Case Law Details

Case Name : M.S. Meghdoot Logistics Vs Commercial Tax Officer (Karnataka High Court)
Appeal Number : Writ Petition No. 10832/2020
Date of Judgement/Order : 21/12/2020
Related Assessment Year :
Courts : All High Courts (6271) Karnataka High Court (327)

M.S. Meghdoot Logistics Vs Commercial Tax Officer (Karnataka High Court)

Proper Officer was empowered to possess Confiscated Goods if option to pay Fine in addition to the tax payable, penalty and other charges was not exercised

Conclusion: Where proper officer, who had detained the conveyance and seized the goods was able to form opinion that there was an attempt to evade payment of tax, would .have to determine the applicable tax and penalty under Section 129 while simultaneously initiating proceedings for adjudging confiscation under Section 130.  If during the pendency of these proceedings, a request for provisional release was submitted, the same would have to be considered in the light of the provisions of Section 129 read with sub-clause (6) of Section 67. If after adjudging confiscation, the option to pay Fine in addition to the tax payable, penalty and other charges was not exercised despite opportunity under section 130(7), the Proper officer would have to take and hold possession of the things confiscated subject to consequences as contemplated thereunder.

Held: The controversy in the present case was because, after the goods were seized in transit with the conveyance being detained, the officer, on the basis of the information collected and available, had formed an opinion that there was an effort to evade payment of tax. The officer, who had issued notice under sub-clause (4) of Section 129 (Show Cause Notice dated 25.08.2020), had issued subsequent notice under sub-clause (4) of Section 130 (the impugned Show Cause Notice dated 07.09.2020) observing that the earlier notice had abated and calling upon assessee to show cause against confiscation and why the tax, penalty and other charges payable in respect of such goods and the conveyance should not be paid by assessee . The chief contention was that there could not be independent or simultaneous confiscation proceedings under Section 130 of the Act with the detention and seizure proceedings under way in accordance with the provisions of Section 129 in the case of contravention of the provisions of the Act/Rules when the goods were being transported, or goods were stored in transit. It was held that the provisions of Section 129 and Section 130 of the CGST Act were carved with specific objectives and contemplate different procedures insofar detaining the conveyance and seizing goods and taking and holding possession of the things confiscated. If after interception of conveyance with goods in transit and detention of the conveyance and seizure of the Goods with issuance of notice under section 129(3), and when there was information about the intent to evade payment of tax, it was not open to the proper officer to treat the notice under section 129(3) of Act as having abated or truncate such proceedings and initiate proceedings under 130 for confiscation with the issuance of notice thereunder. The proper officer, who had detained the conveyance and seized the goods, when he was able to form opinion that there was an attempt to evade payment of tax, would have to determine the applicable tax and penalty under Section 129 of the Act while simultaneously initiating proceedings for adjudging confiscation under Section 130 of the Act. If during the pendency of these proceedings, a request for provisional release as contemplated under sub-clause (3) of Section 129 of the Act, was submitted, the same would have to be considered in the light of the provisions of Section 129 read with sub-clause (6) of Section 67. If after adjudging confiscation, the option to pay Fine in addition to the tax payable, penalty and other charges was not exercised despite opportunity under section 130(7), the Proper officer would have to take and hold possession of the things confiscated subject to consequences as contemplated thereunder. The officer was directed to decide, in accordance with law, on the proposed levy of tax, penalty and cess as proposed therein with reasonable opportunity of hearing to assessee, who should have the liberty to seek provisional release of goods/conveyance as provided for under sub-clause (2) of Section 129 . The officer was also directed to contemporaneously decide on the impugned Show Cause Notice in accordance with the provisions of Section 130 of the Act.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

The petitioner has impugned the Show Cause Notice dated 07.09.2020 bearing No.ADCOM/ENF/SZ/CTO(Enf) 09/VTS/MOV-10/No.8/2020-21 [Annexure-A) issued by the Commercial Tax Officer [Enforcement] South Zone-9, Bengaluru – 560 047 – the respondent – under Section 130 of the Central Goods and Services Tax Act, 2017/ the Karnataka Goods and Services Tax Act, 2017 and Section 20 of Integrated Goods and Services Tax Act, 2017 /Section 11 of the Goods and Services Tax (Compensation to States) Act, 20171. The petitioner has also sought for a direction to the respondent to consider the petitioner’s representation dated 01.09.2020 as per Annexure-G.

