Insha Trading Company through Proprietor Mustak Jamalbhai Sheikh Vs. State Of Gujarat (Gujarat High Court)
ORAL JUDGMENT
(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
- Rule. Mr. Trupesh Kathiriya, learned Assistant Government Pleader waives service of notice of rule on behalf of the respondents.
- Having regard to the controversy involved in the matter as well as the urgency of the case, the matter was taken up for final hearing today.
- By this petition under article 226 of the Constitution of India, the petitioner has challenged the order dated 08.04.2019 passed by the third respondent in exercise of powers under section 130 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST Act”), whereby, the vehicle bearing registration No. DL-01-GC-4470 together with the goods contained therein is ordered to be confiscated and tax, penalty and fine in lieu of confiscation of the goods and conveyance as computed therein have been levied.
4. The facts stated briefly are that the petitioner is engaged in the business of metal and is duly registered under the provisions of the relevant Goods and Services Tax Act. One Ramgarhia Trading Company, which is located at New Delhi and is registered under the relevant Goods and Services Tax
Act, placed an order for brass electrical parts through Jay Gujarat Goods Carrier. It is the case of the petitioner that the driver of the truck was carrying invoice, e-way bill and lorry receipt while transporting brass electrical parts from Jamnagar to Delhi. The truck was intercepted by the third respondent – State Tax Officer on 14.01.2019 at 00:30 a.m. at Soyal Toll
Gate. The driver of the truck had produced the documents relating to the goods which were being transported; however, the third respondent detained the truck on the ground that the genuineness of the goods in transit (its quantity etc.) and/or tendered documents requires further verification. Accordingly, on 14.01.2019, the third respondent issued an order in Form GST MOV-01 recording the statement of the driver as well as
an order for physical verification/inspection of the conveyance
and goods and the documents in Form GST MOV-02. Thereafter, by an order dated 14.01.2019, passed under section 129(1) of the CGST Act, the truck as well as the goods contained therein was ordered to be detained. The ground stated in the order of detention as translated into English reads
thus: “On a perusal of the details in bilty No.15615, it prima
facie being disproportionate, the vehicle has been detained for
verification of the same”. It may be noted that the order of
physical verification in Form GST MOV-02 and the order under
section 129(1) of the CGST Act have been passed on the same
day, that is, on 14.01.2019.
4.1 Thereafter, by an order dated 29.01.2019, passed in
Form GST MOV-09; the petitioner was called upon to pay the
tax and penalty as computed therein. Thereafter, a notice
came to be issued in Form GST MOV-10 under section 130 of
the CGST Act for confiscation of the conveyance and goods in
question on the grounds that on a perusal of the details in bilty
No.15615, it prima facie being disproportionate, the same
required verification; and that upon primary examination of the
dealer online, it is found that in December 2018, he has
generated 42 e-way bills wherein IGST of Rs.3,64,30,800/- is
shown, and that it appears that either the dealer has not paid
such amount or the purchases are not genuine. Thereafter, by
the impugned order dated 08.04.2019, the goods and
conveyance are ordered to be confiscated in exercise of
powers under section 130 of the CGST Act.
5. Mr. Chetan Pandya, learned advocate for the petitioner
assailed the impugned order by submitting that the documents
which were required to be carried by the driver were duly
produced at the time when the vehicle came to be intercepted.
It was submitted that while Form GST MOV-02 was issued
stating that physical verification of the goods is required to be
carried out, however, no report in Part A of Form GST EWB-03
has been uploaded on the portal nor has any report in Form
GST MOV-04 of any physical verification has been furnished to
the petitioner. The attention of the court was invited to the
Circular No. 41/15/2018-GST dated 13.04.2018, issued by the
Central Board of Indirect Taxes and Customs, GST Policy Wing
(hereinafter referred to as “the Board”), to point out that the
Board has prescribed the procedure which is required to be
followed by the proper officer at the time when the goods and
conveyance are intercepted. It was pointed out that in terms
of the said circular, if upon verification of the documents and
on verification of the goods, no discrepancy is found, the
conveyance shall be allowed to move further. It was submitted
that in the present case, the relevant documents namely the
e-way bill and the invoice were duly produced and no
discrepancy has been found therein and that though the
conveyance was detained for the purpose of inspection of the
goods, no inspection appears to have been carried out. It was
submitted that in the absence of any discrepancy having been
noticed by the proper officer, it was not permissible for the
officer to detain the conveyance any longer or to proceed
under section 129 or 130 of the CGST Act. It was submitted
that, therefore, the entire action of the third respondent in
passing the orders under section 129 and section 130 of the
CGST Act respectively, is illegal and arbitrary and is not in
consonance with the instructions issued by the Board in the
circular dated 13.04.2018. It was accordingly urged that the
petitioner deserves to be allowed by setting aside the
impugned order and directing the third respondent to forthwith
release the conveyance along the goods contained therein.
