies only on point of law, the appellate authority may interfere with the discretion of the decision of the adjudicating authority produces manifest injustice or it plainly wrong or unreasonable. Learned counsel for the respondent submits that in the present case, the appellate authority has taken into consideration the books of accounts and other relevant material and the discretion exercised by the appellate authority under Section 107(11) is justified and cannot be said to be based on irrelevant consideration or against the law. It is submitted that this court may not interfere with the well reasoned order passed by the appellate authority.
The appellate authority had framed two issues for decision;
i) Whether confiscation of gold ornaments under Section 130 of the Act is legal or not?
ii) what should be the quantum of penalty and fine in lieu of confiscation in this case?
19. While answering question No.1, the appellate authority concluded that the respondent in violation of Section 31 of the Act, read with Rules 46, 55 & 55A transported gold ornaments of 724.99 grams valued at Rs. 33,63,945/- with an intention to avoid payment of tax and therefore the confiscation of gold ornaments of 724.99 grams by the respondent by invoking Section 130 of the Act is valid. So far, as the second question regarding the quantum of penalty and fine in lieu of confiscation is concerned, the appellate authority held that the respondent is a registered taxable person maintaining books of accounts in the regular course of business and filing returns as it stipulated under the CGST / SGST Act, and therefore, in addition to the penalty, fine in lieu of confiscation equal to four times the tax due will be sufficient to meet the ends of justice and therefore the order of fine has been modified.
20. The appeal under Section 107 of the CGST / SGST Act is not limited on the question of law. The appeal under Section 107 before the first appellate authority is also on question of facts, evidence and law. Where appeal lies only on points of law, there is very limited scope for interference by the appellate authority against an exercise of discretion by the adjudicating authority. In such a case, unless the decision of the adjudicating authority is vitiated by unreasonableness, self misdirection, irrelevant consideration or some other legal error, there is no scope for interference by the appellate authority on the discretion exercised by the adjudicating authority. Nelsovil limited v. Minister of Housing and Local Government [(1962) 1 WLR 404].
21. In Wootton v. Central Land Board [(1957) 1 WLR 424 at 432], it is said that the court / appellate authority may allow such appeal where the appeals lies only on the question of law, if it appears that the adjudicating authority’s decision would produces manifest injustice, or is plainly wrong. Even otherwise if there is manifest, self misdirection and so on so forth or erroneous exercise of discretion, it would enable the appellate authority to interfere with the decision whether the discretion is vested in the adjudicating authority as such. Any erroneous exercise of discretion is always considered to be an error in point of law.
22. Where the right of appeal is unrestricted, the appellate authority or the court should not interfere with the adjudicating authority decision as it is based on its own observance of the material / evidence before it. However, where the appellate authority is equally empowered to exercise the discretion under the appellate provision, the appellate authority is entitled to evaluate the material / evidence to come to a different conclusion or order than the adjudicating authority.
23. In the judgment impugned in the present case, the appellate authority having considered the facts and circumstances of the case as well as the evidence as exercised the discretion under Section 107(11) in modifying the order of penalty / fine to four times of the tax payable.
24. The next question which falls for consideration is that whether the discretion exercised by the appellate authority under Section 107(11) of the CGST /SGST Act is arbitrary, unreasonable based on irrelevant consideration or there is some other legal error.
25. Subsection 2 gives an elbow room to the adjudicating authority to impose redemption fine as it thinks fit subject to maximum fine of the market value of the goods seized provided should not be less than the tax payable as mentioned above. The appellate authority is equally empowered to pass such order as it thinks fit in modifying, annulling of the order passed by the adjudicating authority.
26. Considering the wide nature of the powers conferred on the appellate authority under Section 107(11), there is no fetter on the powers of the appellate authority to modify the order passed under Section 130(2) of the GST Act by the adjudicating authority.
27. If the order of the appellate authority is based on relevant consideration and is not manifestly in just, improper or unreasonable, this court would have very little scope for interference in the discretion exercised by the appellate authority in modifying the order passed by the adjudicating authority.