2. The petitioner is a transporter and operates under a GST registration. The petitioner’s case is that it was approached by M/s MK Enterprises, Delhi (the Consignor) for transportation of certain tobacco products (the Goods) to M/s SKB Trading, Salem (the Consignee). The petitioner arranged for transportation of the Goods from Delhi to Salem with appropriate Tax Invoices/ e-Way Bills. The petitioner’s vehicle bearing No. RJ-14-G-F-9449 (the Conveyance) was intercepted on 10.08.2020 at about 9:45 PM near Makali, Tumkur Road Bengaluru, and the driver/person-in-charge of the Conveyance furnished Lorry receipt, e-Way Bills and Tax Invoices. The respondent passed an order for physical verification of the Goods, Conveyance and documents on 10.8.2020. The respondent conducted the physical verification of the Goods/Conveyance/ Documents and drew up a Physical Verification Report (Annexure-C).  The  respondent also passed the Order of detention dated 10.08.2020 (Annexure-D) under section 129(1) of the Act and Section 20 of IGST Act/ Section 11 of the Compensation to States Act.

3. The reasons assigned by the respondent for ordering detention of conveyance and seizure of Goods and are as follows:

  • For further verification of the genuineness of the goods in transit (its quantity et cetera) and/or tendered documents;
  • for physical verification to ascertain the origin and source of goods and confirmation of transactions,
  • for confirmation of the existence of the Consignor and the Consignee since the Consignee’s place of business is Tamil Nadu where tobacco products are banned.

The respondent has further detailed the reasons for ordering detention of the Goods/Conveyance opining that there is mismatch in the weight of the pouches in the Tax Invoices; there is difference in Maximum Retail Price of the Goods and the price as mentioned in the Tax Invoices but the details of discount are not mentioned; the Consignor has procured the Goods from M/s Uttam Corporation, Delhi under [two] 2 Invoices/e-Way Bills but [eight] 8 Invoices/e-Way Bills are generated in favour of the Consignee; the Consignee is recently registered under the GST. The respondent has opined that, in the circumstances of the case, the existence of the Consignor and the Consignee in the declared places of business in the state of Delhi and Tamil Nadu is to be ascertained and there could be violations of the provisions of Sections 138, 138 (A) of the Act and Section 20 of IGST Act.

4. The petitioner responded to the detention order dated 10.08.2020 asserting that the driver of the conveyance was carrying valid documents, the necessary details were available in the Tax Invoices, the price as mentioned in the Tax Invoices was as agreed upon by the Consignor and the Consignee and there was neither contravention of law nor evasion of taxes in the transaction. Thereafter, the Show Cause Notice dated 25.8.2020 is issued in Form GST MOV-07 (Annexure-E) under Section 129(3) of the Act and Section 20 of the IGST Act/Compensation to States Act, 2017 – hereafter referred to Show Cause Notice dated 25.08.2020 – calling upon the petitioner to show cause why there should not be a levy of tax and penalty as contemplated under Section 129(1)(b) of the Act. The proposed tax amount is in a sum of Rs. 89,94,000/– and the penalty is in a sum of Rs.1,46,15,250/–.

5. The petitioner has filed objections vide the Reply dated 01.09.20 20 (Annexure-G) and the petitioner’s essential response is that the petitioner, as a transporter, had ensured that the necessary documents were accompanying the Conveyance and the petitioner could establish the existence of both the Consignor and the Consignee. It is after this Reply dated 01.09.20 20 (Annexure-G), that the impugned notice dated 07.09.2020 (Annexure-A) – hereafter referred to as the impugned Show Cause Notice dated 07.09.2020 – is issued calling upon the petitioner to show cause why the Goods and the Conveyance should not be confiscated under the provisions of Section 130 of the Act and why the petitioner should not be called upon to pay the proposed Tax, Penalty and Fine.

6. The respondent in issuing the impugned Show Cause Notice dated 07.09.2020 (Annexure- A), while recording that the Show Cause Notice dated 25.8.2020 “stands abated”, has opined that there is connivance between the petitioner (the transporter) and the Consignor/Consignee and that the Goods are brought into the State of Karnataka with the documents raised in favour of taxpayers in Salem, Tamil Nadu with ulterior motive and mala fide intent to evade taxes. The respondent has reasoned that because high value and high evasion prone tobacco goods and copper scraps are transported only through the petitioner, and because the Consignor and the Consignee have not availed the services of any other transporter, complicity is established. The Respondent has recorded that even as per the information available in the e-way Bill System there is huge mismatch between the Inward and Outward Supply turnover of tobacco products by the Consignor and the Consignee as well as M/s Uttam Corporation, Delhi from whom the Consignor has procured the goods according to the petitioner.