6. On the other hand, Mr. Trupesh Kathiriya, learned
Assistant Government Pleader, placed reliance upon the
affidavit-in-reply filed on behalf of the respondents, to submit
that after the conveyance in question was intercepted, the
State Tax Officer had conducted search at the business
premises of the petitioner on 21.01.2019 as well as on
22.01.2019 and found that the petitioner did not maintain any
stock or books of accounts at his business premises. It was
further submitted that the petitioner and the transporter – Jay
Gujarat Goods Carrier are working in collusion with each other
and that, the petitioner is stated to have purchased the goods
which were being transported from parties located at Kolkata,
West Bengal; however, upon verification by the GST
Department, it was found that such parties are not in
existence. It was submitted that, therefore, it appears that the
petitioner has purchased the goods from the local market
without paying any local tax and is selling the same to the
dealers in New Delhi mentioning State tax in the invoice and
thereby, claiming input tax credit. It was submitted that the
authority under the GST Act had issued DRC-1 under section
74 of the GST Act on 25.04.2019 and the petitioner is facing
prosecution for wrongfully availing the benefit of input tax
credit and a charge-sheet has been filed against the petitioner
on 05.10.2019 for the offence punishable under sections
132(1)(c) as well as 132(1)(d) of the GST Act. It was submitted
that in the light of what has been unearthed during the course
of investigation, the order of confiscation is justified. It was
submitted that the petitioner has no other property except
residential premises, the value whereof, is not commensurate
with the amount involved in the entire fraud that has been
committed by the petitioner in collusion with Jay Gujarat Goods
Carrier. It was submitted that, therefore, the respondents are
wholly justified in confiscating the conveyance with the goods
contained therein and that, the petition being devoid of any
merits, deserves to be dismissed.
7. This court has considered the submissions advanced by
the learned advocates for the respective parties. In the present
case, this court is called upon to examine the validity of the
impugned order dated 08.04.2019 passed by the third
respondent under section 130 of the CGST Act as well as the
order dated 14.1.2019 whereby detention of the conveyance
and together with the goods contained therein has been
ordered under section 129(1) of the CGST Act.
7.1 The facts have been noted hereinabove. The conveyance
in question was transporting the goods being brass electrical
parts from Jamnagar to Delhi. The consignor, viz. the
petitioner, and the consignee are duly registered under the
relevant GST Acts. On 14.01.2019, when the conveyance came
to be intercepted, the driver of the conveyance had duly
produced the e-way bill as well as the invoice in connection
with the goods that were transported. On behalf of the
respondents, nothing has been pointed out to show that there
was any discrepancy in the e-way bill or the tax invoice. Under
the circumstances, in the light of the instructions issued by the
Board in the Circular dated 13.04.2018, since, upon verification
of the documents no discrepancies were found, the
conveyance was required to be allowed to move further.
However, in case the third respondent desired to carry out
physical verification of conveyance, goods and the documents,
it was still permissible for him to detain the conveyance, and
accordingly, the third respondent issued an order in Form GST
MOV-02 for physical verification/inspection of the conveyance,
goods and the documents. The said order passed on the
ground that the genuineness of the goods in transit (its
quantity etc.) and/or tendered documents requires further
verification.
