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March 10, 2021

HC orders release of trucks detained which were not in transit carrying any goods

by CA Jessica Nagaonkar in GST

HC orders release of trucks detained which were not in transit carrying any goods

Section 129 of CGST Act, 2017 explains Detention, seizure and release of goods and conveyances in transit.

  • According to Section 129, where 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, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure
  • These goods or documents shall be released:
    • on payment of the applicable tax and penalty equal to 100% of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to 2% of the value of goods or Rs 25,000, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty
    • on payment of the applicable tax and penalty equal to the 50% of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to 5% of the value of goods or Rs 25,000, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty
    • upon furnishing a security equivalent to the amount payable under points (a) & (b) as above
  • No such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
  • The provisions of section 67(6) shall apply for detention and seizure of goods and conveyances.
  • The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty
  • No tax, interest or penalty shall be determined without giving the person concerned an opportunity of being heard.
  • Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided within 7 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130
  • If the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the period of 7 days may be reduced by the proper officer.

Power to summon is mentioned for GST cases under section 70 of the CGST Act 2017. Section 70 of CGST Act provides powers to tax officers to summon persons to give evidence and produce documents. According to Section 70, the proper officer shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908.

Let us refer to the case of Surya Roadways Vs Senior Intelligence Officers (SIO) (Gujarat High Court), where the issue under consideration was whether the two trucks could have been seized under Section 129 of the Act, 2017, more particularly when both the trucks were not in transit carrying any goods.

Facts of the Case:

  • The writ applicant was a transporter and was carrying on business in the name of M/s. Surya Roadways.
  • Two trucks of the ownership of the writ applicant, came to be seized by the officers of the GST in the purported exercise of powers under Section 129 of the GST Act, 2017.
  • The seizure of the two trucks of the ownership of the writ applicant was on the basis that in the past those two trucks were used for transporting the goods in contravention of the provisions of the Act and the Rules.
  • In this regard, an inquiry was initiated and the same was pending as on the date of hearing.
  • Summons under Section 70 was issued to the writ applicant and according to respondent.
  • The writ applicant had not honoured the summons.
  • There was one person, Shri Saunak Desai, against whom, allegations were being levelled by the Department of fraud etc., The statement of Mr. Saunak Desai was recorded and in his statement, the name of the writ applicant had surfaced.

The writ applicant, a Proprietary concern, through its Proprietor, prayed for the following reliefs:

  • HC to issue an appropriate writ and/or writ of mandamus, order or direction and/or appropriate writ, order or direction quashing and setting aside the impugned orders of seizure were illegal and passed without any application of mind
  • HC to issue an appropriate writ and/or writ of mandamus, and/or appropriate writ, order or direction directing that the very initiation of the search proceedings by the respondent authority was without any authority of law;
  • HC to issue an appropriate writ and/or writ of mandamus and/or appropriate writ, order or direction holding that the action of the respondent authority in issuance of summons under Section 70 of the GST Act was arbitrary and colourable exercise of powers;
  • Pending the admission, hearing and final disposal of the present petition, HC to stay further proceedings as initiated by the respondent authority
  • Pending the admission, hearing and final disposal of the present petition, HC to restrain the respondent authority from taking any coercive steps against the petitioner
  • HC to pass any other appropriate order, as deemed fit, in the interest of justice.

Observations of the High Court (HC):

  • The short point for the consideration of HC was whether the two trucks could have been seized under Section 129 of the Act, 2017, more particularly when both the trucks were not in transit carrying any goods.
  • Indisputably both the trucks were seized from the office premises of the writ applicant.
  • The department had doubts with regard to some past transactions.
  • HC did not want to interfere with the inquiry or investigation which was undertaken. Such inquiry or investigation would proceed further in accordance with law.
  • HC proposed to dispose of this writ application with an order of release of the two trucks subject to certain terms and conditions.
  • HC only observed that at the end of the inquiry or investigation, if anything incriminating surfaced which could warrant issuance of MOV-10 to the writ applicant under Section 130 of the Act, the authority could do so in accordance with law.
  • However, now, for the purpose of such inquiry or investigation, the two trucks would not be kept in the custody of the department.
  • In such circumstances, HC directed the respondent to release both the trucks on the writ applicant furnishing an undertaking in writing on oath before the concerned authority that till the conclusion of the inquiry or investigation, he shall not transfer the two trucks in favour of any other person or shall not part with the possession of the same or create any encumbrance upon the same.
  • It would be open for the writ applicant to use the two trucks in his normal course of business.
  • HC said so because in the event if the department deemed fit to issue MOV-10 under Section 130 of the Act, 2017, then at least the goods should be secured for that purpose.
  • HC also clarified that they had otherwise not gone into the legality and validity of the inquiry or investigation.
  • HC again reiterate that it was for the department to carry out the necessary investigation in accordance with law.
  • HC also expected the writ applicant to cooperate in the investigation pursuant to the summons issued under Section 70 of the Act.

Thus, HC disposed the writ application with an order of release of the two trucks subject to certain terms and conditions.

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