7. Sri Arvind Kamath, learned Senior counsel arguing for the petitioner submits that the issuance of the impugned Show Cause Notice dated 07.09.2020 is without jurisdiction and is an arbitrary and improper exercise of the power under the statute. He elaborates that the respondent, who at the first instance issued the earlier Show Cause Notice dated 25.8.2020 (Annexure-E) under Section 129(3) of the Act, has not passed any orders thereon as required despite the petitioner’s detailed response; without orders on the petitioner’s representations/responses filed in response to such Notice dated 25.08.2020, it would not be permissible in the Scheme of Act for the respondent to issue the impugned Show Cause Notice dated 07.09.2020 under Section 130 of the Act: as such, the impugned Show Cause Notice dated 07.09.2020 is null and void ab initio. In support of this proposition, Sri Arvind Kamath has placed reliance on the decision of this Court in Shree Enterprises and another v. The Commercial Tax Officer (GM) (ENF)2 and emphasis is laid on paragraph 11 which reads as follows:

In the present set of facts, it is not in dispute that the notice under section 129 (1) (b) of CGST/KGST 2017 was issued by the respondent on 2.01.2019, to which objections were filed by the petitioners. In such circumstances, it was incumbent on the part of the respondent to consider the said objections and pass a speaking order quantifying the tax and penalty and thereafter to release the goods subject to payment of tax and penalty or to confiscate the Goods. However the respondent considering the objections filed by the petitioners proceeded to pass the impugned order of confiscation of goods and conveyance under section 130 (1) (ii) read with 122 (1) (ii) and (iv) of the CGST act, whereby penalty and fine payable by the petitioner is quantified. At this juncture, reference made by the learned HCGP to section 160 of the CGST Act to treat the said impugned order as an order of penalty cannot be countenanced for the reason that it was not mere wrong quotation of provisions of law in passing the order impugned but the procedure prescribed is disturbed. It is well settled law that unless tax and penalty are quantified, no confiscation order could be passed. It is necessary to provide an opportunity to the owner of the goods or person in charge of the goods vehicle to make payment of tax and penalty subsequent to the objection filed, if any. Without providing such an opportunity, proceeding to pass confiscation order directly would not be construed as any mistake, defect or omission to come within the ambit of section 160 of the CGST Act. It is a fundamental flaw which goes to the root of the matter and the said lacuna cannot be cured by referring to section 160 of the CGST Act. More particularly, when the circular instructions issued by the Government of India clarifies the procedure to be followed by the proper officer while dealing with these matters. Passing of the penalty order being sine qua non in the proceedings initiated by the respondent under section 129 (1) (b) of the Act and the same being missing, the confiscation order impugned herein cannot be held to be justifiable”.

It is argued that the aforesaid enunciation would apply on all fours to the present case and therefore, this Court applying such enunciation must quash the impugned Show Cause Notice dated 07.09.2020.

8. Sri Arvind Kamath has further argued to persuade this Court to accept his submission that insofar as Detention, Seizure and Confiscation of Goods/Conveyance in Transit, the procedure and the consequences are contained in Section 129 of the Act. In terms of Section 129 of the Act, if any person transports any goods, or stores any goods while they are in transit, in contravention of the provisions of the Act or the Rules made thereunder, such goods and conveyance would be liable for seizure and detention, but should be released on payment of the applicable tax and penalty as contemplated under 129(1)(a) or 129(1)(b), or under 129(1)(c): subject to the provisions of 129(2)–(4) there would be conclusion of such proceedings, as mandated under 129(5) on payment of the applicable tax and penalty as provided under 129(1)(a) or (b). If the mandated applicable tax and penalty as aforementioned are not paid within a period of [fourteen] 14 days of detention or seizure, further proceedings for confiscation, as provided under Section 129(6), shall be initiated in accordance with the provisions of Section 130 of the Act. In the case of interception of goods in transit there cannot be two separate proceedings: one under Section 129 and another under Section 130 of the Act.

9. Sri. Arvind Kamath further contends that the impugned Show Cause Notice dated 07.09.2020 is issued invoking Section 130 of the Act holding that the Show Cause Notice dated 25.08.2020 has abated in the premise that in cases of interception of goods in transit there could be separate proceedings either under Section 129 or under Section 130 of the Act because both these provisions, which begin with non-obstante clauses, are construed as two different jurisdictional silos that could be invoked separately in the given circumstances of a case. But, this proposition would be contrary to the scheme under the Act. Sri. Arvind Kamath relies upon the following submissions to bolster his contention :

[i] The Specific Title of Section 129 of the Act:

The title of Section 129 of the CGST/KGST Act, i.e., Detention, seizure and release of goods and conveyance in transit itself indicates that insofar as contravention of the provisions of the CGST/KGST Act, or the Rules made thereunder, the goods and the conveyance would be liable for detention or seizure subject to further proceedings as mentioned therein;

[ii] The power of detention is only under Section 129 of the Act:

The provisions of Section 129 of the CGST/KGST Act confer the power to seize the goods and detain the conveyance but such power is not conferred under the provisions of Section 130 of the Act; and in the absence of specific power to detain/ seizure, which would be necessary when the goods are in transit by a conveyance, there cannot be detention/ seizure under Section 129 and confiscation under Section 130 of the Act. The Legislature, because it intended a different procedure and consequence in cases where there is allegation of contravention when the goods are in transit, has not conferred the power of detention for the purposes of confiscation.

[iii] The different consequences under Section 129 and 130 of the Act:

The consequence of contravention of the provisions of the Act when goods are being transported or stored while they are in transit, which should be under Section 129 of the Act, is different from the consequence of a contravention, or a breach, as contemplated under Section 130 of the Act.

