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TMI Blog2022 (2) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... conveyance carrying goods at office of Assistant Commissioner. The petitioner appeared on the date fixed, i.e. 02.09.2021. He was informed that investigation is underway and was asked to appear on 03.09.2021. On 05.09.2021, the petitioner filed reply to GST MOV-02 through e-mail. The petitioner received a communication dated 11.09.2021 whereby he was informed that on verification, it has been found that inward supply to the sellers/suppliers of the petitioner is from one Balbir Enterprises. Said Balbir Enterprises is not having inward supply and is only engaged in outward supply without paying any tax. Thus, the petitioner is liable to be proceeded under Section 130(1) of the PGST/CGST Act, 2017. 3. The petitioner filed present writ petition on 14.09.2021. At the time of preliminary hearing on 16.09.2021, the following order was passed:- "Present petition is directed against the mala fide action of respondent No. 6 (Mr. Arvind Sharma), while exercising jurisdiction as respondent No. 5. It is urged that the vehicle containing a consignment was detained during transit inspite of availability / production of all the required statutory documents. Further, no order was passed within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer is having NIL inward as per the returns filed which means that only invoices are being raised to pass on inadmissible Input Tax Credits. From M/S VARDHAMAN SALES, NEW DELHI (GSTIN07HLLPK27910 D1ZU). That this firm has again shown purchases from M/S Star Enterprises, New Delhi only which clearly indicates at cyclic transactions taking place thereby creating fraudulent Input Tax Credits. Also M/S Vardhaman Sales, Delhi have shown purchases from M/S Saan Enterprises, New Delhi. No tax at any stage has been paid at any of the stage thereby rendering the creation of the input tax credits as fraudulent beyond any doubt. No tax at any stage has been paid by any of the firms across the supply chain does not have any inward supplies. If there are no inward supplies in the hand of the first firm, then what could have been sold across the supply chain Hence, the ITC created, circulated and utilized is fraudulent. ITC IS NON EXISTENT AND FRAUDULENT. 2. M/s. Saan Enterprises, New Delhi 07BGLPD5743F1 ZG The Dealer is having inward supply from M/s STAR ENTERPRISES, NEW DELHI (meaning thereby that the purchases and sales are being made from amongst the same firms which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Additional Advocate General, Punjab asserts that the action of the State authorities is in consonance with law. MOV02 was handed over to the petitioner at the time of detention wherein it was specifically spelled that the detention was for verification of the documents tendered. As per her, during investigation, incriminating material was found against the petitioner which suggested evasion of tax at its end. Resultantly, show cause notice issued under Section 130 of the CGST Act, 2017 has been issued. She has further contended that the petitioner needs to respond to the show cause notice issued under Section 130 and the present writ petition is not maintainable. 11. We have heard learned counsel for the parties and perused the paper book. 12. From the pleadings on record, the following two questions arises for the consideration of this Court:- "(1). Whether the present writ petition deserves to be dismissed being not maintainable? (2). Whether the impugned order dated 30.08.2021 and further proceedings under Section 130 of the 2017 Act initiated vide show cause notice dated 14.09.2021 deserve to be quashed being bad in law?" 13. To quote from De Smith's Judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments." Thus incidence lays on the recipient of supply. 16. Like every taxation enactment, 2017 Act also has a mechanism on which operates, which is 'input tax credit' defined under Section 2(63). It means credit of 'Input tax' defined under Section 2(62). Section 16, Sections 41, 42 and Section 43A provide for eligibility and conditions for taking input tax credit, claim of input tax credit and provisional acceptance thereof, matching reversal and reclaim of input tax credit and procedure for furnishing return and availing input tax credit respectively. Thus, input tax credit to be claimed by registered person not only depends upon eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 68(3) empowers Proper Officer to require the person in charge of conveyance carrying goods to produce the documents for verification. It casts a duty upon the said person to produce the documents and allow the inspection of goods when asked by the Proper Officer. In exercise of the power conferred by Section 164 of the CGST Act, the Central Government notified the Central Goods and Service Tax Rules, 2017. Rule 138 of 2017 Rules govern e-way bills. In case of transportation of goods by road, e-way bill is required to be generated before the commencement of the movement of the consignment. Rule 138A of CGST prescribes the documents and devices to be carried by the person in charge of the conveyance. As per the said provision, person in charge of a conveyance