TMI Blog2022 (9) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be available. This is evident from Section 129 (6) which states that proceedings under Section 130 can be invoked only if the applicable tax and penalty are not paid despite an order being passed in that regard. The power to detain under Section 129 cannot be converted to a proceeding under Section 130 of the Act since both these provisions operate independently of each other and in completely different contexts. The power to detain is only to stop the transit of the goods and thereby prevent its movement till the tax and penalty is paid. However, the power to confiscate is the process of divesting the owner of the goods of all title to the goods for a contravention of the provisions of the Act and Rules. The entire procedure adopted by the proper officer from converting the detention proceedings into a confiscatory proceeding, ultimately leading to the order of confiscation is wholly illegal and contrary to the statutory scheme of the Act. The Appellate Authority has mechanically accepted the reasoning of the order of the proper officer and has dismissed the appeal without examining the statutory scheme of the Act. The impugned orders cannot be sustained and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. On the following day, i.e., on 29.09.2021, the Deputy Director, DGGI, Zonal Unit, Belagavi, proceeded to issue a notice for confiscation of goods, conveyances and levy of penalty under Section 130 of the CGST Act, in Form GST MOV-10. 6. To this notice, the petitioner submitted a reply dated 27.10.2021. 7. The Deputy Director after granting a personal hearing to the authorised representative of the petitioner, proceeded to pass an order of confiscation under Section 130 of the CGST Act on 24.11.2021 by issuing Form GST MOV-11. 8. Being aggrieved by the order of confiscation, the petitioner preferred an appeal to the Joint Commissioner, Office of the Commissioner of GST Central Excise (Appeals), Belagavi, under sub-section (11) of Section 107 of the CGST Act. 9. The Appellate Authority, on consideration of the appeal, concurred with the view taken by the Deputy Director and proceeded to dismiss the appeal. 10. As against the said order passed in appeal, though an appeal is provided to the appellate authority under sub-section (1) of Section 112 of the CGST Act, since the Appellate Tribunal has not been constituted, the petitioner is before this Court by way of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoke Section 130 of the CGST Act if he was of the opinion that the movement of goods was being effected with the intent to evade payment of tax. He submitted that initially the proper officer did initiate proceedings for detention only, however, on noticing the intent to evade payment of tax, the proper officer decided to invoke his power under Section 130 of the CGST Act and confiscate the goods and conveyances. 16. He contended that in the instant case, the intent to evade payment of tax was manifestly clear and therefore the proceedings initiated for confiscation cannot be found fault with. To support this argument, the learned counsel sought to rely upon the fact that the E-way bill had not been generated and the goods appeared to be grossly undervalued when compared with the Valuation Report submitted by CAMPCO, which indicated the intent to evade the payment of tax. He also stated that the weight of the goods had been mis-declared and there was a non-declaration of grade and quality of Areca nuts in the Invoice with an intent to undervalue the goods for evasion of tax. He also submitted that this was a case of a non-existent dummy supplier and a recipient, and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of tax by an electronic commerce aggregator, in case, the supplies are made through it. 24. Under the Act, the time of supply of goods or services is defined and so also the value of the taxable supply under the provisions of Chapter IV. The Act also provides for availing input tax credit with the objective of eliminating the cascading effect of taxes. 25. The Act, to order facilitate the levy, stipulates the persons liable for registration, the persons not liable for registration and persons who are required to get themselves compulsorily registered and also for deemed registration. It also prescribes the procedure for such registration under Chapter VI. 26. The Act mandates that a registered person supplying goods or services is required to issue a tax invoice before or at the time of removal of goods or providing of service and the said tax invoice is required to contain a description, quantity and value of the goods or the service. A facility for digital payment is also made. A person who is not registered is prohibited from collection of tax in respect of the supply of goods or services or both. 27. In order to ensure the supply is accounted for and documented, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mline the entire process of taxation with minimal disruption to the business of the taxable person. 34. The underlying objective that can be discerned from these provisions is that the Act fundamentally envisages the taxable person to be self compliant and encourages the taxable person to be voluntarily tax compliant. The provisions are framed in such a manner that it rewards compliance by the taxable person at every stage of the levy being collected and the revenue steps in only when there is a default. 