In the event of contravention under Section 129 of the Act, either the owner or the transporter would be liable to pay the applicable tax and the corresponding penalty under Section 129(1)(a) or Section 129(1)(b), and upon payment of such applicable tax and corresponding penalty, the goods seized and conveyance detained shall be released and there would be closure of the proceedings as mentioned in 129(5). However, in the case of a breach as contemplated under Section 130 of the Act, in lieu of confiscation, penalty under Section 122 of the Act as also a separate fine, in addition to the liability to pay Tax and Charges, are imposed. This wider liability is not postulated when the goods in transit by conveyance are intercepted.

Therefore, initiation of confiscation proceedings under Section 130 of the Act when a conveyance in transit is intercepted with the allegations of breach of the provisions of the Act, or the Rules thereunder, would be without jurisdiction and in violation of the Scheme under the Act.

10. Sri. Arvind Kamath submits that it is often reiterated, and it is also reiterated by the Hon’ble Supreme Court of India in Mathuram Agarwal v. State of Madhya Pradesh3 that in tax matters, the letter of law must prevail however different it might apparently be in terms of the spirit of the law, and interpreting tax statutes beyond the plain language amounts to supplementing by including something which the Legislature has not stated through the provisions. The learned Counsel also places reliance on the decision of the Hon’ble Supreme Court in Commercial Taxes Officer v Bombay Machineries4 to contend that if there is any unintended benefit under the provisions of the statute, it would not be permissible to give a particular interpretation to deny such benefit and the proper course would be a Legislative amendment. Therefore, this Court in interpreting the provisions of Section 129 and Section 130 of the Act should not conclude that the authorities under the Act, in cases where goods/conveyance are seized/detained while in transit, could proceed either under Section 129 or 130 of the Act, and if proceedings under Section 129 are initiated, the respondent could treat the proceedings as having abated and commence confiscation proceedings under section 130 of the Act. This interpretation of the provisions of Section 129 or 130 of the Act would offend the scheme under the Act which provides for confiscation of goods/conveyance which are seized/detained while in transit only when there is default in the payment of the applicable tax and penalty determined under Section 129(1) of the Act within the statutory period.

11. Sri Dyan Chinnappa, learned Additional Advocate General, submits that the petitioner cannot rely upon the decision of this Court in Shree Enterprises and another v. The Commercial Tax Officer supra as the present case can be distinguished on facts from the case on hand in the aforesaid decision. In Shree Enterprises, the quantification actually related to the penalty payable under Section 129 of the Act, but by a bona fide error Section 130 of the Act was cited in the impugned order and therefore, reliance was placed upon Section 160 of the Act to contend that the impugned order cannot be invalidated or deemed to be invalid because of such error. This Court concluded that it was incumbent on the authority to consider the objections filed in response to a Notice under Section 129(3) of the Act and pass a speaking order quantifying the payment of tax/penalty citing the settled proposition that there cannot be confiscation unless the tax and the penalty are quantified. As such, the decision in Shree Enterprises would not be of any avail to the petitioner.

12. As regards the other contention by Sri Arvind Kamath, Sri Dyan Chinnappa relying upon the decision of the Division Bench of the Gujarat High Court in Synergy Fertichem Pvt. Ltd. v. State of Gujarat5, submits that the provisions of Section 129 and Section 130 of the Act are mutually exclusive and independent of each other. There must be a harmonious reading of these two provisions keeping in mind the object and purpose behind the enactment thereof. The proceedings under Section 129 of the Act are to ensure compliance with the provisions of the Act and the Rules made thereunder in the event there is breach thereof by providing for detention and seizure of the conveyance and goods, and the release of the conveyance and goods if the applicable tax and prescribed penalty are paid under Section 129. If the amount of applicable tax and penalty as prescribed under section 129(1)(a) or section 129(1)(b) as determined for the purposes of release of the goods and conveyance are not deposited within the statutory period, then the consequence would be confiscation under Section 130 of the Act because of Section 129(6). On the other hand, when the intent to evade tax is manifest, even if it is when the goods are in transit, the authorities could initiate proceedings for confiscation of goods/conveyance under Section 130 of the Act, and in lieu of the confiscation, levy Fine in addition to the applicable tax and Penalty. If however, as contemplated under the provisions of Section 130(1)(v) of the Act, the owner of the conveyance can prove that the conveyance was so used without his or his agent’s knowledge or connivance, the conveyance will not be confiscated.

