THE ASSISTANT STATE TAX OFFICER, ERNAKULAM AND STATE TAX OFFICER (INTELLIGENCE) O/O. INSPECTING ASST. COMMISSIONER (INT.), Versus M/s. INDUS TOWERS LIMITED
GST
2018 (7) TMI 1181 – KERALA HIGH COURT – 2018 (16) G. S. T. L. 531 (Ker.) , [2018] 55 G S.T.R. 404 (Kerala)
KERALA HIGH COURT – HC
Dated:- 13-7-2018
W. A. Nos. 371 And 699 of 2018
GST
Mr. K. Vinod Chandran And Mr. Ashok Menon, JJ.
For The Appellant : Senior Government Pleader Sri.Mohammed Rafiq
For The Respondent : Sri. A. Kumar, Sri. P.J. Anilkumar, Smt. G. Mini And Sri. P.S. Sree Prasad
JUDGMENT
Vinod Chandran, J:
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 [for brevity “CGST Act”] and Kerala State Goods and Services Tax Act, 2017 [for brevity “SGST Act”] and a release ordered as provided under sub-section (1) or order passed under sub-se
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detaining officer issued a notice at Ext.P3 detaining the goods against which the writ petitioner was before this Court. In the other appeal the writ petitioner, dealer in surgical gloves, sent the goods for quality appraisal on job-works and was transporting the same to their business premises for further sale; when the vehicle was detained.
3. The learned Single Judge looked into the provisions defining taxable person and taxable supply as also Section 7 detailing the scope of supply to find that when a taxable person transports goods procured by them for own use to the site, where the goods are to be consumed, the transaction is not for consideration and would not even fall within the scope of Schedule I. Schedule I enumerates those activities, though made without consideration, which fall within the scope of supply. The delivery chalan which accompanied the goods had not been disputed and hence the transaction even according to the detaining officer would not fall within the scop
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d the Rules made there under with the intent to evade payment of tax. If that be so, mere infraction of the procedural Rules like Rules 55 and 138 of the State GST Rules cannot result in detention of goods, though they may result in imposition of penalty. In other words, detention of goods merely for infraction of the procedural Rules in transactions which do not amount to taxable supply, is without jurisdiction.”
As a consequence of the aforesaid finding, the goods were directed to be released unconditionally; finding the action under Section 129 to be without jurisdiction. The aforesaid decision challenged in W.A.No.371 of 2018 was followed in the judgment impugned in W.A. 699 of 2018.
5. The learned Senior Government Pleader assails the decision specifically pointing out the scheme of the goods and service tax enactment and the rules framed thereunder; which encompasses both the sale of goods and supply of services bringing in a total regime change insofar as; the former value ad
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gues the learned Senior Government Pleader, especially pointing out that even in the case of exempted goods, the contravention of the Act and the Rules would entail penalty equal to 2% of the value of goods or 25,000/- rupees which ever is less in the case in which the transporter or the owner of the goods voluntarily comes forward for release of the goods. In the case of no such voluntary action having been taken, the goods would be released only on payment of an amount equal to 50% of the value of goods or 25,000/- rupees whichever is less; under sub-clause (b).
6. There is also provision for release of the goods upon furnishing security equivalent to the amount payable under clause (a) or clause (b) of Section 129(1). Sub-section (3) provides for an adjudication, wherein a notice is issued specifying the tax and penalty payable and thereafter passing an order for payment of such tax and penalty under clause (a), clause (b) or clause (c). There can be release of the goods only on th
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liability for contravention of the Act and Rules. The evasion if any attempted, is not relevant as per the statute, for detention or imposition of penalty under Section 129. The judgments of two Division Benches of this Court, reported in CTO v. Madhu M.B. [(2017) 105 VST 244 (Ker.)] and in W.A.No.509 of 2018 dated 28.02.2018, are also pressed into service to contend that at least at the stage of detention it cannot be looked into whether there is any taxability or not and there should be security furnished, for the tax and penalty that can be imposed under Section 129(1)(a) or (b), to effect release of the goods. Necessarily for release, sub-clause (c) of Section 129(1) will have to be employed as provided in the statute.
