No tax, interest, or penalty shall be determined without giving the person concerned an opportunity of being heard – Karnataka HC
An E-Way bill is basically short for Electronic Way Bill. It is a document which is generated electronically for movement of goods from one place to another. This movement may be inter-state or intra-state. E-Way bill is mandatory to be issued where the consignment value exceeds Rs 50,000 every registered person who causes movement of goods.
Can there be any detention under GST?
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.
Let us refer to the case of Sanchar Tele systems Limited Vs Commercial Tax Officer (Karnataka High Court) where the issue under consideration was whether Commercial Tax Officer can initiate proceedings under section 129 for detaining vehicles, imposing tax, penalty, and interest without providing an opportunity of being heard to the assesse?
Facts of the Case:
- The petitioner was registered as a dealer under the Delhi Service Tax Act, and was engaged in, amongst others, trading and importing of hand held walkie-talkie sets.
- The petitioner asserted that it imported walkie-talkie sets only for supply to the Police and the other Government Security Departments across India.
- A consignment of these walkie-talkies is imported from M/s JVC Kenwood Corporation, Japan and dispatched to Bangalore Airports Custom Authority from Singapore Airport.
- The petitioner had obtained clearance from the Customs Authority after paying applicable IGST and basic customs duty as provided in the Bills of Entry.
- However, the present dispute was because the CTO had commenced proceedings under section 129 culminating with the impugned orders after the Commercial Tax Officer (CTO) detained one of the vehicles hired by the petitioner for transportation of these walkie-talkie sets.
- According to the CTO, the driver on interception of the Vehicle could produce only two Commercial Invoice copies and two Delivery Challan copies but could not furnish the prescribed e-way bills.
- The consignment could not have been moved without generating e-way Bills in view of the provisions of Rule 138 of the CGST Rules, 2017 and the subsequent Notification No. FD 47 CSL 2017 Bengaluru dated 06.09.2017.
- Therefore, the consequences under Section 129 of the CGST Act would have to follow.
- As such, the CTO on physical verification and issuance of Form GST MOV-02 as well as recording Form GST MOV-04 has detained the Vehicle issuing order of detention in Form GST MOV-06 which is served on the person-in-charge of the Goods on 09.02.2019.
- Subsequently, the CTO had served notice in Form GST MOV- 07 by affixture on the vehicle after drawing mahazar because the driver, the person-in-charge, refused to accept such notice.
Proceedings in Commercial Tax Department
- The proceedings were with regard to the transportation of the consignment without e-way bills in the vehicle and there was no dispute that notice in Form GST MOV-07 was issued by the CTO even in respect of this other vehicle after issuance of the required endorsements in the prescribed Forms.
- The petitioner filed its response with the Joint Commissioner of Commercial Taxes (Vigilance), placing on record that the CTO intercepted the vehicle within 3-4 km of Bangalore Airport Customs Office.
- The driver of the vehicle, because he got the clearance early and everything was found correct, left the premises before the e-way bills were generated.
- However, the e-way bills were generated before interception.
- The error was bona fide and unintentional and there was no intention to evade tax.
- The petitioner’s authorized persons and advocates also subsequently filed a detailed response stating that e-way bills for the consignment were generated and before these e-way bills could be transferred to the driver, the CTO intercepted the vehicle.
- The Endorsements were served on the driver of the vehicle at about 4:15 p.m. and there was a possibility that the time of interception is wrongly mentioned as 2:15 p.m.
- The petitioner’s authorized persons and advocates also filed further reply to the notice in Form GST MOV-07 enclosing an affidavit of the person in charge of the consignment which is an elaboration of the earlier response.
- The CTO did not accept the petitioner’s response being of the opinion that the vehicle was intercepted at 2:45 p.m., and e-way bills were not generated before the commencement of the movement of the vehicle.
- The CTO concluded that the driver’s statement that he left the Bangalore International Airport at around 3:15 p.m. due to VIP movement and that the Endorsements were served at the premises of CTO Enforcement Office at 4:15 p.m. could not be believed because the “Good’s delivery place” and the “Passengers boarding/de-boarding places” at the Airport were different.
- The details maintained by M/s Menzies Aviation Security showed that the vehicle entered airport for loading at 2:12 p.m. and exited at 2.33 p.m and therefore the driver’s (Person-in-charge) statement that he left the Airport premises at 3:15 p.m., was not accepted.
- The CTO had consequentially issued the Orders under Section 129(3) demanding tax and penalty as contemplated under Section 129(1)(a)
Proceedings of Appeal
- In the appeal under Section 107 of the CGST Act, the joint Commissioner confirmed the CTO’s orders.
- He concluded that violation of the provisions of Rule 138 of the KGST Rules and the notification issued as regards generation of e-way bills was indisputable in view of the admitted fact that the driver of the vehicle could not produce the e-way bills when the vehicle was intercepted.
- He confirmed the CTO’s conclusion based on the correspondence with M/s Menzies Aviation Security, a security agency at the Bangalore International Airport Authority, as regards the vehicle’s entry and exit from the Airport.
- He also concluded that the petitioner’s contention that the Endorsements in the prescribed form are issued at 4:15 p.m. at the CTO Enforcement Office and the prescribed e-way bills were generated earlier cannot be accepted because the petitioner relies upon online tools and data which are not prescribed either under the provisions of the CGST Act or the CGST Rules.
- The data on the GSTIN have legal sanctity and this data establishes that the necessary e-way Bills were not generated when the consignment was moved from the Bangalore International Airport.
Observations of the High Court (HC)
- According to the HC, the dispute lied within a narrow compass that was the consignment moved without generating the prescribed e-way bills?
- There was no serious dispute about the petitioner’s assertion that consignment was being transported to the transporter’s godown situated within the prescribed distance from the airport premises, and the e-way bills are generated between 3:06 p.m. and 3:12 p.m.
- The petitioner asserted that the CTO intercepted the vehicle and directed the driver of the vehicle to the CTO Enforcement Office, because Form-Part B of the e-way bills were not populated, and the endorsements in the prescribed form were served at 4:15 p.m. when the vehicles reached the CTO Enforcement Office premises.
- The petitioner to substantiate its aforesaid case proposed to rely upon the data available on Internet while the CTO relies upon correspondence with M/s Menzies Aviation Security.
- The documents relied upon by the petitioner were not accepted, and the reason assigned by the respondents for non-accepting the petitioner’s case and the documents, in this Court’s considered opinion, was rooted inseparably in the reliance upon the data furnished by M/s Menzies Aviation Security in response to the communication by the CTO.
- The provisions of section 129(4) mandated that no tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.
- This stipulation that no tax or interest or penalty shall be determined unless the person concerned is given an opportunity of being heard incorporates the seminal principle of fair play which is inherent in the established principle that no person is to be condemned unheard.
- If the CTO intended to rely upon data maintained by a third party and shared by such third party pursuant to the communication made by him, the fair play made it binding on the CTO to provide an opportunity to the petitioner to meet the data lest the petitioner is fastened with the liability to pay either the tax or interest or penalty on the basis of the data that, allegedly – and as was alleged by the petitioner, was obtained behind its back to its detriment.
- The impugned orders when thus tested could not be sustained and would have to be quashed with the proceedings restored to the CTO for fresh consideration with the necessary opportunity to the petitioner to meet all materials that could be relied against it.
In simple words, Tax, Interest, or Penalty under GST cannot be imposed without giving opportunity of being heard to Assessee.