is required to carry the invoice or bill of supply or delivery challan, as the case may be and in case of transportation of goods by road, he is also required to carry copy of e-way bill in physical form or the e-way bill number in electronic form or mapped to a radio frequency identification device embedded on to the conveyance in such manner as may be notified by the Commissioner. Thus, as per Section 68 of the 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of tax and penalty under clause (a) or clause (b) of sub section (1). (4) No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard. (5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded. (6) Where the person transporting any goods or the owner of the goods fails to pay the amount of penalty under subsection (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3): Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section(3) or one lakh rupees, whichever is less: Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer." "130. Confiscation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment. (6) 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. (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 in lieu of confiscation, dispose of such goods or conveyance and deposit the sale proceeds thereof with the Government." 20. Section 168 of 2017 Act confers power on the Central Board of Indirect Taxes and Customs to issue orders, instructions or directions to the Central Tax Officers as it may deem fit for the purpose of uniformity in the implementation of the Act. Exercising the said powers, the Board issued circular dated 13.04.2018 (Annexure P-7). The same reads as under:- "Circular No. 41/15/2018-GST CBEC-20-16/03/2017-GST Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes and Customs GST Policy Wing New Delhi, Dated the 13th April, 2018 To, The Principal Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pection of goods in movement and detention, seizure and release and confiscation of such goods and conveyances. In order to ensure uniformity in the implementation of the provisions of the CGST Act across all the field formations, the Board, in exercise of the powers conferred under section 168(1) of the CGST Act, hereby issues the following instructions: (a) The jurisdictional Commissioner or an officer authorised by him for this purpose shall, by an order, designate an officer/officers as the proper officer/ officers to conduct interception and inspection of conveyances and goods in the jurisdictional area specified in such order. (b) The proper officer, empowered to intercept and inspect a conveyance, may intercept any conveyance for verification of documents and/or inspection of goods. On being intercepted, the person in charge of the conveyance shall produce the documents related to the goods and the conveyance. The proper officer shall verify such documents and where, prima facie, no discrepancies are found, the conveyance shall be allowed to move further. An e-way bill number may be available with the person in charge of the conveyance or in the form of a printout, sms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch physical verification/inspection. (g) Where no discrepancies are found after inspection of the goods and conveyance, the proper officer shall issue forthwith a release order in FORM GST MOV-05 and allow the conveyance to move further. Where the proper officer is of the opinion that the goods and conveyance need to be detained under section 129 of CGST Act, he shall issue an order of detention in FORM GST MOV-06 and a notice in FORM GST MOV-07 in accordance with the provisions of sub-section (3) of section 129 of the CGST Act, specifying the tax and penalty payable. The said notice shall be served on the person in charge of the conveyance. (h) Where the owner of the goods or any person authorized by him comes forward to make the payment of tax and penalty as applicable under clause (a) of sub-section (1) of section 129 of the CGST Act, or where the owner of the goods does not come forward to make the payment of tax and penalty as applicable under clause (b) of sub-section (1) of the said section, the proper officer shall, after the amount of tax and penalty has been paid in accordance with the provisions of the CGST Act and the CGST Rules, release the goods and conveyance by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay directly invoke section 130 of the CGST Act by issuing a notice proposing to confiscate the goods and conveyance in FORM GST MOV-10. In the said notice, the quantum tax and penalty leviable under section 130 of the CGST Act read with section 122 of the CGST Act, and the fine in lieu of confiscation leviable under sub-section (2) of section 130 of the CGST Act shall be specified. Where the conveyance is used for the carriage of goods or passengers for hire, the owner of the conveyance shall also be issued a notice under the third proviso to sub-section (2) of section 130 of the CGST Act, proposing to impose a fine equal to the tax payable on the goods being transported in lieu of confiscation of the conveyance. (m) 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. (n) An order of confiscation of goods shall be passed in FORM GST MOV-11, after taking into