2018 (7) TMI 1181 – KERALA HIGH COURT – 2018 (16) G. S. T. L. 531 (Ker.) – Detention and seizure of goods – Declaration as required under Rule 138 being KER-I, was not seen uploaded or the print out accompanied with the goods – Whether in the case of a transport, wherein obviously there is no tax liability on the goods, there could be a detention and seizure effected under Section 129 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Kerala State Goods and Services Tax Act, 2017 (SGST Act) and a release ordered as provided under sub-section (1) or order passed under sub-section (3) of Section 129?
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Held that:- In the present case, the delivery challan which accompanied the transport is one issued by the assessee respondent, over which the assessee has absolute control and could be subject to manipulation. The assessee having transported the goods with delivery chalan, could very well sell the goods if the transport is undetected and then tear it up, as also issue a c
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y is an automatic consequence. The time when such declaration was uploaded is crucial and a declaration made after the detention of the goods cannot lead to the assessee being absolved from the penalty.
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We cannot agree with the learned Single Judge that merely because there was no suspicion raised against the delivery challan there is an admission of non-taxability of the goods transported. The finding that the transaction would not fall within the scope of taxable supply under the statute, cannot be sustained for reason of there being no declaration made under Rule 138. The resultant finding that mere infraction of the procedural rules cannot result in detention of goods though they may result in imposition of penalty cannot also be sustained – The respondents are entitled to an adjudication, but they would have to prove that in fact there was a declaration made under Rule 138 before the transport commenced. If they do prove that aspect, they would be absolved of the liability;
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Act ] and a release ordered as provided under sub-section (1) or order passed under sub-section (3) of Section 129, is the question raised in the appeal. We need to first briefly look at the facts of both these appeals filed by the State. 2. The writ petitioner in W.A.No.371/2018 is engaged in the establishment of infrastructure for cellular telephone Companies, meaning the erection and activation of towers and other infrastructure for effective services of the mobile companies. The petitioner for the purpose of such installation had imported from other States, batteries, which were stored in its go-downs at Ernakulam. These were to be installed in two sites at Gandhinagar at Kadavanthara and at Ambalappuzha. The vehicle in which the transport was made was detained. On examination of the documents, it was found that the goods were accompanied with a delivery chalan as provided under Rule 55 of the Kerala Goods and Services Tax Rules, 2017. However, the declaration as required under Rul
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e the transaction even according to the detaining officer would not fall within the scope of a taxable supply, was the finding. In such circumstances, the goods can be said to have been detained only for the infraction, insofar as a declaration under Rule 138 (KER-I) having not been uploaded and accompanied with the transport. 4. Section 129 which was invoked by the authorities was specifically looked into as also Section 130 and it was found so: A combined reading of Sections 129 and 130, especially the provision contained in sub section (6) of Section 129 indicates that the detention of the goods is contemplated under the statutes only when it is suspected that the goods are liable to confiscation. This aspect is seen clarified by the Central Board of Excise and Customs in the FAQs published by them on 31.3.2017 also. Section 130 dealing with the confiscation of goods indicates beyond doubt that the confiscation of goods is contemplated under the statutes only when a taxable supply i
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ly of services bringing in a total regime change insofar as; the former value added tax & general sales tax regime applicable to sale of goods alone. The check posts as provided in the earlier regime have been done away with and hence the stringent provisions also intended at deterrence of any attempt of evasion. The provisions of the Goods and Services Tax Act and the Rules framed there under have to be treated with the rigor it intends as against any violation; without reference to any mens rea, contumacious conduct or even a suspicion of attempt to evade tax. Section 129 is pointed out specifically to indicate that it is a non obstante clause which provides for detention and seizure in the case of any contravention of the provisions of the Act and the Rules. The release of goods so detained can be effected only on satisfying the conditions either at (a), (b) or (c) of Section 129(1). Sub-section (3) of Section 129 is the provision enabling adjudication; which again refers to sub
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clause (a), clause (b) or clause (c). There can be release of the goods only on the tax and penalty being paid voluntarily under clause (a) or on the detainee satisfying the tax and penalty as levied under sub-section (3) of Section 129. The fact that the transport of goods was in pursuance of a transaction which is not taxable is irrelevant and inconsequential, according to the learned Senior Government Pleader. When exempted goods are also subject to a levy of tax and penalty, on a transport in contravention of the Act or Rules, the taxability fades into oblivion and the tax and penalty leviable would be in accordance with and by reference to the goods and the rate of tax as per the statute. Hence, the impugned judgment has to be set aside, is the strong compelling argument. 7. The learned Senior Government Pleader relies on the decision in Guljag Industries v. CTO [(2007) 7 SCC 269] and Asst. CTO v.Bajaj Electricals Ltd. [(2009) 1 SCC 308] to further buttress his contention that ta
