TMI Blog2021 (12) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ords owner of the goods is clearly indicative of the intention behind incorporating section 130(2) of the Act. The intent of section 130(2) of the Act is to provide an option to the owner to redeem the goods before he is divested of his ownership and while the process of adjudication is going on. The two different stages in which the goods can be released - during adjudication and post-adjudication are obviously created with a purpose. The purpose of the two-stage release is that, if the owner of the goods, even before being deprived of his title to the goods or conveyance, is ready to pay the fine stipulated by the officer, then without further wrangles, if the goods and or conveyance can be released to the said owner, the same avoids unnecessary procedural formalities. If the fine in lieu of confiscation is paid at the initial stage, no prejudice would be caused to the revenue also, since by virtue of section 130(7) even after adjudication, an option to pay fine in lieu of confiscation is to be offered peremptorily - section 130(2) of the Act applies before the order of confiscation is issued. Whether the amount payable for release of the goods under section 130 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SR.GOVERNMENT PLEADER RESPONDENT: SRI.K.SRIKUMAR (SR, SRI.K.MANOJ CHANDRAN AND SMT.AMMU CHARLES ORDER BECHU KURIAN THOMAS, J. An interim order is the cause of this review petition. By the interim order, this Court directed release of goods that were the subject matter of proceedings for confiscation under the Central Goods and Services Tax Act, 2017 (for brevity the Act ). A review petition against the interim order is preferred by the State Tax Officer, leading to seminal questions on the scope and ambit of the powers of release of goods while the confiscation proceedings are going on. 2. The primary question for consideration is whether section 130(2) of the Act contemplates the release of goods by payment of fine in lieu of confiscation, even before orders of confiscation are issued. In addition, an incidental question that arises is on the quantum payable as fine in lieu of confiscation. 3. The genesis of the dispute emerges from an inspection conducted by the officers of the Kerala State GST Department on 03-08-2021, who seized, as per Rule 139(2) of the Central Goods and Services Tax Rules, 2017, (for brevity the Rules ), beedis, stored by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 3 4 5 6 7 8 9 1 Beedi 2403 8500 packets 85000 23906 23906 0 0 Ext.P8(b) Sl. No Description of goods HSN Code Quantity Total value Central tax State tax/Union Territory Tax Integrated tax Cess 1 2 3 4 5 6 7 8 9 1 Onam Diamond Beedi 2403 34 Bags(160 packets @ ₹ 200 per packet ₹ 10,88,000/- 306000 306000 0 0 2 SM Beedi 2403 64 Bags(120 packets @ ₹ 200/- per packet)+ 80 packets @ ₹ 200/- TOTAL (Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was amended and included as section 110A in the Customs Act. Reliance was made to the decisions in Union of India v. Lexus Exports Pvt. Ltd [(1997) 10 SCC 232], M/s. Meghdoot Logistics v. Commercial Tax Officer (W.P.(C) No.10832 of 2020), as well as the Constitution Bench judgment in Commissioner of Customs (Import) Mumbai v. Dilip Kumar and Company and others [(2018) 9 SCC 1]. 11. The learned Senior Counsel Sri. K.Srikumar, duly instructed by Adv. Manoj Chandran, on the other hand, submitted that the nonobstante clause in section 130 of the Act ought not to be interpreted with strict rigour as if all other provisions of the Act, are to be ignored. According to the learned Senior Counsel, the intention of using the term notwithstanding anything contained in this Act is only to stipulate that a special provision has been carved out. However, the same cannot be in ignorance of other provisions of the statute, including the provisions of section 67(6) as well as those relating to perishable goods under section 67(8) of the Act. It was argued that the concept of provisional release will apply even for proceedings initiated under section 130 of the Act. The learned Senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 unless the owner of the conveyance proves that it 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. (2) Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as 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 subsection (1) of section 129: PROVIDED ALSO that where any such conveyance is used for the carriage of the goods or passengers f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act are not at all to appropriate goods. Its intent is to ensure that tax is paid for every taxable transaction. The power of confiscation is vested only when the tax officer is satisfied that there was an intent to evade payment of tax or to avoid the rigours of the taxing provisions of the Act. The Gujarat High Court had elaborately dealt with the scope of section 130 of the Act in the decision in Synergy Fertichem Pvt. Ltd. v. State of Gujarat [(2020) 76 GSTR 81 (Guj.)] and had held that confiscation is an aggravated form of action, intended to deter the dealers from evading tax. 17. Section 129 of the Act incorporates the concept of provisional release of goods detained under the said section by reference to section 67(6) of the Act. However, such a tool of referential incorporation or the words provisional release is absent in section 130 of the Act. Though the words provisional release is absent in section 130 of the Act, and there is a conspicuous absence of even a reference to section 67(6), does it indicate the intention of the legislature to avoid release of goods until confiscation orders are issued? The aforesaid is the core question to be answered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act are analysed, it can be discerned that the option to pay a fine in lieu of confiscation is mentioned twice once in Section 130(2) and again in section 130(7) of the Act. 21. The effect of section 130(7) of the Act is to be appreciated initially. While appreciating the aforesaid sub-clause, it is worth noticing the arrangement of various sub-clauses of section 130 of the Act. Section 130(1) deals with the instances when goods and conveyances are liable for confiscation and the effect of confiscation. (I am skipping sub-clauses (2) and (3) for the time being). When subclause (4) speaks about giving an opportunity of being heard, subclause (5) refers to the vesting of title of the goods upon the Government after confiscation and sub-clause (6) refers to taking possession of the things confiscated. Sub-clause (7) comes after all the above provisions and refers to confiscated goods, clearly indicating the intent of the legislature that confiscation has already taken place. 