consideration the objections filed by the person in charge of the goods (owner or his representative), and the same shall be served on the person concerned. Once the order of confiscation is passed, the title of such goods s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us goods. (s) Whenever an order or proceedings under the CGST Act is passed by the proper officer, a corresponding order or proceedings shall be passed by him under the respective State or Union Territory GST Act and if applicable, under the Goody and Services Tax (Compensations to States) Act, 2017. Further, sub-sections (3) and (4) of section 79 of the CGST Act/respective State GST Acts may be referred to in case of recovery of arrears of central tax/State tax/ Union territory tax. (t) The procedure narrated above shall be applicable mutatis mutandis for an order or proceeding under the IGST Act, 2017. (u) Demand of any tax, penalty, fine or other charges shall be added in the electronic liability ledger of the person concerned. Where no electronic liability ledger is available in case of an unregistered person, a temporary ID shall be created by the proper officer on the common portal and the liability shall be created therein. He shall also credit the payments made towards such demands of tax, penalty or fine and other charges by debiting the electronic cash ledger of the concerned person. (v) A summary of every order in FORM GST MOV-09 to FORM GST MOV-11 shall be uploa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He cannot be held liable under Section 130 for contravention of the provision of law by other person in the supply chain. Wrongful claim of input tax credit may be result of a bonafide claim as well and does not necessarily involve intent to evade payment of tax. Moreover, wrongful claim of input tax credit is not one of the conditions enumerated under Section 130(1) of the 2017 Act that could entail confiscation of the goods. Section 130 being penal in nature has to be construed strictly. 24. We must notice here that the power of authorities to search, seizure, detained, confiscate goods in transit is not a phenomenon exclusively attached to 2017 Act. In fact, in earlier tax regime also, the powers of the authority to inspect and detain goods in transit continued to be a subject matter of judicial debate. A Division Bench of this Court in 'Xcell Automation vs. State of Punjab and another' reported as PLR (2007) Punjab and Haryana page 685, after considering plethora of judgments culled out the following preposition:- "The position can be summed up as under: (1) Exercise of power at the check-post to be valid, should have reasonable nexus with the attempt at evasion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form". Once a person cannot be compelled to do something not possible, definitely he cannot be penalized for not doing so. 26. In the present case, the goods and conveyance in transit were accompanied with the documents as prescribed under Rule 138A, i.e. the invoice and the e-way bill. No discrepancy has been pointed out in the said documents even in the reply filed by the respondents. 27. The notice dated 14.09.2021 reveals that the same has been issued on the basis of:- "On subsequent verification of the inward supply of the sellers for the subsequent period it is found that:- a) S.D. ENTERPRISES (03GBQPK0612B1Z7) - The Dealer is having inward supply from M/s K.S ENTERPRISES 03MGFPS4269EIZ3 whose subsequent inward supply is from BALBIR ENTERPRISES 03GWYPS4252J1ZR. M/s Balbir Enterprises is not having any inward supply and is just doing outward supply and is not paying any Tax as is evident from his returns for the preceding periods. b) ROYAL METAL (03FVZPS9476P1ZX) - The dealer is having inward supply from two firms namely GLOBAL IMPEX 031AIPK9969NIZO and EKAM STEELS 03CTTPB3824M1ZH. The subsequent inward supply of GLOBAL IMPEX 03IAIPK9969NIZO is from M/S K.S ENTERPRISES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 130, the case alleged against the petitioner is that of wrongful claim of input tax credit. The petitioner or for that matter any registered person shall be entitled to tax credit of input tax on any supply of goods or services, only when he shall is able to show that the tax in respect of such supply has been paid to the Government either in cash or through utilization of input tax credit admissible in respect of the said supply. Needless to reiterate any person can claim input tax credit under the provisions of the 2017 Act only if the same has been actually paid to the Government. Thus, the action of the respondents in initiating proceedings under Section 130 on the basis of show cause notice dated 14.09.2021 cannot be sustained. 30. In view of the discussion above, we find that question No.2 posed in para No. 12, deserves to be answered in favour of the petitioner. Having found that the authority committed error manifest on the record, we do not feel it appropriate to non-suit the petitioner on the ground of alternate remedy. Guided by the law laid down by Supreme Court in Whirlphool Corpration vs. Registrar of Trade Mark, Mumbai, reported as 1998 Vol. 8 SCC 1:- " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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