7.2 In terms of the Circular dated 13.04.2018, when the
proper officer issues an order for physical verification, he is
within twenty four hours of the issuance of Form GST MOV-02,
required to prepare a report in Part A of Form GST EWB-03 and
upload the same on the common portal. It is further provided
that within a period of three working days from the date of
issue of the order in Form GST MOV-02, the proper officer shall
conclude the inspection proceedings, either by himself or
through any other proper officer authorized in this behalf and
that, where the circumstances warrant such time to be
extended, he shall obtain a written permission in Form GST
MOV-03 from the Commissioner or an officer authorized by him
for extension of time beyond three working days and a copy of
the order of extension is required to be served on the person in
charge of the conveyance. The circular further provides that on
completion of physical verification/inspection of the
conveyance and goods in movement, the proper officer shall
prepare a report of such physical verification in Form GST
MOV-04 and serve a copy of the said report to the person in
charge of the goods and conveyance. The proper officer shall
also record, on the common portal, the final report of the
inspection in Part B of Form GST EWB-03 within three days of
such physical verification/inspection. Thus, when the
conveyance was detained for the purpose of inspection, it was
incumbent upon the third respondent to prepare a report in
Form GST EWB-03 and upload the same on the common portal
within twenty four hours from issuance of Form GST MOV-02
and upon completion of physical verification, he was further
required to prepare a report in Form GST MOV-04 and serve a
copy of the said report to the person in charge of the goods
and conveyance and thereafter record the final report of the
inspection in Part B of Form GST EWB-03 within three days of
such physical verification. However, in the facts of the present
case, no such reports in Part A of Form GST EWB-03, Form GST
MOV-04 or Part B of Form EWB-03 have been prepared. Thus,
it appears that though the vehicle was detained for the
purpose of carrying out inspection, no such inspection was
carried out or that upon physical verification no discrepancy
was found in the conveyance/goods or documents. Clause (g)
of the above referred circular requires that where no
discrepancies are found after the 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. The clause further provides that when the proper
officer is of the opinion that the goods and conveyance need to
be detained under section 129 of the 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 subsection
(3) of section 129 of the CGST Act, specifying the tax
and penalty payable and such notice is required to be served
on the person in charge of the conveyance. In the facts of the
case, despite the fact that no discrepancy appears to have
been found after the inspection of the goods and conveyance,
the proper officer has not issued a release order in Form GST
MOV-05. Further, despite the fact that Form GST MOV-02 was
issued, without verification/inspection of the goods and
conveyance, the third respondent has issued an order of
detention in Form GST MOV-06 on the same day, that is, on
14.01.2019, on the ground that upon a perusal of the details in
bilty No.15615, the same being disproportionate, the vehicle is
required to be detained for verification of the same.
7.3 In the affidavit-in-reply, there is not even a whisper
regarding any discrepancy having been found in bilty
No.15615 after verification, despite the fact that the
conveyance has been detained for that purpose. Thus, it
appears that, there is no valid ground for detention of the
vehicle in question on the part of the respondents. Under the
circumstances, the question of calling upon the petitioner to
pay the tax, penalty and fine, as computed by the respondent
in the order of demand of tax and penalty in Form GST MOV-09
dated 29.01.2019 does not arise.
7.4 Despite the aforesaid position, the third respondent has
proceeded further and issued a notice under section 130 of the
CGST Act in Form GST MOV 10, and has thereafter, passed an
order of confiscation under section 130 of the Act in Form GST
MOV-11. The reason for passing such an order has got nothing
to do with the reasons for which, the goods and conveyance
were initially detained. The reasons for issuance of the notice
for confiscation under section 130 of the CGST Act in Form GST
MOV-10 are that upon preliminary verification of the dealer
online, 42 e-way bills have been generated in December 2018,
wherein, IGST has been shown to Rs.3,64,30,800/- and it
appears that, dealers has not paid the same or that the
purchases are not genuine. If that be so, nothing prevents the
respondents from taking appropriate action against petitioner
in accordance with law under the relevant provisions of the
CGST Act. However, when the conveyance in question was
carrying the goods which were duly accompanied by
documents and no discrepancy was found in connection
therewith, there was no reason for the third respondent to
confiscate the same. The impugned order of confiscation
passed by the third respondent under section 130 of the CGST
Act, therefore, cannot be sustained.
8. For the forgoing reasons, the petition succeeds and is
accordingly, allowed. The order dated 08.04.2019 issued by
the third respondent under section 130 of the CGST Act as well
as the order of demand of tax and penalty dated 29.01.2019,
issued in Form GST MOV-09 are hereby quashed and set aside
and the third respondent is directed to forthwith release the
conveyance and goods in question.
8.1 It is clarified that the fact that this court has ordered
release of the goods and conveyance will not, in any manner,
come in the way of the respondents in proceeding against the
petitioner in connection with the contravention of any
provisions of the GST Acts and the rules framed thereunder
which find reference in the affidavit-in-reply filed on behalf of
the respondents.
8.2 Rule is made absolute accordingly with no order as to
costs. Direct service is permitted.
[Harsha Devani, J.]
[ Sangeeta K. Vishen, J. ]