35. In fact, what is to be noticed here is that when there is a default noticed on scrutiny, the proper officer is required to take recourse to an audit or a special audit or a proceeding for determination of tax not paid, either due to an error or due to a fraudulent intention with the intent to evade payment of tax. 36. Chapter XIV and XV provide for the manner in which the default, if any is to be dealt with. The provisions of Chapter XIV empower the proper officer to conduct an inspection, search or seizure. This power of inspection can be exercised by a proper officer only against two persons. Firstly, on a taxable person who has suppressed any transaction relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e context of this case. 42. In cases where fraud or wilful misstatement is not involved, the proper officer is empowered to issue a notice calling upon the person chargeable with tax to show cause as to why the amount specified in the notice along with applicable interest and a penalty leviable under the Act should not be paid. 43. In cases where fraud or wilful misstatement is involved, the officer is empowered to issue a notice calling upon the person chargeable with tax to show cause as to why the amount specified in the notice along with applicable interest and a penalty equivalent to the tax specified in the notice should not be paid by him. 44. It is to be noticed here that, in proceedings for the determination of tax, in cases other than fraud, the person chargeable with tax is called upon to pay the penalty leviable under the Act while in proceedings for determination of tax in cases where fraud is involved, the person chargeable with tax is called upon to pay penalty equivalent to the amount of tax specified in the notice. Thus, there is a marked difference in the matter of imposition of penalty when it comes to a proceeding for determination of tax based on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also disincentivising persons chargeable with tax which is built into the statutory scheme, when it comes to the determination of tax. 53. In cases of proceedings initiated for determination of tax for non-payment of tax not on account of a moral impropriety i.e., fraud, wilful misstatement and suppression of facts, the same statutory scheme is replicated, however, with a notable difference in penalising the wrongdoing. 54. In fact, at the very stage of issuing a show cause notice, the person chargeable with a tax who is alleged to have acted with a fraudulent intention is called upon to pay the same sum of money equivalent to the applicable tax apart from the applicable tax and the interest as a penalty. Thus, the show-cause notice itself signifies that for an immoral conduct, the person chargeable with tax is saddled with the liability to pay twice the applicable tax, apart from interest. 55. If, however, the person chargeable with tax, wishes to pre-empt this notice and pays the applicable tax along with interest and a penalty of 15% of the tax payable, before he is served with the show cause notice, the matter comes to an end. He is essentially let off the hook by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not suffer a penalty. If the wrongdoing is on account of an immoral conduct, even then, if the wrongdoer acknowledges his error and makes amends before receipt of a show cause notice, he is saddled with a penalty of just 15% and if he chooses not to pay the actual tax payable, he is saddled with a larger penalty of 25%. If he desists further and contests the proceedings and forces a determination of the tax payable, he is saddled with a penalty of 50% of the applicable tax. 61. In both the above-mentioned cases, it is to be observed that the law does not intend to confiscate the goods itself as a penal measure and the law only ensures that the applicable tax with interest and penalty is recovered from the wrongdoer. 62. The other provisions in Chapter XV deal with the recovery of tax, which would not be relevant for this case. Similarly, Chapters XVI, XVII and XVIII contain provisions relating to the liability to pay in certain cases, Advance Tax Ruling and Appeals and revisions, which would also not be relevant for the issues involved in this case. 63. Chapter XIX provides for dealing with offences and penalties. Section 122 to Section 128 provides for the imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er concerned in this case. 70. The goods detained or seized are also liable to be released if a security equivalent to the amount payable as prescribed in clause (a) or clause (b). In other words, if the owner of the goods furnishes a security equivalent to the applicable tax and a penalty equivalent to the applicable tax, the goods, conveyances and the documents related to them are bound to be released. 71. Similarly, if a person other than the owner furnishes security for an amount equivalent to the applicable tax and 50% of the value of the goods reduced by the applicable tax, the goods, conveyances and documents related to them are bound to be released in favour of that person. 72. The proviso attached to Section 129 (1) bars the detention of the goods and conveyances unless an order of detention is served on the person transporting the goods. 