Podaran Foods India Private Limited Vs State of Kerala (Kerala High Court)
Conclusion: Writ Court was not to be ordinarily approached in detention cases where effective alternate remedies by way of provisional clearance, and appeal thereafter, were provided against alleged arbitrary/illegal detention orders.
Held: In the instant case. writ petitions being filed in this court challenging detention orders passed under the GST Act when the scheme of the Act clearly indicated that the writ court was not to be ordinarily approached in detention cases where effective alternate remedies by way of provisional clearance, and appeal thereafter, were provided against alleged arbitrary/illegal detention orders. It was held that any person aggrieved by the order of the proper officer must necessarily approach the appellate authority before which an appeal against the adjudication order under Section 129 (3) of the Act is maintainable. In the instant case too, the remedy of assessee was to approach the appellate authority under the Act against the finding of the proper officer. There was no reason to interfere with the adjudication orders in Form GST MOV-9 impugned in the writ petition. Assessee was relegated to his alternate remedy of preferring appeals against the said adjudication orders before the appellate authority under the Act.
FULL TEXT OF THE HIGH COURT JUDGMENT
As these writ petitions raise a common challenge to the legality of orders of detention passed by the respondents under the GST Act, they are taken up together for consideration and disposed by this common judgment.
2. I have heard Sri.Shrikumar, the learned Senior Counsel, duly assisted by Sri.Manoj Chandran for the petitioner in W.P(C) No.22608 of 2020, Sri.A.Kumar, the learned counsel for the petitioner in W.P(C).No.22072 of 2020, Sri.Karthik S. Nair, the learned counsel for the petitioner in W.P(C) No.17379 of 2020 and the learned Govt. Pleader Smt.Dr. Thushara James for the respondents in all the writ petitions.
3. For the sake of convenience, the general provisions regarding detention and their scope and ambit are discussed first, and the application of the legal principles to the facts of the individual cases discussed thereafter. I have chosen to resort to said format because I have come across numerous instances of writ petitions being filed in this court challenging detention orders passed under the GST Act when the scheme of the Act clearly indicates that the writ court is not to be ordinarily approached in detention cases where effective alternate remedies by way of provisional clearance, and appeal thereafter, are provided against alleged arbitrary/illegal detention orders. The legal position in this regard was recently reiterated by the Supreme Court in State of Uttar Pradesh v. Kay Pan Fragrance Pvt. Ltd. – [2020 (74) GSTR 281 (SC)] when it observed that writ petitions seeking directions to release seized goods ought not to be entertained as the Act provides for a complete mechanism for release and disposal of seized goods. I also believe that an enunciation of the scope and ambit of the statutory provision would help clarify the doubts arising in the minds of proper officers, who are entrusted with the task of overseeing the transportation of taxable goods with a view to check the evasion of tax, as regards the procedure to be followed while going about their assigned duties.
4. The detention of goods and vehicles, while in transit pursuant to a commercial arrangement between the consignor and consignee thereof, is often seen as infringing the fundamental freedom guaranteed to a citizen under Article 19 (1)(g) of our Constitution, to carry on a trade or business of his choice. It is also seen as a restriction to one’s freedom to engage in trade, commerce and intercourse throughout the territory of India, a right guaranteed under Article 301 of the Constitution. The justification of any legal provision that authorises such detention must, therefore, be through a demonstration of the reasonableness of the provision, and its necessity in larger public interest.
5. Tax legislations in our country, especially those dealing with indirect taxes, have always found the need to have provisions for detaining goods and vehicles while in transit to ensure that tax that is legitimately due to the State is not lost through deliberate evasion by unscrupulous assessees. It is therefore that such provisions have been incorporated as incidental machinery provisions for levying the tax as contemplated in the statute concerned. The detection of evasion, and the consequential recovery of tax due to the State, are seen as acts that sub serve larger public interest, and hence the restrictions to the exercise of the constitutional freedoms are seen as reasonable.
6. It follows, as a corollary to the above position, that unless there is a possibility of tax evasion, a detention of goods and vehicles cannot be justified, and that an authority vested with the powers of detention under a taxing statute has to bear in mind that the provisions authorizing detention have to be strictly construed for what is at stake is a constitutional right, fundamental or otherwise, of a citizen. There is also the aspect of fairness in the levy and collection of taxes that must inform the authorities entrusted with the said task, for fair implementation of the law has been recognised as an essential attribute of the rule of law in a republic such as ours.
7. Our nation witnessed a paradigm shift in the matter of levy and collection of indirect taxes with the introduction of GST, a destination based consumption tax on the supply of goods and services, through the Constitution (101st Amendment) Act, 2016. The GST regime that came into effect from 01.07.2017 provides for concurrent exercise of taxing powers by the Centre and the States on the same subject and the Centre and the States are to act in tandem based on the GST Council’s recommendations.
8. Section 129 of the GST Act is contained in Chapter XIX thereof that deals with offences and penalties and reads as follows:
“129 – Detention, seizure and release of goods and conveyances in transit
(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,–
(a) on payment of 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.”
A schematic analysis of Section 129 of the Act reveals the following salient features of the said provision;
1. Section 129, not surprisingly, opens with a non-obstante clause that conveys the legislative intention that the provisions of the statute shall not be an impediment to the measure envisaged thereunder. It is an indication by the legislature that the detention provision, which appears to run counter to the general presumption that trade, commerce and intercourse throughout the territory of India will be free, does not unreasonably restrict the said freedom, but is merely a machinery provision that is intended to check evasion of tax and which must be read along with the substantive provisions of the statute that provide for the levy and collection of tax.