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n such goods. This would necessarily indicate that there can be no penalty imposed under Section 129 if the transaction itself is proved to be one having no tax liability. It is pointed out that in the earlier regime of tax on sale of goods there was a specific provision insofar as providing a penalty to the extent of twice the tax evaded if such evasion could be computed and in all other cases where computation is not possible, penalty to the maximum extent of ₹ 10,000/-. The earlier enactments specifically provided for a penalty, wherein the tax evasion could not be computed, which is not available in the scheme under Section 129. Though there is a general penalty applicable under Section 125, the officer detaining the goods under Section 129 would not have the power to impose such penalty. Hence on detention and notice issued even for a technical breach there would be an imposition of tax and penalty as provided under clause (a) or (b). The adjudication as provided under sub-s
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transport and the triplicate is retained by the consignor/assessee for production along with the returns before the AO. Delivery chalan, as seen from Rule 55, is in lieu of a tax invoice and is only with respect to transactions where the transaction of transport of goods is not taxable. The detaining officer having not raised any suspicion against the delivery chalan, it is very evident that even the Department admits that the transport of goods, is pursuant to a transaction where there is no tax liability. Since there is no liability, there could be no penalty imposed in the case of the two transports covered by the two appeals. The learned Counsel also argues that under the GST regime an inter-State transaction is liable to tax even if it is 'consignment sale' under Section 7 of the Integrated Goods and Service Tax Act, 2017 [for brevity IGST Act ). An intra-State supply is covered under Section 2(64) of the SGST Act. As the learned Single Judge has found, the present movemen
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that there is only a technical or venial breach and there should definitely be a guilty mind and a malafide intention. 11. CST v. Sanjiv Fabrics [(2010) 9 SCC 630] is also pressed into service to argue that if a prosecution is inevitable on detection of an offence, it could not be said to be one of civil liability. Section 132(1)(h) of the SGST Act is pointed out to indicate that a transport, in contravention of the Act and Rules, would invite prosecution. Section 135 is a presumption insofar as mens rea in circumstances constituting a prosecution. Hence, it cannot be said that the liability under Section 129 can be imposed without any mens rea being there, especially when it would also lead to a prosecution; the actual initiation of which is inconsequential in deciding whether there should be mens rea in imposing penalty. The transactions in both the aforesaid cases being not taxable, there could be no detention or subsequent imposition of tax and penalty under Section 129. It is also
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think that there is any finding in the notices issued as to the genuineness of the transaction having been accepted by the detaining officer. We were specifically taken to the notice at Exhibit P3 and the reply at Exhibit P6 in the writ petition; relating to W.A.No.371 of 2018. The officer, on interception, has spoken about the detention, its time and the existence of a delivery chalan. The officer then noticed Rule 138 and the absence of the document as prescribed under the said rule. The allegation was specifically with respect to violation of the Act and Rules, punishable under section 129. The reply also does not say anything more than this. From the notice and reply, it has to be only understood that on the delivery chalan being produced at the time of detention, the officer found a violation of the Act and Rules insofar as there being no Form KER-1 uploaded and a copy accompanying the goods. The delivery chalan, as produced by the assessee, indicated the assessee's case of a
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f the delivery chalan was accepted by the department. A delivery chalan, under section 55, is not one issued by the Department and is one prepared by the assessee who is only obliged to maintain it serially numbered. It does not lie in the detaining officer's mouth to suspect the genuineness of the delivery chalan when the consignor swears by it. But however the non taxable nature of the transaction will be justified as per the Rules only if a declaration is made as per Section 138. Only when there is a declaration uploaded in Form KER-1 would the transaction, which is non-taxable, would be intimated to the Department and available in its site. If not, there could definitely be a sale effected without an invoice; if the delivery chalan goes undetected, resulting in evasion of tax. 14. Guljag Industries on facts considered two different situations in which there was detention of vehicle and imposition of penalty under the Rajasthan Sales Tax Act. At one instance, when the vehicle wa
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he vehicle, was far more than that covered by the bill. On further inspection two envelopes with addresses of two different dealers were recovered from the vehicle and the bill produced was only for one of them. The assessee took a contention that the other bill was also with the driver and not produced at the time of inspection. The High Court, on facts found that, if for some reason the driver did not produce the documents at the check post, which were subsequently produced and it could be proved that the documents were not false or forged, there could be raised no allegation of evasion of tax. 16. In Guljag Industries the Court first considered the detention and imposition of penalty; in the context of production of a blank declaration signed by the consignee. On an examination of the provisions in the statute it was found that every import of taxable goods has to be accompanied with a declaration in Form ST 18-A completely filled in, in all respects, which has to be produced by the
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he case of a statement not being filed before the Assessing officer, it results in evasion of tax. However, when the goods in movement are carried without the declaration form, then strictly liability comes in. Even then; it was held that the goods being accompanied by a declaration form duly signed but not filled up would, from the modus operandi adopted, indicate mens rea. 18. From Guljag Industries we have to extract the following paragraphs speaking on mens rea: 9. Existence of mens rea is an essential ingredient of an offence. However, it is a rule of construction. If there is a conflict between the common law and the statute law, one has to construe a statute in conformity with the common law. However, if it is plain from the statute that it intends to alter the course of the common law, then that plain meaning should be accepted. Existence of mens rea is an essential ingredient in every offence; but that presumption is liable to be displaced either by the words of the statute cr