8. The learned Counsel for the two respondents, however, points out that Section 129 specifically speaks of penalty as relatable to the tax applicable equal to 100% of the tax payable on such goods. This would necessarily indicate that there can be no penalty impose
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ndents seek to sustain the judgment of the learned Single Judge specifically pointing out that their transactions, one being of consignment to ones own site and the other of re-transmission after job work, are not taxable transactions. It is emphasized that the words employed in Section 129(1)(a) are 'applicable tax and penalty equal to one hundred per cent of the tax payable'. Hence, only if there is a liability to tax, could there be a detention and a subsequent order being passed for payment of tax and penalty under Section 129. It is pointed out that the learned Single Judge has found that there is no dispute raised by the detaining officer as to the delivery chalan which accompanied the transport. A delivery chalan is prepared in triplicate; which issued forms are serially maintained with the assessee. The original of the delivery challan is for the consignee, the duplicate accompanies the transport and the triplicate is retained by the consignor/assessee for production al
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of the IGST Act and, hence, there could be no tax or penalty levied on the transaction.
10. Guljag Industries is read over to contend that the instant case is not one in which there is a civil liability. Guljag Industries was concerned with two instances; one being the transport accompanied with a incomplete form and the other being a total absence of document, which are to accompany the goods. The finding with respect to a civil liability was confined to those instances where there was an incomplete form. In the case of absence of documents, the Hon'ble Supreme Court left it to be considered in the light of the judgment in State of Rajasthan v. D.P.Metals [(2002) 1 SCC 279]. As held by the Hon'ble Supreme Court, the breach cannot be one merely of a technical or venial nature but postulates mens rea. In the present cases, where there was absence of the declaration under KER-1, it cannot be said that there is only a technical or venial breach and there should definitely be a g
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e a futile exercise, since on violation being found, necessarily tax and penalty would have to be imposed. This would violate the principles of reasonableness and fall foul of Article 14 of the Constitution of India. The last contention is with reference to Form KER-1 as seen from the SGST Rules. The form indicates a facilitation centre, which centres are now, after abolition of check posts; not available. Without the facilitation centre being shown, there could be no uploading effected, is the submission. Based on Section 138 of the SGST Act and Form KER-1 as seen from the Rules, it is argued that the declaration is required only for inter-State transport.
12. At the outset, it is to be stated that we refrain from considering the reasonableness of the provision or violation alleged of Article 14 for the simple reason that there is no challenge to the provisions as such in the writ petition. We also do not think that there is any finding in the notices issued as to the genuineness of
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d declaration.
13. In W.A.No.371 of 2018, the goods transported were said to have been purchased by the assessee inter-State and stored in his godown. The instant transport was allegedly to the work site of the assessee for installation of the goods at such work site. In W.A.No.699 of 2018, the assessee had purchased goods, then entrusted it for job work and was transporting it to its own business premises for further sale. Both produced delivery chalan issued by them. The delivery chalan having been produced, the transaction was found to be one having no tax liability; which necessarily required a declaration in Form KER-1. Sub-section (3) of section 55 specifically speaks of a declaration as specified in Rule 138, when goods are transported on a delivery chalan in lieu of invoice. This specifically is a violation of the Act and Rules and we cannot agree with the learned Single Judge that the genuineness of the delivery chalan was accepted by the department. A delivery chalan, under
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oods transported were not declared though signed in blank. The goods had originated in Andhra Pradesh and it was the contention of the consignee in Rajasthan; that the form was not filled up with the details of the goods, only since the consignor was not conversant in Hindi. The Adjudicating Officer refused to accept the explanation and in first appeal it was noticed that the form had to be filled up by the consignee; who had also signed it in blank. The Tribunal set aside the penalty on the conclusion that there was no mens rea on the part of the consignee. The High Court reversing the findings of the Tribunal held that the declaration was not filled in deliberately, indicating the intention of the assessee to evade tax.
15. In the other instance when the goods were detained and checked the driver produced the bill for a certain quantity of goods. The quantity of goods, on actual verification, contained in the vehicle, was far more than that covered by the bill. On further inspection
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icate, the original of which, the competent officer at the check post has to forward to the Assessing Officer. It was also noticed that the Form in which the declaration has to be made is issued by the Department, which has two parts one to be filled in by the consignee and the other by the consignor. The consignee having signed it without entering the material particulars of the goods, it was held, the declaration itself becomes meaningless for reason of the identity & description of goods transported, having not been disclosed. Without these material particulars there could be manipulation of value and also multiple transport resulting in the assessment being put into jeopardy.
17. The Supreme Court, in Guljag Industries noticed the dichotomy; (i) a liability for non filing of statements before the Assessing Officer and (ii) the goods being in movement without supporting declaration forms in para 26. In the case of a statement not being filed before the Assessing officer, it results
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imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime.
