Is order of detention under GST appealable?

Introduction

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

1.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

2. These goods or documents shall be released:-

a. 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

b. 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

c. upon furnishing a security equivalent to the amount payable under points (a) & (b) as above

3. No such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

4. The provisions of section 67(6) shall apply for detention and seizure of goods and conveyances.

5. 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

6. No tax, interest or penalty shall be determined without giving the person concerned an opportunity of being heard.

7. 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

8. 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.

Provisional Release of Goods

1. As per Section 129 (1)(c) read with section 67(6) also read with Rule 140, goods can provisionally be released on furnishing bank guarantee equal to 100% of the tax payable and also upon the execution of bond for the value of goods in question.
2. Provisional release is subject to adjudication wherein after release of goods proper officer would conduct adjudication by verifying all connected records and would take a final decision as to whether the bank guarantee has to be realized to the Government account or to be released in favour of the assessee.

Appeal under Section 107

According to Section 107(1), any person aggrieved by any decision or order passed under CGST Act, the SGST Act or the UTGST Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within 3 months from the date on which the said decision or order was communicated to such person.

According to Section 121, no appeal shall lie against any decision taken or order passed by an officer of central tax if such decision taken or order passed relates to any of the following matters:-

1. an order of the Commissioner or other authority empowered to direct transfer of proceedings from one officer to another officer; or
2. an order pertaining to the seizure or retention of books of account, register and other documents; or
3. an order sanctioning prosecution under this Act; or
4. an order passed under section 80.

Can detention under GST be appealable under Section 107?

In case where adjudication order is against the assessee, an appeal under Section 107 would lie against such an order.  Disputes are going on regarding the question whether an appeal under Section is possible where goods are detained under Section 129(1) and are released on payment of tax and penalty demanded, leaving no room for any further adjudication.

Let us refer the High Court Judgment of Uttarakhand HC in M/s. Agarwal Timber Suppliers Vs. State of Uttarakhand and Others in Special Appeal No. 765 of 2019 dated 08.08.2019 to understand whether detention under GST be appealable under Section 107.

Facts of the Case:-

1. The appellant (petitioner) purchased timber from the Uttarakhand Forest Development Corporation, a statutory Corporation created under Section 3 of the Uttar Pradesh Forest Corporation Act, 1974.
2. The invoice raised by the Uttarakhand Forest Development Corporation, on the petitioner, was a tax invoice, meaning thereby that both CGST and SGST were charged on the sale price of the goods.
3. The petitioner claimed to have paid the said amount to the Corporation even before the goods were transported.
4. The Corporation instead of raising 2 separate e-way bills for 2 separate consignments had raised 1 e-way bill for the total amount on both the consignments.
5. While the goods of the petitioner were in transit, they were seized and, on the ground that only 1 e-way bill was issued instead of 2, a penalty was sought to be levied on the petitioner.
6. Contending that the penalty, if at all, should have been paid by the Corporation, since the error in issuing one e-way bill instead of two was on their part and not on the part of the petitioner, the jurisdiction of the High Court was invoked.
7. The learned Single Judge, however, dismissed the writ petition at the stage of admission assigning the petitioner to the remedy under Section 107 of the CGST Act.

Observations of the High Court

1. In the present case, there was no dispute regarding tax and it was the petitioner’s case that the tax had been paid to the Corporation which, in turn, is obligated to remit the said amount to the State Tax Department.
2. Since the petitioner disputes levy of penalty in its entirety, they would, in terms of Section 107(6) of the CGST Act, only be required to deposit 10% of such penalty and as a result, in terms of Section 107(7) of the CGST Act, the remaining penalty need not be paid.
3. That does not, however, solve the problem which the petitioner faced i.e. for release of the goods detained by the respondent-authorities.
4. If, on the other hand, he were to comply with the demand notice issued under Section 129(1), in terms of Section 129(5) of the CGST Act, on payment of the amount referred to in Sub-Section (1), all proceedings in respect of the notice shall be deemed to be concluded, in which event the goods would be released.
5. Would conclusion of all proceedings mean that the appellant would not be entitled to prefer an appeal?
6. To modify the order of the learned Single Judge and, instead, direct the petitioner to deposit the entire amount of penalty with the concerned authorities, and furnish proof of deposit of the said amount along with the Appeal to be preferred under Section 107(1) of the CGST Act.
7. On such deposit, and on an Appeal being preferred thereafter within the period of limitation prescribed under Section 107(1) of the CGST Act, the Appeal shall be entertained by the Appellate Authority, and shall be adjudicated on its merits.
8. As soon as an Appeal is preferred by the petitioner, enclosing thereto proof of payment of total penalty amount, the subject goods shall be released in their favour.
9. In case the Appeal is decided in the petitioner’s favour, they shall then be entitled for refund of the amount deposited by them pursuant to the order now passed by the HC.

Thus, it is laid down that the detention itself is appealable. In this case the wider question was that whether an appeal is legally permissible in cases where goods are released upon payment of applicable tax and penalty seems unanswered.

However, in sharp contrast with the above judgment, the High Court of Allahabad in M/s. R K Overseas Vs. Union Of India And Ors (Writ Tax No. 111 of 2018 dated: 01.02.2018) held that the order U/s 129(1) is not appealable

Facts of the Case:-

1. The goods in transit have been seized vide order passed under section 129(1).
2. The order of seizure has been passed on two grounds that the goods were being transported from New Delhi and not from Ghaziabad as alleged.
3. Secondly, the value of the goods has been suppressed and according to Kaccha bill found with the consignment, the value of the goods is much higher.
4. A preliminary objection is taken by respondent, that against the order passed under section 129(1) of the Act an appeal would lie under section 107 of the Act and that a penalty order has also been passed under section 129(3).
5. In response to the above preliminary objection petitioner submitted that he is not challenging the order of penalty passed under section 129(3) of the Act rather his challenge is only confined to the order of seizure.

Observations of the Court

1. Section 107 of the Act provides for appeal to appellate authority against the orders passed by the adjudicating authority but section 121 carves out the exceptions.
2. On the conjoint reading of sections 107 and 121 it is thus apparent that though all orders passed under the Act by the adjudicating authority are appealable but not the ones which have been specifically excluded from the purview of appeal under section 121 of the Act such as orders pertaining to seizure.
3. In view of the aforesaid facts and circumstances, HC held that the order of seizure of the goods in transit or storage passed under section 129(1) was not appealable and therefore, a writ petition is maintainable against it subject to the limitations of judicial review.
4. The goods along with vehicle shall be released on furnishing indemnity bond and security other than cash and bank guarantee in respect of proposed tax and penalty as has been determined under section 129(3) of the Act subject to the penalty of the said order.

As such different high courts have interpreted the law in dispute differently, it has undoubtedly resulted in uncertainty. Judicial review either by the High Courts or by the Supreme Court is necessary to avert further confusion.

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