73. Sub-section (2) of Section 129 makes the provisions of Section 67 (6) applicable to detentions or seizures made. Section 67 (6) states that the goods seized during the course of an inspection are required to be released on a provisional basis either upon execution of a bond and furnishing a security as prescribed or if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (5) of Section 129, if the owner or any other person complies with the order passed by the officer by paying the applicable tax, interest and penalty, the entire detention and seizure proceedings are deemed to have been concluded. 82. It is only if the order is not complied within 14 days, do the authorities secure a right to initiate confiscation proceedings under Section 130 of the Act. Thus, the power of confiscation when goods and conveyances are seized would be available only when the applicable tax and penalty is not paid. This once again establishes that the primary intent of the law is to recover the applicable tax and penalty and only if this is not achieved, the power of confiscation is required to come into play. 83. It is to be emphasised here that the power available under Section 129 to detain and seize is only when the goods and conveyances are in transit. In other words, under Section 129, the proper officer would not have the power to detain goods or conveyances which are not in transit i.e., when they are found in the registered place of business of the taxable person. 84. Section 130 2 of the Act provides for confiscation of the goods. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confiscation being made, the title to the goods and conveyances would vest in the Government and the proper officer adjudging the confiscation is entitled to take possession of the confiscated things and he is also empowered to dispose off the goods or conveyance if the fine in lieu of confiscation is not paid within three months. 90. As could be seen from the statutory framework, the power to inspect and seize the goods is granted to the proper officer under Section 67 and under Section 129 of the Act. 91. Under Section 67, if (a) the taxable person has suppressed any transaction relating to the supply of goods or services or both or (b) a person engaged in the business of transporting the goods or the owner of a warehouse or godown is keeping goods which have escaped payment of tax, the proper officer can inspect and seize the goods and documents. This inspection and seizure can be carried out at any place of businesses of the taxable person or the person engaged in the business of transporting goods or storage of goods. However, when such goods or documents are seized, the proper officer is bound to release them on a provisional basis if a bond is executed and security fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed either under Section 67 of the Act or under Section 129 of the Act, the power to confiscate under Section 130 would not be available. This is evident from Section 129 (6) which states that proceedings under Section 130 can be invoked only if the applicable tax and penalty are not paid despite an order being passed in that regard. 97. Thus, the procedure adopted by the proper officer, in this case, to embark on confiscation proceedings after invoking his power under Section 129 to detain and seize the goods is contrary to the statutory scheme. 98. However, the Learned Counsel for respondents contends that a Circular has been issued on 13.04.2018 by the Commissioner in exercise of the powers conferred under Section 168 of the Act and as per Instruction No.2(l) of the said Circular, if the proper officer is of the opinion that the movement of the goods is being effected to evade payment of tax, he could directly invoke confiscation proceedings under Section 130. This argument cannot be accepted for more than one reason. 99. Firstly, the statutory framework, as explained above does not permit confiscation proceedings merely because it is found by the proper officer that applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act. This power to issue instructions for the uniform implementation of the Act cannot vest the Commissioner to prescribe a set of instructions which go against the grain of the statutory provisions. The instructions in the Circular empowering the proper officer to invoke the power of confiscation under Section 130 of the Act after he has invoked the power of detention under Section 129 amounts to nullifying the right available to the owner of the goods or the owner of the conveyances to get the goods and conveyances released and such a power is not available to the Commissioner under Section 168. If this argument were to be accepted, it would essentially mean that the Commissioner can issue instructions which virtually amount to amending the statutory provisions or at least enable the officers to distort and defeat the statutory framework. 103. It is to be stated that the power to detain under Section 129 cannot be converted to a proceeding under Section 130 of the Act since both these provisions operate independently of each other and in completely different contexts. The power to detain is only to stop the transit of the goods and thereby prevent its moveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the power that is available to a proper officer when the goods are in transit and obviously when the goods in transit are detained, only that procedure prescribed can be applied and not any other provision. The Commissioner by issuing a circular has basically devised a new procedure contrary to the one provided under the statute, which is impermissible. Thus, the reliance placed on the Circular can be of no avail and the power to switch over to the confiscatory proceedings midway when the goods are detained in transit would not be available to the proper officer. 