HC Orders Release of Seized Goods Upon Delivery Challan Production

Mane Kancor Ingredients Pvt. Ltd. Vs State Tax Officer (FAC) (Madras High Court)

Goods seized for not accompanying delivery challan: HC directs release on production of relevant delivery challans

In a significant ruling, the Madras High Court has directed the release of goods seized from Mane Kancor Ingredients Pvt. Ltd. The case involves the detention of goods and imposition of penalties due to the absence of delivery challans during transportation. This decision underscores the importance of adhering to documentation requirements under the GST regime and clarifies the conditions under which goods can be transported without accompanying delivery challans.

Background

Mane Kancor Ingredients Pvt. Ltd., a prominent supplier of natural food ingredient solutions, encountered legal challenges when their goods were detained by the State Tax Officer (FAC). The detention occurred on 21.05.2024, while transporting 16 metric tonnes of ‘Oleoresin Paprika Crude’ from Chennai Sea Customs Port to their Karnataka unit. The impugned order, dated 27.05.2024, cited the absence of delivery challans as the primary reason for detention and imposed penalties on the company.

Petitioner’s Argument

The petitioner, Mane Kancor Ingredients Pvt. Ltd., argued that the transportation of goods was compliant with existing GST regulations. They provided several key documents to support their case:

1. Advance Authorisation Certificate: This certificate specified the Karnataka unit as an authorized destination for the transported goods.
2. GST Registration Certificate: This document listed the Karnataka unit as an additional place of business, thereby legitimizing the transportation route.
3. E-Way Bill: The bill clearly indicated the shipment’s origin, destination, and the details of the exporter and importer.

The petitioner’s counsel highlighted a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on 26.03.2018. According to paragraph 8.4 of this circular, delivery challans are mandatory when goods are dispatched directly by the principal to a job worker. However, the petitioner contended that since the goods were transported directly to a job worker, the absence of a delivery challan should not be grounds for detention.

Respondent’s Argument

The respondent, represented by Mr. C. Harsha Raj, argued that the petitioner, being a registered entity in Kerala, must ensure proper documentation for all transactions. The absence of a delivery challan, according to the respondent, disrupted the documentation chain from the exporter to the importer and finally to the recipient. Thus, the respondents justified the interception and detention of the goods.

Court’s Decision

After considering the arguments, the Madras High Court found merit in the petitioner’s case. The court noted that the Advance Authorisation Certificate, GST Registration Certificate, Bill of Entry, and E-Way Bill collectively established the legitimacy of the transportation. Furthermore, the court acknowledged the petitioner’s reliance on the CBIC clarification, which supports the transportation of goods directly to a job worker without an accompanying delivery challan in specific scenarios.

The court directed the first respondent to reconsider the petitioner’s request for the release of the goods, subject to the production of relevant delivery challans. This direction was given with a clear timeline, requiring the respondent to resolve the matter by 20.06.2024.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

An order dated 27.05.2024 by which the petitioner’s goods were detained and penalty was imposed is challenged in this writ petition.

2. The petitioner is a company engaged in the business of supplying natural food ingredients solutions. The petitioner states that it was conferred the status of ‘4 Star Export House’ by the Director General of Foreign Trade and was issued with an ‘Authorised Economic Operator Certificate’. Upon importing 16 metric tonnes of ‘Oleoresin Paprika Crude’ from M/s. Lead Healthy (Hongkong) Trading Company Limited under invoice No. 240264 dated 07.04.2024 and Bill of Entry bearing No. 3299678 dated 02.05.2024, the petitioner transported the goods from Chennai Sea Customs Port to its Karnataka Unit in vehicle bearing Registration No. TN88 4255. The said goods were intercepted on 21.05.2024. Eventually, the order impugned herein was issued.

3. Learned counsel for the petitioner referred to the Advance Authorisation Certificate of the petitioner and pointed out that the said certificate specifies the name and address of supporting manufacturers of the petitioner. The list of supporting manufacturers includes the Karnataka Unit to which the goods were transported. By referring to the GST Registration Certificate, learned counsel points out that the list of additional places of business in Karnataka are specified in the Registration Certificate and that such list includes the address of the Unit to which the goods were transported. By stating that the goods were transported with an E-way bill and that the E-way bill also specified the Karnataka Unit to which the goods were transported, learned counsel further submits that the impugned order was issued merely because the goods were not accompanied by a delivery challan. In this connection, learned counsel referred to the circular issued by the Central Board of Indirect Taxes and Customs (‘CBIC’ in short) on 26.03.2018. By referring to paragraph 8.4 thereof, he submits that delivery challans are required to be despatched directly by the principal to the job worker in cases wherein the goods are sent directly by the supplier to the job worker. Since upon clearance at the Chennai Sea Customs Port, the goods were intended to be transported directly to the job worker in Karnataka, learned counsel submits that it was not necessary that the delivery challan should accompany the goods as per the clarification issued by CBIC.

4. Mr. C. Harsha Raj, learned Additional Government Pleader appears on behalf of the respondents. He points out that the petitioner is a registered person in Kerala. For purposes of GST law, each registered Unit is a separate person. Consequently, he submits that proper documentation is necessary to establish the chain flowing from the exporter through the importer to the recipient. In the absence of the delivery challan, he submits that this chain is incomplete and that the respondents were fully justified in intercepting the vehicle and detaining the goods.

5. During the previous hearing, learned counsel for the petitioner requested for time to ascertain whether delivery challans could be produced by the petitioner. Today, when the matter is taken up, he submits that delivery challans are available and would be produced before the respondents.

6. The petitioner has placed on record the Advance Authorisation Certificate. The said document specifies the name and address of the Karnataka Unit to which the goods were transported. The GST Registration Certificate of the petitioner specifies the list of additional places of business. This list includes the Karnataka Unit to which the goods were transported. The Bill of Entry is on record as also the E-way Bill. The E-way Bill indicates the name of the exporter. It also indicates the name of the importer and the shipping address in Karnataka. The petitioner has placed reliance on the clarification issued by the CBIC. It is certainly arguable that the delivery challans are required to be sent directly by the principal to the job worker in cases wherein the goods moved directly to the job worker. When these facts and circumstances are considered cumulatively, this is an appropriate case to direct the 1^st respondent to consider the petitioner’s request for release of goods expeditiously subject to production of relevant delivery challans.

7. For reasons set out above, the writ petition is disposed of by setting aside the order dated 27.05.2024 and directing the 1^st respondent to reconsider the petitioner’s request for release of goods. Such request shall be considered subject to production of relevant delivery challans and disposed of on or before 20.06.2024. No costs. Connected W.M.Ps. are closed.