28. The judgment of the Supreme court in the case of Gunwant Lal Godawat (supra) was rendered on interpreting the provisions of Gold Control Act, 1968 and does not have any bearing on the facts of the present case where the question of the powers of the appellate authority under Section 107(11) of the CGST / SGST Act.
Paragraph 62 to 72 of the said judgment which has been suggested by Sri. Mohammed Rafiq are extracted hereunder:-
“62.The said rule (Ed: Rule 126 M (8)) grants the further discretion to impose a fine that is less than or more than the market value as on the date of seizure or of order of confiscation, as the case may be (however, redemption at a higher value would not make commercial sense since the buyer will prefer buying from the market). Section 73 read with Section 2(v) of the Act mandates that the redemption fine will not exceed the market value of the gold seized as on the date of seizure.
The Act takes away the discretion available to the officer to determine the relevant date for valuation by mandating the relevant date to be the date of seizure, which in any case is one of the methods available to the officer for calculating the redemption fine under rule 126M(8). Therefore, the Act only reduces the discretion available under Rule 126M(8) with respect to the relevant date for calculation of the redemption fine. The officer continues to have the discretion to impose a fine lesser than the market value as on the date of seizure. There is therefore no inconsistency between the DoI Rules and the Act.”
63. The substance of the submission is that both the RULES and the GOLD ACT provide for giving an option to the “owner” of the gold adjudged to be confiscated. While the RULES provide an unrestricted discretion to the “officer adjudging” to determine the amount of fine, GOLD ACT restricts the discretion by imposing an upper limit on the quantum of fine that could be imposed by declaring that “give to the owner thereof an option to pay in lieu of confiscation such fine, not exceeding the value”. According to the petitioner, such value is to be determined with reference to the date of the seizure of the gold because of Section 73 of the GOLD ACT read with Section 2(v)thereof.
64. At the outset, we must make it clear that there is nothing in the text of Section 73 of the GOLD ACT which requires the value of the gold (for the purpose of determining the fine) should be the value of the gold as on the date of the seizure. But the expression ‘value’ is a defined expression under Section 2(v)of the Act.
“Section 73- Power to give option to pay fine in lieu of confiscation-Whenever any confiscation is authorized by this Act, the officer adjudging it may, subject to such conditions as may be specified in the order adjudging the confiscation, give to the owner thereof an option to pay in lieu of confiscation such fine, not exceeding the value29 of the thing in respect of which confiscation is authorized, as the said officer thinks fit.”Section 2(v). ‘value’, in relation to primary gold, article or ornaments, means,-
(i) when the gold is seized under this Act, the market price of such gold as on the date of the seizure thereof,
(ii) when the gold is not available for seizure, the market price of such gold as on the date on which the notice referred to in section 79 is issued.”
65. The language of Section 73 is clear that it applies only to those cases wherein confiscation is one which is authorised “by this Act”. In our opinion, Section 73 would have no application to those cases of confiscation which are adjudged under the RULES. It would be applicable only for those cases where the confiscation is authorised. This rule originally provided for imposition of a fine not exceeding twice the value of the goods. However, the word “twice” was omitted by the Gold Control (Amendment) Act, 1971(21 of 1971), Sec.3. by the GOLD ACT. Section 73 authorises the confiscation of gold in respect of which “any provision of this Act or any rule or order made thereunder has been, or is being, or is attempted to be, contravened”. In other words, Section 71 authorises the confiscation of gold if there has been or is or is attempt to contravene the provisions of the GOLD ACT i.e. only such contravention occur after the commencement of the GOLD ACT but not contravention of law which existed anterior thereto (the RULES).
