PROVISIONAL RELEASE OF GOODS UNDER GST LAWS

[Mr. M. GOVINDARAJAN]

Section 68 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) stipulates that the person in charge of a conveyance carrying any consignment of goods of value exceeding a specified amount shall carry with him the documents and devices prescribed in this behalf.  The details of documents required to be carried by the person in charge of the conveyance shall be validated in such manner as may be prescribed. Where any conveyance is intercepted by the proper officer at any place, he may require the person in charge of the conveyance to produce the documents for verification, and the said person shall be liable to produce the documents and also allow the inspection of goods.

Inspection of goods

Any movement of goods by means of vehicles of more than Rs.50,000/- by a registered person must be accompanied by an E-way Bill.  The law gives powers to the proper officer to intercept goods in transit.  The driver of the said vehicle is required to carry the invoice, E-way bill and other required documents.  The documents and goods can be inspected by the proper officer.

Remedy available

If the goods and vehicles are detained by the proper officer the registered person as well as the owner of the vehicle can file appeal against the order before Commissioner (Appeals).  The Commissioner (Appeals) may decide the case in favor of the registered person or in favor of the revenue.  Provisional release of goods and vehicles may be allowed by the Appellate Authority.  The Appellate Authority deems fit they may provisionally release the goods and vehicle subject to certain terms and conditions.

Writ petition

If the Appellate Authority decides the case against the registered person the registered person may file appeal the GST Tribunal.  Since the Tribunal has not been established the aggrieved person may approach the High Court against the detention order and file writ petition.  The High Court may allow the writ petition or reject the writ petition on hearing both the parties. 

Bank guarantee

The seized goods may be released on a provisional basis upon execution of a bond for the value of the goods in Form GST INS-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable.  The bank guarantee need not required to be given if the registered person pays the entire tax and the penalty, for the provisional release of goods. Likewise if the registered person comes forward to pay the penalty, tax or provide bank guarantee the goods will be released provisionally subject to conditions imposed by the Court.

In the following three case laws the petitioners were willing to furnish bond equivalent to the fine proposed to be imposed and got order for release of goods provisionally.

In KAPIL HUKMICHAND KOTHARI VERSUS UNION OF INDIA  - 2022 (6) TMI 603 - GUJARAT HIGH COURT the petitioner is engaged in the business of trading of copper and copper scrap.  The petitioner got the order from Sahajanand Chem Industries, Gandhinagar for copper scrap to the tune of Rs.1.09 crores.  The said goods were transported from Surat on 25.04.22 in conveyance to be delivered at Gandhinagar.  The E-way Bill generated was valid for the period from 25.04.2022 to 27.04.2022. 

On the way to Gandhinagar the vehicle was intercepted by Respondent No. 4 on 26.04.2022 at 08.45 am and caused inspection of goods.  The documents asked for by him were duly submitted by the driver of the vehicle.  However the goods were detained by the authority.  Since the goods were detained the petitioner submitted a representation before the authority but the goods were not released by the authority.  Therefore the petitioner filed the present writ petition before the High Court.  The petitioner contended that under Section 129 of the Act the authority can detain only those goods and/or conveyance which is used in transit in contravention of the provisions of the Act or Rules made there under is found.  In the present case there is no contravention of any of the provision of the Act or Rules for goods in transit were found as recorded by the Authority while issuing MOV – 06 on 26.04.2022.  The petitioner is willing to pay Rs.17 lakhs which has been tentatively determined by the authority as penalty amount which is reflected in the show cause notice and also to issue bond to the tune of Rs.65 lakhs under the head ‘The determination of fine in lieu of confiscation of goods as well as calculation of fine in lieu of confiscation of conveyance’.

The High Court observed that after following the procedure when MOV - 06 was issued in which the reasons were assigned for detention of goods.  Similar reasons were recorded in Form GST MOV – 10 issued by the Authority.  The High Court, without going into the merits of the case issued the directions to the petitioner to deposit Rs.17 lakhs and furnish the bond of Rs.65 lakhs with the Authority, the Authority shall release the vehicle and goods in question.  The inquiry with respect to Form GST MOV – 10 shall proceed further in accordance with law.

In M/S. RKS AGENCIES (REPRESENTED BY PROPRIETOR R. VENKATACHALAM) VERSUS STATE TAX OFFICER-I, ADJUDICATION VELLORE- 2022 (4) TMI 821 - MADRAS HIGH COURT, the petitioner purchased cement from Andhra Pradesh and transmitted the same to its branch office at Coimbatore.  On the way of transit the vehicle was intercepted by the Departmental Authorities and they found that there was a violation in the invoice that the full address of the buyer has not been mentioned.  Further they found that there is no activity in the Coimbatore branch.  For this violation the Authority detained the goods and issued notice on 07.03.2022.  The notice directed the petitioner to pay the penalty imposed on it within three days, failing which action would be taken under section 130 of the Act.

The petitioner contended that the absence of full address of the buyer is not such a big offence or violation, for which the goods in question cannot be detained by the Revenue.  The notice is not actually in the notice format.  The Authority passed final order on 11.03.2022.   Normally a meager penalty of Rs.5000/- would be imposed for such meager violations but the Authority imposed penalty to the tune of Rs.96,000/-  and Rs.1,17,000/- an exorbitant one.  This cannot be sustained.  By virtue of this detention the petitioner’s interest is greatly prejudiced.  Therefore, whatever the usual penalty imposed against such alleged violation can be imposed as a condition precedent to release the goods, however, without prejudice to the right of the petitioner to urge before the Appellate Authority against such order passed on 11.03.2022. The Revenue contended that this sort of violations has already been noticed.  The branch office is a non functional officer and one inspection it was found that no buying or stocking anything taken place.   Therefore cumulatively considering all these present fine has been imposed through the final order. 

The High Court considered the contentions raised by both the parties. The High Court observed that the final order date 11.03.2022 is yet to be challenged before the Appellate Authority.  Considering the facts of the case the High Court issued the following orders-

• The petitioner on payment of 25% of the demand of the penalty in each case, the goods and vehicles in question detained by the Department shall be released.  Such payment of 25% of the penalty is without prejudice to the right of the petitioner to be urged or raised before the Appellate Authority against the final order passed on 11.03.2022 if the petitioner is advised to do so.
• If the petitioner does not pay the 25% of the demand of penalty the goods and vehicles in question need not be released.
• After paying 25% penalty and the goods and vehicles are released, against which subsequently if the petitioner has not chosen to assail the order dated 11.03.2022 in appeal it is open to the Revenue to proceed in accordance with law for recovering the remaining amount of the penalty.

In M/S. SHAROFF STEEL TRADERS VERSUS THE STATE TAX OFFICER, ROVING SQUAD, VELLORE., THE STATE TAX OFFICER, ADJUDICATION, INTELLIGENCE, VELLORE. - 2022 (6) TMI 850 - MADRAS HIGH COURT, the petitioners conveyed the goods in vehicles which were intercepted and upon verification of the documents the Authorities found various discrepancies in the shipment of the goods and the documents accompanying the consignments.  Detention orders have been passed and also proposed to impose penalty for the non compliances.  The petitioner filed objections to the proposals contained in the notice.  The Assessing Authority rejected the contentions of the petitioners and passed orders adverse to the petitioners.  The petitioner was willing to furnish bank guarantees equivalent to the amount of penalty quantified by the Authority under the show cause notices to obtain the provisional release of the goods. 

The High Court ordered that let the petitioners furnish bank guarantees for the amounts quantified in terms of the impugned notices in proper form, upon receipt of which the goods shall be released forthwith by the Officer.