13. Sri Dyan Chinnappa, submits that thus the purposes of the provisions of Section 129 and Section 130 of the Act are distinct with undeniable differences in the consequences, even in the case of a transporter, when there is contravention of breach of the provisions of the Act/Rules and there is intent to evade taxes. Therefore, when a conveyance transporting goods is intercepted in transit, and there is reason for detention/seizure, recourse could be had to the provisions of Section 129 of the Act: upon scrutiny of the response to the Show Cause Notice issued thereunder and upon ascertaining further information, it comes out that there is evasion of tax, it would be open to the authorities to initiate proceedings for confiscation with the initial notice under Section 129 of the Act abating. This would be the true import of both the provisions of Section 129 and Section 130 of the Act which commence with non-obstante clauses. Hence, the impugned Show Cause Notice dated 07.09.2020 does not suffer from any jurisdictional infirmity.

14. The questions that arise for consideration is:

[a] As this Court in Shree Enterprises and another v. The Commissioner of Commercial Tax considered the question whether, after interception of conveyance with goods in transit and detention of the conveyance and seizure of the Goods and issuance of notice under section 129(3) of the Act, it would be open to the authorities, in appropriate cases, to treat the notice under section 129(3) of Act as having abated and initiate proceedings under 130 of the Act for confiscation with the issuance of notice thereunder, and.

[b] If this question is not considered by this Court in the aforesaid decision, whether this Court in the light of the provisions of the Act could opine that it would be open to the authorities under Act to so initiate proceedings for confiscation under 130 of the Act

15. In Shree Enterprises supra the order of quantification under Section 130 and penalty under Section 122 of the Act was called in question in the factual matrix of that case where, notice under section 129(3) of the Act was issued calling upon the concerned to show cause against quantification of the applicable Tax and Penalty in terms of Section 129(1) of the Act. Upon receipt of objections/ response, the impugned order in the prescribed Form under Section 130 of the Act was issued. The authorities tried to justify issuance of such order on the ground that there was a bona fide error in mentioning the provisions and the quantification in the impugned order was in effect quantification under section 129 of the CGST Act.

16. This Court, considering these circumstances has opined that it was incumbent on the part of the authority to consider the objections and pass a speaking order quantifying the tax and penalty and thereafter to release the goods subject to payment of tax and penalty or to confiscate the goods: insofar as reference to section 160 of the Act to treat the said order as an order of penalty under Section 129 of the Act, this Court has opined the same could not be countenanced because it was not a mere wrong mentioning of the provision but the disturbing the procedure established.

17. The controversy in the present case is because, after the goods are seized in transit with the conveyance being detained, the respondent, on the basis of the information collected and available, has formed an opinion that there is an effort to evade payment of tax. The respondent, who had issued notice under sub-clause (4) of Section 129 of the Act (Show Cause Notice dated 25.08.2020), has issued subsequent notice under sub-clause (4) of Section 130 of the Act (the impugned Show Cause Notice dated 07.09.2020) observing that the earlier notice has abated and calling upon the petitioner to show cause against confiscation and why the tax, penalty and other charges payable in respect of such goods and the conveyance should not be paid by the petitioner. The chief contention is that there cannot be independent or simultaneous confiscation proceedings under Section 130 of the Act with the detention and seizure proceedings under way in accordance with the provisions of Section 129 of the Act in the case of contravention of the provisions of the Act/Rules when the goods are being transported, or goods are stored in transit.

18. It is settled that a decision is an authority for what it decides. The Hon’ble Supreme Court in Royal Medical Trust and another v. Union of India and another6 reiterating the principle enunciated Quinn v. Leathem (1901 AC 495 has held as follows.

“It is well settled in law that the ratio of the decision has to be understood regard being had to its context and factual exposition. The ratiocination in an authority is basically founded on the interpretation of the statutory provision. If it is based on a particular fact or the decision of the Court is guided by specific nature of the case, it will not amount to the ratio of the judgement. Lord Halsbury in Quinn v. Leathem, has ruled:-

… every judgement must be read as applicable to the particular fact proved, or assumed to be proved, since the generality of the expressions which may be found are not intended to the expositions of the whole law, but are governed and qualified by the particular fact of the case in which such expressions are to be found.”

When the decision in Sree Enterprises supra is examined as against this touchstone, this Court must hold that the question which is presented for consideration in the present case did not come up for consideration before this Court in such case and therefore, this decision is not helpful to the petitioner.

19. The merits of the chief contention in this case7will have to be examined not just in the light of the provisions of Section 129 of the Act (about which there is no dispute) but also in the light of the provisions of Section 130 of the Act. If a person transports any goods, or store any goods while they are in transit in contravention of the provisions of the Act or the rules made thereunder consequences would have to follow to ensure there is substantial deterrent in continuing with such contravention. There cannot be any doubt, or quarrel, that the provisions of Section 129 of the Act are intended to achieve this object. The provisions of Section 130 of the Act deals with confiscation. Under Section 130 of the Act, proceedings for confiscation could be initiated if there is reason for the authorities to opine that there is contravention with the provisions of the Act/Rules in the supply or receipt of goods with the intention to evade tax8 or there is inability to account for the goods9 or goods liable to tax under the Act are supplied without having applied for registration10 or if conveyance is used as a means of transport for carriage of goods in contravention of the provisions of the Act11. The object of the provisions of Section 130 of the Act, when seen with the object of the provisions of section 129 of the Act, are wider i.e., it is to curb contraventions of the provisions of the Act/ Rules with a certain intent12.