32. … In the present case, we are not concerned with the transit pass. In the present case, there are no words in Section 78(5) similar to Section 28-B of the Uttar Pradesh Sales Tax Act, 1948 which states that if the transit pass was not handed over to the officer at the check-post, the Department would be entitled to raise the presumption that the goods in transit were sold in the State. As stated hereinabove, we have to go by the words used in the section to ascertain whether the legislature has excluded the element of mens rea. It is the statutory law enacted by the competent legislature which can exclude the presumption under common law. We hold that Section 78(5) excludes the presumption of mens rea which is normally prevailing in common law. Our reasoning is also based on one more factor, namely, that Section 78(5) provides a remedy for re
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ve to mislead the authorities. However in such cases the presumption would be rebuttable, by the assessee on production of requisite documents referred to in the provision. The declaration was to the effect that if by mistake some documents were not readily available at the time of checking, principles of natural justice require an opportunity to produce the same. Even in such circumstance, it has to be proved that there is no possibility of the document being subsequently prepared. The declaration in D.P. Metals according to us, is only to the effect that if the statutorily required documents were not accompanying the goods in transport, then the assessee should be given an opportunity to prove that the documents where in fact existing but the same did not accompany the goods for a bonafide reason. The opportunity to rebut cannot extend to the assessee creating or even making valid documents subsequent to the detention.
20. The High Court in interpreting a provision would and should
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ribed form, serially and in triplicate. The delivery chalan is not issued by the Department and the numbering of the same in serial is fully with the assessee. We say this because the learned single judge has specifically found that there was no dispute regarding the genuineness of the delivery challan. It has to be observed that a dispute on genuineness would arise if the forms have been issued by the Department. In the earlier regime the Delivery Notes were issued by the Department, the copies of used ones to be furnished to the Department along with the return. In the present regime there is a virtual site maintained by the Department where in the forms are to be uploaded; which serves as intimation to the Assessing Officer.
21. In the present case the delivery chalan 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 chal
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. This would not absolve the liability to tax and penalty under Section 129. As has been held in Guljag Industries and D.P. Metals when there is absence of a declaration in the prescribed form; mandatorily required to accompany a transport of goods, then there can be no automatic penalty. The transporter, consignor or the consignee should be given an opportunity to prove that there was in fact a declaration validly made, before the commencement of the transport and hence the ommission was only technical and venial in so far as the declaration not physically accompanying the transport. The violation would stand on a totally different footing, from a forged declaration or an incomlete or blank declaration accompanying the transport. Hence if the declration as in this case, was infact uploaded prior to the transport the assessee could be absolved from the penalty but otherwise penalty is an automatic consequence. The time when such declration was uploaded is crucial and a declaration made
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e to evolve an abstract principle of law which could be applied to determine the question. As already stated, answer to the question depends on the object of the statute and the language employed in the provision of the statute creating the offence. There is no gainsaying that a penal provision has to be strictly construed on its own language”.
The offence alleged in the cited case law was purchase of goods on the strength of C forms; which goods were not included in the registration certificate. The defence set up was that there was a bonafide mistake touching upon the description of the goods included in the registration certificate and the Department had been permitting such purchases in the previous years. The learned Judges held so, with reference to the specific statutory provisions in paragraphs 30 & 31:
“30. To put it succinctly, in examining whether mens rea is an essential element of an offence created under a taxing statute, regard must be had to the following factors:
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e petitioner to rebut the presumption available of an attempt to evade tax by reason of the documents having not accompanied the goods. Answering this, we would think that the contention of adjudication under Section 129(3) being a mirage would also be answered. If the declaration was in fact uploaded before the commencement of the transport and by some means the driver was not able to produce it before the detention, definitely the consignor could prove that the declaration was uploaded before the transport. This would absolve the liability for penalty, since if the declaration had been uploaded prior to the transport, there is no mens rea on the consignor or the transporter and there could be found no intention of diversion of goods. However, a declaration made subsequent to the detention would not absolve the assessee from the liability. In fact in W.A.No.371 of 2018 there is a declaration made after detention; which cannot absolve the liability to penalty and also establish that th
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ity 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. If the conditions under the Act and Rules are not complied with, definitely Section 129 operates and confiscation would be attracted. 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; otherwise, they would definitely be required to satisfy the tax and penalty as available under Section 129. We, hence, vacate the judgment of the learned Single Judge and allow the appeal. The vehicle and the goods having been already re
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