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on one more factor, namely, that Section 78(5) provides a remedy for recovery of the loss caused to the State by such contravention . 19. The dichotomy as noticed by the Supreme Court and emphasised by the learned Counsel for the respondents is insofar as the declaration as to strict civil liability, for having failed to comply with the statutory obligation, being applicable only to cases in which there was blank/incomplete declaration form accompanying the goods. In cases in which there are no documents accompanying the goods in movement, the law laid down in State of Rajasthan Vs D.P. Metals (2002) 1 SCC 279 was held to hold the field. D.P. Metals is a case in which a manufacturer of stainless steel sheets was faced with penalty proceedings by reason of absence of declaration in Form ST 18-A, on inspection of a truck carrying goods. The Court held that when there are false or forged declaration submitted to the competent officer then penalty under Section 78 (5) would be leviable. T
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ion. 20. The High Court in interpreting a provision would and should be averse to speculation on facts. However considering the ramifications of our decision, in a fledgeling statute, we are constrained so to do. In the present case the assessee asserts the transport of batteries to be non-taxable for reason of the goods having been imported, to their godown and then transported to their own work site for installation. The transaction as projected, definitely is non-taxable. The statutory rules prescribe certain documents to be accompanying the goods, even with a non-taxable transport. Rule 55 and 138 are the prescriptions, being a delivery chalan and a declaration uploaded in the site of the Department. Here we have to notice that the declaration forms as referred to in Guljag industries was issued by the Department, the counterfoil of which had to be produced before the Department at the time of filing of monthly returns or annual returns. In the present case as per the statutory rul
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lation. The assessee having transported the goods with delivery chalan, could very well sell the goods if the transport is undetected and then tear it up, as also issue a chalan with the same number for the next transport. The intimation regarding the transport of goods to the Assessing Officer is not achieved by the mere issuance of a chalan under Section 55. This would be achieved only if there is a declaration under Section138, which would ensure that the transaction is not otherwise and there is no diversion of the goods. This would establish the bonafides of the assessee and the transport, which could very well be checked and verified by the Department. 22. The exercise of speculation is insofar as there could have been a sale of batteries or the surgical gloves by the assessee, when there was no declaration uploaded, before the transport commenced, to the site as prescribed in the statutory rules; if the transport went undetected. There is no dispute that in the present case the
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when such declration was uploaded is crucial and a declaration made after the detention of the goods cannot lead to the assessee being absolved from the penalty. 23. Sanjiv Fabrics was urged to argue that mens rea is a necessary requirement and essential ingredient for sustaining an allegation of an offence committed. Answering the vexed question it was held so in para 24 & 25:- 24. Whether an offence can be said to have been committed without the necessary mens rea is a vexed question. However, the broad principle applied by the courts to answer the said question is that there is a presumption that mens rea is an essential ingredient in every offence but the presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals and both must be considered. (See Sherras v. De Rutzenand State of Maharashtra v. Mayer Hans George.) 25. Although in relation to the taxing statutes, this Court has, on various occasions,
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taxing statute, regard must be had to the following factors: (i) the object and scheme of the statute; (ii) the language of the section; and (iii) the nature of penalty. 31. It is true that the object of Section 10(b) of the Act is to prevent any misuse of the registration certificate but the legislature has, in the said section, used the expression falsely represents in contradistinction to wrongly represents . Therefore, what we are required to construe is whether the words falsely represents would cover a mere incorrect representation or would embrace only such representations which are knowingly, wilfully and intentionally false. 24. We do not think the principle has any application in the above case.Testing the facts emanating in this case with the dictum as laid down in Guljag Industries or even D.P. Metals, there can be found a clear case of violation of the Act and Rules as also mens rea. Guljag Industries had noticed that when the document accompanying the goods is absent, th
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lity to penalty and also establish that there was no declaration made and uploaded prior to the transport. The fact of a declaration having been uploaded demolishes the contention of the respondent in W.A.No.699 of 2018 that it is physically impossible to upload the declaration for reason of absence of facilitation centers. 25. In both the instances, the assessee had known that the transport was one where there was no tax liability to the goods and had also issued a delivery challan under Rule 55. When a delivery challan is issued under Rule 55, it is a mandate under sub-rule (3) of Rule 55 that there should be a declaration as specified in Rule 138. The fact that there was no such declaration uploaded in the site as an intimation to the Department of the transport of such goods raises a reasonable presumption of asttempt to evade tax, against the respondents herein. We cannot agree with the learned Single Judge that merely because there was no suspicion raised against the delivery cha
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