20. The provisions of Section 129 and Section 130 of the Act, which begin with non-obstante clauses, are carved with specific objectives and contemplate different procedures insofar detaining the conveyance and seizing goods and taking and holding possession of the things confiscated. A significant feature of the provisions of Section 129 of the Act is the provision for release of the detained conveyance and seized goods on provisional basis. The provisions of Section 129(1)(c) of the Act enable furnishing security for an amount equivalent to the amount payable under Section 129(1)(a) or 129(1)(b) in the prescribed Form and manner. The provisions of Section 129(2) of the Act stipulate that the provisions of Section 67 (6) of the Act, which relate to power of “inspection, search, seizure and arrest”, shall apply mutatis mutandis for detention and seizure of goods and conveyances. The provisions of Section 67(6) of the Act states that goods seized under sub-section (2) thereof, ‘shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or non-payment of applicable tax, interest and penalty payable as the case may be. This provision, amongst others, becomes crucial when seen in contradiction with the provisions of section 130 of the Act.

21. Insofar as proceedings for confiscation under Section 130 of the Act, there is no provision for the provisional release of the detained conveyance and seized goods. But, with confiscation, the title to the goods and conveyance vests in the government13 subject to an option to the owner of the goods, as well as the owner of the conveyance, to pay Fine in lieu of confiscation apart from the liability to pay applicable tax and penalty14. If, after an opportunity of being heard, Fine is determined and such Fine as well as the applicable tax, penalty and charges, are not paid, there will be confiscation of the goods and conveyance with the vesting of title thereto in the government. The proper officer upon adjudging confiscation shall take and hold possession of the goods/conveyance confiscated and every officer of police, on the requisition of such proper officer shall assist him in taking and holding such possession with further recourse as contemplated under sub-clause (7). The differences in Sections 129 and 130 of the Act can be brought to in a tabular column thus:

Section 129 Detention and seizure of   conveyance    and
goods – IN TRANSIT
Section  130 Taking and Holding of the things Confiscated – AFTER ADJUDGING
129(1)(c) and

129(2)

Upon furnishing a security equivalent  to  the amount payable  under
clause (a) or clause (b) in such form and manner as may be prescribed:

  • The provisions of sub-section (6) of section 67 shall, mutatis   mutandis,
    apply for detention and seizure of goods and conveyances
130(5)

130 (6)

Where any goods or

conveyance  are confiscated under this Act, the title of such goods  or  conveyance
shall thereupon vest in the Government

  • 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.
129(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 130 130 (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 i n lieu of confiscation, dispose of such goods or conveyance and deposit the sale proceeds thereof with the Government.

22. Further, the consequences of the proceedings Section 129 and Section 130 are different though there is cross reference as regards the determination of applicable Tax and Penalty. If there has to be determination of penalty as contemplated under Section 129(1)(a) or 129(1)(b) of the Act and payment thereof along with applicable tax for closure of the proceedings under Section 129 of the Act. Even for the completion of the confiscation proceedings under Section 130 of the Act there has to be determination of such penalty and payment of applicable tax. Though, both the owner of the goods and owner of the conveyance, can avoid confiscation by paying different Fine as prescribed, this will be in addition to the liability to pay any tax, penalty and charges payable in respect of such goods/conveyance. The differences in these regards under these two provisions in the tabular columns will be as follows:

Section 129 The consequence insofar liability to pay Tax and Penalty Section 130 The consequence insofar liability to pay Tax, Penalty, Fine and other charges
Sub- clause (1)(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;
Sub- clause  (2) a. To the owner of the
goods: Option to pay in lieu of confiscation, such Fineas 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:b. The owner of the conveyance
Option to pay in lieu of the confiscation of the conveyance a Fine equal to the Tax payable on
the goods being
transported thereon
Sub- clause  (1)(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
Sub- clause (3) Where any Fine in lieu of confiscation of goods or conveyance is imposed under subsection
(2), the owner of
such goods or
conveyance or the
person referred to subsection
(1), shall, in
addition, be liable to
any tax, penalty and
charges payable in
respect of such goods
or conveyance.

