Judgement Alert : No goods/vehicle detention by squad-officer during inter-state transit apprehending mis-classification.


Judgement Alert : No goods/vehicle detention by squad-officer during inter-state transit apprehending mis-classification.

Posted By : CA Chitresh Gupta and CA Shilpi Gupta | 06-Jul-2020

Judgement Alert : No goods/vehicle detention by squad-officer during inter-state transit apprehending mis-classification.
    
Jointly By:    
CA. Chitresh Gupta
FCA, B. Com(H), IFRS (Cert.), IDT (Cert.)
Co-Author of book “GST –Law, Analysis & Procedures”
Faculty on Goods & Services Tax by ICAI    CA. Shilpi Gupta
FCA, M.Com, B.Com(H) -SRCC
Co-Author of book “GST –Law, Analysis & Procedures”
Faculty on Goods & Services Tax by ICAI


Petitioner    Daily Fresh Fruits India Private Limited
Citation    2020 (3) TMI 439
HC    Kerala High Court

FACTS
The petitioner a Private Limited Company engaged in manufacture and supply of fruit-based beverages/drinks registered under the Tamil Nadu Goods and Services Tax Act, 2017.
According to the petitioner, the carbonated fruit drinks manufactured by them was classified under HSN 2202 9920 under GST and discharging GST @ 12% on all intra State and inter-State supplies. The codes have been specified under the Chapter XXII of GST Tariff Codes. In the aforementioned code in respect of fruit-based drinks the tax is @ 12% ie., 6% under the Central GST and another 6% as State GST. On earlier occasions, the petitioner had also brought the aforementioned drinks within the jurisdiction of Kerala and the vehicles carrying the aforementioned goods were intercepted on the premise that the aforementioned goods were wrongly classified, in fact they would be falling under the head 2202 10, for which the GST rate is 28%.
Though against the aforementioned detention, the petitioner after paying the tax and penalties, obtained the release of the vehicles, this time again on 31st January 2020, the goods of similar nature being brought within the jurisdiction of the Kerala State were intercepted and detained on the same premise. It is in this back ground, the action of the authorities in detention has been assailed in the present writ petition.

ISSUE INVOLVED
Whether goods/vehicle can be detained by squad-officer during inter-state transit apprehending mis-classification?

SUBMISSION
It is not a case of evasion but a bonafide dispute concerning the exigibility of tax ie. the rate of tax. A bare reading of Section 129 (1) of the GST Act states that in contravention of any of the provisions of the Act or the rules made there under, the goods liable to be detained can be released on payment of tax and penalty but that situation would only arise when the goods were moved without any valid documents, but the instant case is covered under the valid tax invoice, on which the applicable IGST was duly charged and E-way Bill, was correctly generated by the petitioner. The authorities in Kerala have powers to verify documents like invoice and E-way bills but in fact, there was no discrepancy in respect of the quantity or description of the goods mentioned in the tax invoice. The only reason for detention was that the lemon drinks were not correctly classified and liable to be tax as 28% and not under 22029920 attracting 12% of GST.
The learned Government Pleader opposed the aforementioned prayer of the petitioner by relying upon Section 129 of the CGST Act, starting with a non-obstante clause that the officers are empowered in case any person transporting any goods while they are in transit in contravention of the provisions of the Act or the rules made thereunder, such goods and conveyance shall be liable to detention or seizure. They shall be released on the conditions enumerated in clauses (a) to (c) of Section 129 and as per the provisions of sub Section (6) of Section 129 in case the amount of tax and penalty imposed upon any goods or the owner of the goods is not deposited within 14 days of such detention and seizure, the proceedings of confiscation and levy of penalty as provided under Section 130 of 2017 of the GST Act would follow.

HELD
It was held that in case of a bonafide dispute with regard to the classification between a transitor of the goods and the squad officer, the squad officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers and nothing beyond. In the present case, it is a case of bonafide miscalculation as to whether the goods would be exigible to 12% or 28%. The judgment cited in N.V.K Mohammed Sulthan Rawtger's case was also a case where the petitioner firm was a manufacturer of 'Ground Betel Nuts (Arecanuts)' and registered with the Tamil Nadu under the Goods and Service Tax Act. The goods were intercepted by the inspecting authority to be in contravention of the misbranding. By relying upon the decision in J.K Synthetics Limited V. Commercial Taxes Officer, 1994 (4) SCC 276, it was held that the charging provisions must be construed strictly but not the machinery provisions which would be construed like any other statute. The court also referred the case of honourable Gujarat High Court in Synergy Fertichem Pvt. Ltd.'s case wherein the similar view was expressed.

COMMENTS
It is a very welcome judgement by Honorable High Court of Kerala. As section 129(1) starts with non-obstante clause and use the words ‘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 thereunder’, is open to very wide connotation. It is rightly held that in case of a bonafide dispute with regard to the classification between a transitor of the goods and the squad officer, the squad officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers only and nothing beyond.





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