66. There is a distinction between acts done pursuant to the authorization of a statute and acts done pursuant to the authorization under a different statute or a statutory instrument but deemed to have been done under the earlier of the above mentioned two statutes. When a statute creates a fiction requiring certain events which took place prior to the commencement of such a statute to be deemed to have been done under the statute, such a fiction does not retrospectively authorise doing of such acts. It only takes note of the existence of certain state of affairs and creates putative state of affairs by declaring that such anterior events should be deemed to have taken place under “Section 71. Confiscation of gold. (1) Any gold in respect of which any provision of this Act or any rule or order made thereunder has been, or is being, or is attempted to be, contravened, together with any package, covering or receptacle in which such gold is found, shall be liable to confiscation:” the statute which came into existence later. Such fictions could only have limited consequences.
67. Prior to the GOLD ACT, seizure and confiscation of gold were authorised by the RULES. Though, by virtue of the fiction created under Section 116, the confiscations adjudged under the RULES are deemed to be confiscations adjudged under the GOLD ACT, the Scheme and the limitations of such fiction are already explained earlier in para 29. Therefore, neither Section 73 nor the definition under Section 2(v), in our opinion, would be applicable for the confiscations adjudged under the RULES – pursuant to a seizure that took place before the commencement of the GOLD ACT.
68. No doubt that the option to pay fine in lieu of confiscation is one of the consequences flowing from the adjudgment of confiscation. Therefore, in view of the fiction under Section 116,Section 73of the GOLD ACT would have been applicable if consequence of applying such fiction to the confiscations adjudged under the RULES is not inconsistent with the GOLD ACT. In view of the language of Section 73– “confiscation authorised by this Act” limits the operation of Section 73only to the confiscations adjudged under the GOLD ACT. Hence, there is an inconsistency. We are of the opinion that the High Court rightly held that Section 73 would not come into play at all in the case on hand. Therefore, the fine amount cannot be determined on the basis of the value of the gold.
69. On the other hand, as rightly opined by the High Court, the market value of the gold as on the date of the exercise of the option by the owner of the gold to pay fine in lieu of the confiscation would be the legally appropriate amount of fine. Because it is a fine in lieu of confiscation. Confiscation would result in the loss of the entire property in the confiscated gold resulting in a financial loss of the value of gold to the owner. Hence, the value of the gold is to be determined with reference to the date on which the owner exercises the option to pay the fine in lieu of the confiscation.
70. One of the ancillary submissions made on behalf of the appellant is that in view of the fact that the order of the Collector dated 9.12.94 gave an option to the appellant to redeem the gold by paying a fine of Rs.2.5 crores in lieu of confiscation which had become final in view of the dismissal of the appeal of the department on 23.5.1996. Therefore, it was not open to the High Court to hold that the appellant is liable to pay a redemption fine of Rs.11.04 crores in a reference under Section 82-B of the GOLD ACT. The High Court could not sit in appeal on the judgment of the Tribunal and substitute its opinion regarding the amount of fine to be collected from the appellant in view of the confiscation of his gold.
71. The submission of the appellant is required to be rejected for the simple reason that the determination of the amount of fine made by the tribunal was without any basis. The conclusion of the Tribunal that the fine in lieu of confiscation must be equal to the value of the gold as on the date of its seizure is not based on any principle of law. The correctness of the said conclusion was the subject matter of the reference before the High Court. The High Court was completely justified in examining the correctness of the legal basis on which the figure of Rs.12.5 lakhs was arrived at. For the reasons already recorded by us earlier, the High Court rightly came to the conclusion that the fine in lieu of confiscation must represent the value of the gold so confiscated as on the date (9.12.94) the appellant was given an option to pay the fine in lieu of confiscation. Even according to the said order of the Collector, the value of the gold as on that date was Rs.11.04 crores. Therefore, the High Court was right in its direction.
72. We are only left with one submission made on behalf of the Union of India, i.e., in view of the enormous delay which took place in the confiscation proceedings (50+ years), the appellant must be made to pay the interest on the amount of fine of Rs.11.04 crores. Otherwise, it would have the effect of permitting the appellant to profit by litigation as according to the Attorney General if the appellant is permitted to take back the entire quantity of 240.040 kgs. of gold the current market value would be Rs. 72 crores (approx.). We find the submission wholly justified. We, therefore, deem it proper to direct that the appellant would be entitled to redeem the gold by paying not only the fine of Rs.11.04 crores but also the interest thereon calculated @ 10% p.a.”