23. In Synergy Fertichem P. Ltd., v. State of Gujarat supra, a Division bench of the Gujarat High Court, while considering the question whether both Sections 129 and 130 of the Act are independent of each other or they could be used interchangeably at the discretion of the authorities, after a conspectus reference to the decisions by the Hon’ble Apex Court on different aspects given the specific features of these provisions such as both the provisions beginning with the non-obstante clauses, the cross reference in each of these provisions to the liability to pay the applicable tax, penalty and fine, the conditions attached for initiation of proceedings for confiscation under Section 130 of the Act, the need for restraint in the authorities to initiate proceedings for confiscation for every infraction and to initiate such proceedings only if it could from the circumstances of the case form an informed opinion, has held as follows insofar as what is material for the purposes of the case:

“In an appropriate case, even after determining the amount of tax and penalty under section 129 of the Act and release of the goods and vehicle, the authorities may be justified in issuing notice under section 130 of the Act for the purposes of initiating confiscation proceedings. In other words, at the stage of section 129 of the Act, there may not be sufficient evidence for the purpose of coming to the conclusion that the case is one where the owner of the goods or the driver of the vehicle had the intention to evade payment of tax. Further enquiry in this regard may reveal such intention to evade tax. In such circumstances also, the authority may be justified in initiating the confiscation proceedings.”

The Division Bench after a detailed analysis has, amongst others, concluded that:

(i) Section 129 of the Act talks about detention, seizure and release of goods and conveyances in transit. On the other hand, Section 130 talks about confiscation of goods or conveyance and levy of tax, penalty and fine thereof. Although, both the sections start with a non-obstante clause, yet, the harmonious reading of the two sections, keeping in mind the object and purpose behind the enactment thereof, would indicate that they are independent of each other. Section 130 of the Act, which provides for confiscation of the goods or conveyance is not, in any manner, dependent or subject to Section 129 of the Act. Both the sections are mutually exclusive.

(v) Even if the goods or the conveyance is released upon payment of the tax and penalty under Section 129of the Act, later, if the authorities find something incriminating against the owner of the goods in the course of the inquiry, if any, then it would be permissible to them to initiate the confiscation proceedings under Section 130 of the Act.

(vi) Section 130 of the Act is not dependent on clause (6) of Section 129 of the Act.

(vii) Sections 129 and 130 respectively of the Act are mutually exclusive and independent of each other. If the amount of tax and penalty, as determined under Section 129 of the Act for the purpose of release of the goods and the conveyance, is not deposited within the statutory time period, then the consequence of the same would be forfeiture of the goods and the vehicle with the Government. This does not necessarily imply that the confiscation proceedings can be initiated only in the event of the failure on the part of the owner of the goods or the conveyance in depositing the amount towards the tax and liability determined under Section 129 of the Act.

24. This Court in the light of the provisions of Section 129 and 130 of the Act, which are delineated as above, and upon reading of the decision of the Division Bench of Gujarat High Court in Synergy Fermitech P Ltd supra., is of the considered view that the it cannot be held that the provisions of Section 130 of the Act could be invoked in cases of conveyance/ goods detained/ seized while in transit only if there is a failure to pay the amount of tax and penalty as provided under section 129 (6) of the Act. This Court, for the reasons discussed hereafter, would also hold that the failure to pay the amount of tax and penalty as contemplated under Section 129(6) of the Act would be just one of the circumstances in which proceedings under Section 130 of the Act could be initiated in cases of conveyance/ goods detained/ seized while in transit.

25. The relevant provisions of Section 130 of the Act would be Section 130(1) and it reads as under:

“Section 130: – 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 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.”

If in the use of conveyance for transportation of goods or storing of goods in transit, the contravention of the provisions of the Act/Rules is established, there can be no doubt, with the provisions of Section 130(1)(v) of the Act, the consequence of confiscation would be visited. If the intention to evade payment of tax in transporting the goods by conveyance is established, would be it outside the purview of the provisions of Section 130(1)(iv) of the Act which stipulates that if any person contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax then there shall be confiscation (without limiting to the goods) .

26. The Hon’ble Supreme Court in J K Synthetics Limited vs. CTO15 has observed that:

“It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same.”

When the provisions of Section 130(1)(iv) of the Act are looked at fairly and read harmoniously with the object of Section 130 of the Act, even without interpolating any morality or ethics or logic, it could only be that if intent to evade payment of tax is established in the use of the conveyance for transporting goods, the confiscation proceedings under Section 130 of the Act must be invoked. Would this be different if, at the first instance, a conveyance is detained, and based on the information at the stage notice under Section 129 (3) of the Act is issued but the proceedings are yet to complete and it is learnt that there could be contravention of the provisions of the Act/Rules with intent to evade payment of tax.

27. The authorities, when they intercept a conveyance carrying goods or in which goods are stored, may not be able to immediately ascertain whether there is contravention of the provisions of the Act/Rules and if there is contravention, the true nature of the contravention given the myriad transactions and the manner of execution of these transactions. The authorities may not immediately know whether there is any intent to evade payment of tax. Therefore, on detention conveyance, depending on the circumstances of the case, including the information available to the authorities, proceedings under Section 129 would inevitably follow. However, if during the course of enquiry under Section 129, it comes to the knowledge of the proper officer, as it is asserted in the present case, that the contravention of the provisions of the Act/Rules while transporting goods or in storing goods in transit, is with intent to evade payment of tax, proceedings under Section 130 of the Act would have to follow. It cannot be reasonably opined that the proceedings under Section 129 of the Act [with the liberty to seek provisional release as permissible under Section 129(2)] must first conclude and then the confiscation proceedings under Section 130 of the Act must commence.