2. The provision itself is attracted whenever there is a transportation of goods or storage of goods while in transit, in contravention of the provisions of the Act or Rules made thereunder. This is obviously a reference to those provisions of the CGST/SGST/IGST Act and Rules that deal with the manner of transportation of goods or storage of goods while in transit.
Briefly stated the provisions are as under;
i. Section 31 that requires every registered person supplying taxable goods to issue a tax invoice showing the description, quantity and value of the goods, the tax charged thereon and such other particulars as are prescribed in the Rules. The particulars to be contained in the invoice or the documents that may be generated in lieu thereof, as well as the manner in which they have to be issued, are dealt with in Rules 46 to 55A of the CGST Rules. The invoice has to be issued before or at the time of removal of goods for supply to the recipient.
ii. Chapter XVI of the CGST Rules that contain Rules 138 to 138E that deals with the form in which an e-way bill is to be prepared and generated and the particulars to be contained therein. While Rule 138 obliges every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees to upload an e-way bill electronically on the common portal, before commencement of such movement, Rule 138A obliges a person in charge of a conveyance to carry the invoice/bill of supply/delivery chalan and a copy of the e-way bill in physical form or the e-way bill number in electronic form. Rules 138B and 138C deal with the procedure for verification of documents and conveyances and the inspection and verification of goods respectively.
3. On a contravention of the provisions of the Act and Rules being detected as above, the goods and conveyance concerned become liable to detention/seizure, and after such detention/seizure, can be released only on making the payments stipulated in clauses (a) or (b) of Section 129 (1) or upon furnishing the security as provided in clause (c) thereof, as the case may be. What is apparent from the said provision is that there is no discretion conferred on the detaining authority to release the goods and conveyance on terms that are less stringent than what is specified under the aforesaid clauses of Section 129 (1). Further, although sub-section (2) of Section 129 makes the provisions of sub-section 6 of Section 67 applicable mutatis mutandis for the detention and seizure of goods and conveyances, a reading of Section 67 (6) with Rule 140 of the CGST Rules clearly indicates that a provisional release of the goods and the conveyance can be allowed only upon execution of a bond for the value of the goods, and on furnishing security in the form of bank guarantee equivalent to the amount of applicable tax, interest and penalty payable. It is apparent, therefore, that a determination of contravention of the provisions of the Act and Rules under Section 129 (1) automatically attracts the liability to pay (i) the tax due in respect of the goods, and (ii) a penalty equivalent to 100% of the tax payable on the goods or (iii) in the case of exempted goods, the prescribed amount equal to the specified percentage of the value of the goods, depending on whether or not the owner of the goods comes forward for payment of the tax and penalty, and that the detaining authority does not have any discretion to reduce the quantum of the amount stipulated for payment under the statute.
4. Sub-sections (3) and (4) of Section 129 spell out a requirement for the proper officer detaining or seizing the goods or conveyance to issue a notice specifying the tax and penalty payable and thereafter passing an order for payment of the same after giving the person concerned an opportunity of being heard. Inasmuch as there is no discretion available in the proper officer to reduce the amounts stipulated for payment under the statute, in the event of a finding of contravention of the statutory provisions that justify the detention/seizure itself, the procedural requirements under Section 129 (3) and (4) must be seen as providing an opportunity to the person concerned of showing cause as to why a detention/seizure of goods is not justified in a particular case. In other words, notwithstanding that the detained/seized goods may have been provisionally cleared by the person concerned, on furnishing of a bond and/or bank guarantee as prescribed, the person concerned can still question the legality of the detention before the proper officer. The proper officer, on his part, is obliged to consider the objections of the person concerned and render a finding as regards the legality of the seizure/detention in the order that he is obliged to pass under Section 129 (3).
5. On payment of the amounts referred to in Section 129(1), the proceedings in respect of the notice in Section 129 (3) shall be deemed concluded. In other words, if in response to the notice issued under Section 129 (3), the person concerned pays the amounts demanded therein without demur, the proceedings under Section 129 (3) for that person is deemed concluded by the passing of a formal order under Section 129 (3). On the other hand, when the notice under Section 129 (3) of the Act is served on a person who, on being served with an order of detention, has cleared the goods and conveyance on furnishing a bond and/or bank guarantee, and thereafter responded to the notice served on him, then the proceedings under Section 129 (3) of the Act for such person is deemed concluded only after the adjudication proceedings is completed by the proper officer as above. For such person, an appellate remedy lies against the adjudication order of the proper officer under Section 129 (3). Further, although not expressly provided for under the statute, I am of the view that to render the appellate remedy effective, a requirement ought to be read into the statutory framework that the proper officer should not invoke the bank guarantee for a period of three months from the date of service of the adjudication order under Section 129 (3). The said requirement would safeguard the interests of the person concerned, as also the revenue that holds the bank guarantee, while simultaneously obviating the need for persons concerned to approach the writ court challenging the detention orders.
6. Section 129 (6) provides for a situation where a person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty stipulated in Section 129 (1) within a period of fourteen days of the detention or seizure of the goods. In such cases, proceedings under Section 130 of the Act are to be initiated against the person concerned for the purposes of realizing the amounts due to the Government through a sale of the seized/detained goods by following the procedure prescribed under the said provision.
9. It is rather surprising that although the statute provides for a detention of goods and conveyance while in transit, the procedure to be followed by the proper officer concerned is not spelt out in any Rule framed under the parent Act. The central government has, however, chosen to prescribe the procedure for interception of conveyances for inspection of goods in movement, detention, release and confiscation of goods and conveyances through various Circulars issued in exercise of its powers under Section 168 (1) of the CGST Act. A reading of the various circulars issued from time to time reveals the following procedure to be currently in vogue and followed by the proper officers.