22. Under section 130(7) of the Act, the proper officer can after satisfying that the confiscated goods are not required in any other proceeding and, after giving reasonable time of three months, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership. Thus, incorporating a provision in the form of section 130(2), over and apart from section 130(7), is an indication of the wisdom of the legislature that even before the owner is divested of his ownership, he must have an option to pay fine in lieu of confiscation. Applicability of section 130(2) of the Act depends, not when confiscation is ordered, but when confiscation is authorised by the Act and when ownership of the goods remains with the owner of the goods and not the Government. In my view, section 130(2) of the Act is a means to obtain a release of the goods or conveyance contemplated at a stage prior to the final order of confiscation. It is not a post adjudicatory release that is contemplated under section 130(2) of the Act and on the contrary, it is a release during the course of adjudication. 26. Absence of the use of the words provisional release or non-reference to section 67(6) of the Act is not determinative of the intent of the section. Since section 130 of the Act is a code by itself, the provisions of section 130 must be viewed independently to understand its scope. None can find fault if the legislature in its wisdom thought it fit to incorporate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... release of goods, subject to certain terms and conditions, this Court is of the view that section 130(2) contemplates a release not provisional or absolute but a release peculiar to the Act during the course of adjudication. Further, the provisions of section 125 of the Customs Act though contains similar wordings as in section 130(2) of the Act, the interpretations adopted therein cannot be adopted in their entirety since specific distinctions are available in the various clauses of section 130 of the Act. 30. Thus, I answer the first question that though section 130(2) is not a case of provisional release, the sub-clause confers power upon the competent officer to release the goods on payment of fine in lieu of confiscation, while the proceedings for confiscation are continuing and before orders of adjudication are passed. Issue No. (ii). Whether the amount payable for release of the goods under section 130 of the Act is fine alone or is it fine, penalty and tax to be paid together for securing release of the goods? 31. While considering this issue, it is necessary to bear in mind section 130(1) of the Act which provides that when any of the five circumstances me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of tax, penalty and other charges payable. Before such adjudication, the dealer cannot be compelled to pay the tax or penalty. 35. At the stage when the fine in lieu of confiscation is paid to obtain release, the adjudication as to whether the goods or conveyance are to be actually confiscated or not, or whether any tax or penalty or other charges are due for the goods or conveyance, have not been ascertained. Similarly the quantum of tax and penalty have also not been ascertained by any form of adjudication. As mentioned earlier, it requires an adjudication. Adjudication requires a hearing. The period within which the adjudication has to be completed, is left to the discretion of the Proper Officer. 36. The observation in Synergy Fertichem Pvt. Ltd. v. State of Gujarat [(2020) 76 GSTR 81 (Guj.)], is relevant. It was observed therein that the fine provided in the first proviso to sub-section(2) of section 130 is the maximum fine leviable. Consequently, the Proper Officer adjudging the case is required to examine the seriousness of the contravention and impose fine accordingly. It is not as if in every case the Proper Officer should levy the maximum fine. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt absolute forfeiture but only give a right to have the vessel forfeited under due process of law. Similarly, it has been held that in Section 302, Indian Penal Code, the phrase shall also be liable to fine does not convey a mandate but leaves it to the discretion of the Court convicting an accused of the offence of murder, to impose or not to impose fine in addition to the sentence of death or imprisonment for life. 40. Thus the words be liable in section 130(3) of the Act only conveys a possibility of attracting the obligation and not an imperative obligation, shorn of fair procedure. In view of the above deliberations, this Court is of the view that, when fine in lieu of confiscation is paid by a dealer under section 130(2) of the Act, the liability for payment of tax, penalty and charges will fall upon the dealer, in addition to the fine and they need be paid only after adjudication. To obtain the release of the goods or conveyances, while the adjudication proceedings are continuing, the taxpayer needs to pay only the fine and not the tax, penalty and charges thereon. The tax, penalty and charges can be paid after adjudication. Issue No.(iii) What is the basis or rat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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