28. The provisions of Section 130 of the Act, as Section 129 of the Act, begin non-obstante clause. The Hon’ble Supreme Court in Shri Sarwan Singh & Anr. v. Shri Kasturi Lal16, while resolving the controversy on whether the provisions of Slum Clearance Act must have precedence over the Delhi Rent Act, and the significance of non-obstante clauses, has held that:

“When two or more laws or provisions operate in the same field and each contains a non-obstante clause stating that its provision will override those of any other provisions or law, stimulating and intricate problems of interpretation arise. In resolving such problems of interpretation, no settled principles can be applied except to refer to the object and purpose of each of the two provisions, containing a non obstante clause. Two provisions in same Act each containing a non obstante clause, requires a harmonious interpretation of the two seemingly conflicting provisions in the same Act. In this difficult exercise, there are involved proper consideration of giving effect to the object and purpose of two provisions and the language employed in each

The non-obstante clauses in both Sections 129 and 130 of the Act, will have to be read harmoniously given the object of these two provisions. The object of these two provisions as well as the interplay insofar as determination of liability are discussed earlier. The non-obstante clause establishes that the Legislature did not intend that, for the commencement of the proceedings under Section 130 of the Act, the proceedings initiated under Section 129 of the Act should end even without determination of the liability thereunder.

29. In the light of the above discussion it is held that if after interception of conveyance with goods in transit and detention of the conveyance and seizure of the Goods with issuance of notice under section 129(3) of the Act, and when there is information about the intent to evade payment of tax, it is not open to the proper officer to treat the notice under section 129(3) of Act as having abated or truncate such proceedings and initiate proceedings under 130 of the Act for confiscation with the issuance of notice thereunder. The proper officer, who has detained the conveyance and seized the goods, when he is able to form opinion that there is an attempt to evade payment of tax, will have to determine the applicable tax and penalty under Section 129 of the Act while simultaneously initiating proceedings for adjudging confiscation under Section 130 of the Act. If during the pendency of these proceedings, a request for provisional release as contemplated under sub-clause (3) of Section 129 of the Act, is submitted, the same will have to be considered in the light of the provisions of Section 129 read with sub-clause (6) of Section 67 of the Act. If after adjudging confiscation, the option to pay Fine in addition to the tax payable, penalty and other charges is not exercised despite opportunity under section 130(7) of the Act, the Proper officer will have to take and hold possession of the things confiscated subject to consequences as contemplated thereunder.

For the foregoing, the writ petition is disposed of restoring the Show Cause Notice dated 25.08.2020 (Annexure-E) directing the respondent to decide, in accordance with law, on the proposed levy of tax, penalty and cess as proposed therein with reasonable opportunity of hearing to the petitioner, who shall have the liberty to seek provisional release of goods/conveyance as provided for under sub-clause (2) of Section 129 of the Act. The respondent is also directed to contemporaneously decide on the impugned Show Cause Notice dated 07.09.2020 (Annexure-A) in accordance with the provisions of Section 130 of the Act.

Notes:-

1For convenience, the Central Goods and Services Tax Act 2017/Karnataka Goods and Services Tax Act, 2017 are hereafter collectively referred to as the “Act” and individually these Act and the Integrated Goods and Service Act are referred to in the abbreviation

2 Writ Petition No. 6445/2019 and Writ Petition No. 7370/2019 (T-Res) decided on 14.03.2019

3 (1999) 8 Supreme Court Cases 667

4 (2020) 77 GSTR (SC), and the Hon’ble Supreme Court in this case was considering the validity of the circulars issued clarifying that the expression ‘Delivery’ in Explanation 1 to section 3 of CST Act, 1956 should not be confined to Physical Delivery but would also include Constructive Delivery

5 (2020) 76 GSTR 81 (Gujarat)

6 (2017) 16 Supreme Court cases 605

7 Whether there cannot be independent or simultaneous confiscation proceedings under Section 130 of the Act with the detention and seizure proceedings under the provisions of Section 129 of the Act, in the case of contravention of the provisions of the Act/Rules when the goods are being transported, or goods are stored in transit.

8 Section 130(1)(i) and (iv)

9 Section 130(1)(ii)

10 Section130(1)(iv)

11 Section 130(1)(v)

12 The significance and import of this expression has been elaborately discussed by the Division Bench of the Gujarat High Court in Synergy Fertichem P. Ltd. Supra

13 Section 130 (5)

14 Section 130 (2) and the third proviso

15 (1994) 4 Supreme Court Cases Page 276

16 (1977) 1 SCC 750 and referred to by the Division Bench of the Hujarat High Court in Synergy Fertichem P. Ltd., v. State of Gujarat supra

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