CONFISCATION OF GOODS WITHOUT GIVING OPPORTUNITY TO THE OWNER OF GOODS

[DR.MARIAPPAN GOVINDARAJAN]

Detention of goods and conveyances in transit

Section 129 (1) of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides that 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 there under, 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.  No such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

Release of detained goods

The detained or seized goods shall be released-

• on payment of the applicable tax and penalty equal to 100% of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to 2% of the value of goods or ₹ 25,000/-, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;
•  on payment of the applicable tax and penalty equal to the 50% 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 5% of the value of goods or ₹ 25,000/-, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;
• upon furnishing a security equivalent to the amount payable under as above  in such form and manner as may be prescribed.

Order for payment of tax and penalty

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.    No tax, interest or penalty shall be determined without giving the person concerned an opportunity of being heard.

Confiscation of goods

Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty within 14 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130.   Where any objections are filed against the proposed amount of tax and penalty payable the proper officer shall consider the objections and thereafter pass a speaking order quantifying the tax and penalty payable.  All such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.   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.

In ‘Shree Enterprises v. Commercial Tax Officer, Shivamoga’ – 2019 (4) TMI 147 - KARNATAKA HIGH COURT the writ petitioner is the consignee and transporter of the goods in question.  Manish Enterprise sold 230 bags of areca nut consisting of 16100 kgs to the petitioner.  The said sales attract integrated tax.  The Revenue intercepted the vehicle carrying the said goods.  Despite the driver produced the tax invoices and e-way bill to the Officers, the Officers of the Revenue suspected the genuineness of the documents.  They have detained the goods and vehicle for more than a month.  The Revenue further confiscated the goods and vehicles.

The petitioner filed the present writ petition before the High Court against the order of confiscation.  The writ petitioner contended that-

• The detention is illegal and in violation of the procedure prescribed by the Government of India through circulars. 
• The Revenue confiscated the goods and vehicles without any order for confiscation or there being any arrears of tax and penalty.
• The Revenue came to an unilateral presumption that the consignor is indulging in issuing tax invoices fraudulently without causing any movement of goods in violation of section 122(1) of the Kerala Goods and Services Tax Act, 2017, which was unwarranted.
• The Revenue passed a confiscation order after issuing the penalty notice without considering the objections filed by the petitioner and thereby being no penalty order passed.

The petitioner prayed the High Court to set aside the confiscation order being ex-facie illegal.

The Revenue contended the following-

• The impugned order indicates the quantification of the penalty and fine payable under section 130(1) and 130(2) of CGST Act which is a bona fide mistake committed in quoting a wrong provision of law.
• The penalty and fine quantified relates to the penalty liable to be paid by the petitioner under section 129 of the Act.
• Section 160 of the Act provides that no assessment, re-assessment, adjudication, review, revision, appeal, rectification, notice, summons or other proceedings done, accepted, made, issued, initiated, or purported to have been done, accepted, made, issued, initiated in pursuance of any of the provisions of this Act shall be invalid or deemed to be invalid merely by reason of any mistake, defect or omission therein, if such assessment, re-assessment, adjudication, review, revision, appeal, rectification, notice, summons or other proceedings are in substance and effect in conformity with or according to the intents, purposes and requirements of this Act or any existing law.  Accordingly any mistake committed in the order would not invalid in terms of section 160 of the Act.
• On enquiry it was noticed by the Revenue that the consignor was indulged in bill trading activities.
• Issuing tax invoices without there being any supply of goods is an offence falling under section 122(ii) of the Act.

The Revenue prayed the High Court to dismiss the writ petition filed by the petitioner.

The High Court heard the arguments submitted by the both sides.  The High Court held that it is well settled law that unless the 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 subsequently to the objections filed, if any.  Without providing such opportunity proceeding to pass confiscation order directly would not be construed as any mistake, defect or omission to come within the ambit of section160 of the Act.  It is a fundamental flaw which goes to the root of the matter and the said lacuna could not be cured by referring to section 160 of the Act.  Passing of the penalty order sine qua non in the proceedings initiated by the Revenue under section 129(1)(b) of the Act and the same being missing, the confiscation order impugned cannot be held to be justifiable.

The High Court quashed the impugned order.  The High Court directed the Revenue to consider the objections filed by the petitioners and pass appropriate orders in accordance with the law and in an expedite manner after quantifying the tax and penalty for the purposes of section 129 of the Act.  On quantification of penalty, if any, goods and conveyances shall be released to the petitioners subject to the payment of the penalty quantified.