29. In the case of Deputy Commissioner, Dakshine Kannada District (supra) , the question which was involved for consideration is that whether the fine in lieu of confiscation contemplated under the second proviso to Section 6-A(1) of the Essential Commodities Act 1955, provides for levy of fine on the basis of market value of the confiscated vehicle or on the basis of the market price of the essential commodity are to be carried by such vehicle. The supreme court after considering the provisions of the Essential Commodities Act, 1955 held that measure of fine which required to be levied in lieu of confiscation under the second proviso of 6-A(1) would be relatable to the market price of the vehicle and not of the seized essential commodities and the fine amount in lieu of confiscation is not to exceed the market price of the vehicle on the date of seizure of essential commodity. It is within the discretion of the competent authority to fix a reasonable amount considering the facts and circumstances of each case.
30. In the Essential Commodities Act, there is no such provision of imposing the fine which would not be less than the tax payable. If one considers the Section 133(2), it provides guidelines for imposing the fine when the adjudicating authority decided to impose less fine than the market price of the goods seized. No such guideline is provided under the Essential Commodities Act and the said judgment was rendered in the facts of the said case as mentioned above. There was no such issue of power of appellate authority as vested under Section 107(11) of the GST Act and therefore in my considered view, the said judgment also has no relevance to the facts of the present case.
31. So far in the judgment in the case of The Commissioner of Customs (supra) is concerned, the Supreme court considered Section 125 of the Customs Act, which provides that the adjudicating authority in case of confiscation of any goods where the importation or exportation is prohibited under the Customs Act or under any other law for the time being in force, is required to give an option to pay in lieu of confiscation of fine as the said officer considers. However, such fines should not exceed the market price of the goods confiscated, in case of imported goods, the duty chargeable thereon. In the said case the Commissioner imposed the redemption fine in lieu of confiscation and also penalty in terms of provision of Section 112 and 125 of the Customs Act respectively. However, the said orders passed by the commissioner came to be interfered by the Tribunal and the Tribunal reduced the quantum of redemption fine as also the penalty.
32. Considering the provisions of the Customs Act, the Supreme Court held that the quantum of redemption fine would be imposed is always be dependent on the determination of the market price of the goods confiscated. This is one of the pre-requisite prescribed in that statue itself. In the said case, there was no market survey done for determining the market price of the goods, and therefore, it could not have been possible for the Commissioner to arrive at legally justified and correct quantum of redemption fine to be imposed.
33. In the Customs Act, there is no such provision or guideline for imposing the fine less than the market price of the goods confiscated as provided under Section 130(2) of the Act. Under the Scheme of the GST Act, if the adjudicating authority decided to impose the redemption fine other than the market price of the confiscated goods, there is a guidelines / restriction for imposing the fine and penalty, and therefore, I am of the considered view that the said judgment has also of no relevance.
34. Section 130 of the Act provides for provision relating to the confiscation of goods or conveyances. This section also provides for fine which shall be payable for release of such goods confiscated. The Section got amended by the Finance Act, 2021 so as to delink the proceedings under that section relating to confiscation of goods or conveyances, levy of penalty from the proceedings under Section 129 relating to detention, seizure and release of goods and conveyances in transit as it is evident from notes and clauses, Clause 130, GST bill, 2017.
35. The power to seize and confiscate the goods and levy penalty are intended to check tax revision and deter the tax evaders. These powers are ancillary or incidental to the power to levy taxes and fall within the ambit and scope of legislative powers as held in the Synergy Fertichem Pvt limited v. State of Gujarat [(2020) 76 GSTR 81].
36. The confiscation of goods or vehicle is a coercive steps. It is an aggravated form of sanction to deter the persons from avoiding taxes. However, the provisions are to be strictly interpreted as it is interferes with the right to property as envisaged under Article 300 A, the Constitution of India.