108. In this case, the goods were intercepted while in transit on 13.09.2021 and the proper officer also passed an order of detention on 28.09.2021 (MOV-6) and on the passing of this order, the owner of the goods or the owner of the conveyance secured a right under Section 129 to get the goods released. However, the proper officer, thereafter proceeded to issue a notice of confiscation (MOV-10). Thus, the proper officer basically nullified the statutory right of the owner of the goods or the non-owner to get the goods released on compliance with the conditions specified in Section 129(1) (a) to (c), which would render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s payable and if a registered person supplies goods on which tax is not paid or short paid, he is required to pay a penalty of ten thousand rupees or ten percent of the tax, if it is by error and a penalty of ten thousand rupees or the tax due, if it is by reason of fraud. 114. In other words, for transporting the goods without an e-way bill (it is admitted in this case that the consignment was accompanied by a tax invoice), the taxable person (i.e., a person who is registered under Section 22 of the Act) would be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded. 115. In respect of the act of supplying the goods without paying tax or with a shortfall, the registered person would be liable to pay a penalty of ten thousand rupees or ten percent of the tax due (if it was by error) or a penalty of ten thousand rupees or the tax due (if it was by fraud). 116. Thus, in the instant case, the proper officer possessed the power to impose a penalty for transporting the goods without the cover of documents and also impose a penalty for supplying the goods without payment of tax. 117. As stated above, the goods were accompanied by a tax invoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty as prescribed in Section 122 and that could not entitle him to invoke his power to confiscate the goods itself. 122. It is to be kept in mind the predominant principle under the Act is to ensure that the registered person is given a chance to rectify his wrongdoing whenever the wrongdoing is noticed and pay the applicable tax and penalty or interest as the case may be. The proper officer cannot snatch away that right conferred on the registered person by invoking proceedings to confiscate the goods itself. The power of confiscation being the ultimate and the most extreme punishment can only be invoked in extraordinary circumstances, and definitely not when the goods are detained in transit, given the design of the statutory framework. It is to be noticed here that the statute consciously leans towards giving an opportunity to the wrongdoer to rectify his wrongs voluntarily. 123. As far as the allegation that the goods appear to be grossly under-valued, it is to be stated that the basis for this allegation was a valuation report given by CAMPCO. 124. Under Section 15 of the Act, the value of the supply of goods would be the transaction value and a transaction v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 74 and cannot really be raised and determined in a confiscatory proceeding, given the fact that the petitioner was a registered person and its registration had been accepted by the Department. 129. In my view, the entire procedure adopted by the proper officer from converting the detention proceedings into a confiscatory proceeding, ultimately leading to the order of confiscation is wholly illegal and contrary to the statutory scheme of the Act. The Appellate Authority has mechanically accepted the reasoning of the order of the proper officer and has dismissed the appeal without examining the statutory scheme of the Act. I am therefore of the view that impugned orders cannot be sustained and the same are quashed. The question that is framed is accordingly answered in the negative. 130. Since it is stated that the confiscated goods are already sold in a public auction, the respondents are directed to pay the petitioners (the owner of the goods), the sale proceeds of the auction after deducting the penalty prescribed under Section 129(1)(a) of the Act, within a period of four weeks from the date of receipt of a certified copy of this order. 131. As a consequence, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty under clause (a) or clause (b) or clause (c). (4) No tax, interest or 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 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: Provided 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 fourteen days may be reduced by the proper officer. 2. 130. Confiscation of goods or conveyances and levy of penalty. (1) 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 3. 122. Penalty for certain offences. (1) Where a taxable person who (i) x x x (xiv) transports any taxable goods without the cover of documents as may be specified in this behalf; x x x he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher. 4. 122. Penalty for certain offences. (1) x x x (2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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