37. Non obstante clause of Section 130(1) has been omitted by the Finance Act, 2021. As a result of the amendment made by the Finance Act, 2021, the nature of the Section now is an independent Section and no longer linked to Section 129. Section 129 requires contravention of the provision of the Act and the Rules, whereas Section 130(1) lays down specific circumstances for invoking the provisions which are basically related to the intention of person to evade the payment of tax. This Section is not confined to confiscation of goods and vehicles in transit only. The goods or conveyances falling within any of the five clause in the subsection are liable to confiscated. Section 130 can be invoked, if any of the five clauses of subsection 1 applies, even in cases where the amount of tax and penalties have been paid under Section 129.
38. Confiscation proceedings under Section 130 can be initiated based on the incriminating evidence against the owner of the goods in the course of the inquire, if any, even after the release of the goods or conveyance on the payment of the tax and penalty under Section 129 of the Act. It is not necessary to conclude the proceedings under Section 129 before initiating proceedings under Section 130. However, the contravention of the Act and Rules justifying detention under section 129 will not by itself result in confiscation of goods or conveyance. Section 130 is an independent provision empowering confiscation in cases of intention to avoid tax. In a given case, the same breach or contravention of the provision of the Act or Rules can lead to detention of seizure of the goods under Section 129 and confiscation under Section 130(1) of the Act.
39. The authority must be convinced that the contravention of the provisions of the Act or rules made thereunder was with definite intent to avoid the payment of tax. The adjudicating officer must firstly record contravention and specifically refer to the provisions of the Act and Rules that had been contravened and secondly must record a specific finding that such contravention was with intent to avoid the payment of tax. The fine provided under the first proviso of Section 130(2) is the maximum fine levied. In every case, the adjudicating officer / authority is required to examine the seriousness of the contravention and impose the fine accordingly. It is not as if the maximum fine should be imposed in every case. The confiscation order should reflect the application of mind of the adjudicating officer on the quantum of fine imposed by him. Therefore, it cannot be said that the adjudicating authority has absolute discretion to impose the fine. The quantum of fine must reflect in the due application of mind of the adjudicating authority. The maximum fine should be imposed in cases where the adjudicating authority is of the opinion that the contravention was of such a serious nature and not otherwise.
40. Section 107(11) of the GST Act enables the appellate authority to make such further enquiry as may be necessary. In Anandeshwar Traders State of Uttar pradesh [(2021) 92 GSTR 197] it has been held that the appellate authority cannot affirm order on fresh reasons outside the impugned order. The further enquiry cannot be made for this purpose. The appellate authority is empowered to make further enquiry after deciding that the impugned order is erroneous, such enquiry must be to decide the issue in appeal. From the reading of subsection (11), it is evident that the appellate authority has ample power to decide the issue afresh and make enquiry to decide the issue in appeal. In view of the provisions of the Act, it would be difficult to say that the appellate authority has no jurisdiction to interfere with the discretion exercised by the adjudicating authority in imposing the fine in lieu of the confiscation of the goods other than the market value of the goods. Thus, the contention of Shri. Mohammed Rafiq, that once the discretion has been exercised by the adjudicating authority in imposing market value of the goods in lieu of confiscation, such discretion is not liable to be interfered by the appellate authority is not convincing. Section 107(11) has wider amplitude than the normal appellate provisions against an order of Court/ Tribunal. Section 107 should be given liberal interpretation and not restricted one as it has been contended by Sri. Mohammed Rafiq.
41. Having given my thoughtful consideration to the facts of the case and provisions of Sections 130 and 107 of the CGST / SGST Act, 2017, I am of the view that the impugned order passed by the appellate authority in Ext.P2 in W.P(C) No. 24387 of 2023 & Ext.P3 in W.P (C) No.38455 of 2023 do not suffer from any unreasonableness, neither based on any irrelevant consideration nor there is any other legal infirmity which require this court to interfere with the orders impugned in the present writ petitions. In view thereof, the present writ petitions fail and hereby dismissed, however without cost.
Author Bio
