N.V.K. MOHAMMED SULTHAN RAWTHER AND SONS AND WILLSON Versus UNION OF INDIA THROUGH ITS SECRETARY (REVENUE) , MINISRY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI, THE COMMISSIONER, GOODS AND SERVICES TAX DEPARTMENT, THIRUVANANTHAPURAM, THE STATE TAX OFFICER CIRCLE II, COMMERCIAL TAX DEPARTMENT, DINDIGUL, ASSISTANT STATE TAX OFFICER SQUAD NO. 11, STATE GOODS AND SERVICE TAX DEPARTMENT, PALAKKAD – 2018 (11) TMI 1503 – KERALA HIGH COURT – TMI – Jurisdiction – scope of adjudication proceedings – detention of goods – Ground Betel Nuts (Arecanuts) – dispute with regard to rate of tax and classification of the goods – case of petitioner is that dispute about the rate of tax is not a matter for adjudication in a proceeding under Section 68 or 129 of the GST Act.
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Held that:- The classification or the alleged misbranding of the product-even the alleged tax variation, not evasion though-cannot be considered here – the writ’s province is restricted. It is, indeed, for the assessing authoriti
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ing authority to initiate the proceedings “for assessment of any alleged sale, at which the petitioner will have all his opportunities to put forward his pleas on law and on fact.” Indeed, emphatic is the enunciation of law in Rams that the process of detention of the goods cannot be resorted to when the dispute is bona fide, especially, concerning the exigibility of tax and, more particularly, the rate of that tax.
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Thus, it can be concluded that the Ext.P11 is arbitrary and unsustainable, and is accordingly set aside – the Assistant State Tax Officer will release the goods forthwith – petition allowed. – WP (C). No. 32324 of 2018 Dated:- 16-10-2018 – MR DAMA SESHADRI NAIDU, J. For The Petitioner : ADVS. SRI. K. I. MAYANKUTTY MATHER KUM. NARAYANI HARIKRISHNAN AND SRI. R. JAIKRISHNA SREEKALA ASOKAN For The Respondent : ADV. MR. R. PREMSANKAR, CGC BY DR. THUSHARA JAMES, GOVERNMENT PLEADER JUDGMENT The first petitioner is a manufacturer of Ground Betel Nuts (Arecanuts) with the bra
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he petitioners had allegedly been trying to evade tax by misdescribing the product. 4. Served with the Exhibit P11 detention notice, dated 26.09.2018, the petitioners authorised representative met the ASTO and explained about the genuineness of the transport. He tried to impress upon the authority that there was neither misclassification nor evasion of tax. But the ASTO remained unconvinced. Aggrieved, the petitioners filed this Writ petition. 5. The petitioners seek the Court to (a) declare that the petitioners Arecanut Ground with HSN 0802 attracts GST only at 5%, as in item falling under Serial No. 28 of Schedule I of G.O.(P) No. 62/2017/TAXES, as amended; (b) direct the authority not to detain the petitioners commodity en route alleging that the rate of tax is 18% and not 5% as shown in the invoices; (c) direct the ASTO to release the lorry and goods (arecanut) covered by the Exts.P9 and P10, as carried in Lorry No. TN-37-BS-9384, forth with. Submissions: The Petitioners : 6. In th
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he relies on M/s. Crane Betal Nut Powder Works v. Commissioner of Customs and Central Excise, Tirupati (2007) 4 SCC 155. He also contends that ASTO s detaining the consignment is arbitrary, unjust, and without jurisdiction, too. 9. To elaborate, Sri Mather submits that the detention power conferred on the officers, either under Section 68 or Section 129, must be exercised only under the circumstances and grounds set out in those provisions. He also submits that Section 122 of the GST Act defines the offences warranting imposition of penalty. Misclassification of goods in the invoice, according to him, is not an offence falling under either Section 122, 67, or 68 of the Act. 10. About the HSN Code, too, Sri Mather has extensively argued. But I reckon the adjudicatory scope of this writ petition confines itself to detention and release of goods. Classification-or rather misclassification-of a commodity is not within the scope of this writ; that issue goes beyond it. 11. In the end, Sri
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a particular rate cannot be assailed. Referring to the Exts.P8 and P8(a) returns, Dr. James contends that returns are filed under the statutory mandate. Unless those returns are subjected to scrutiny and upheld, they remain, according to her, the assessee s mere self-declaration. She thus asserts that a return can only mean a true and correct return, accepted by the authorities on scrutiny and verification. 15. To elaborate on the tax regime and the statutory scheme, Dr. James has taken me through various provisions including Sections 31, 95, and 122, besides Rule 46 of the KSGST Rules. She repeatedly stressed that the petitioners have an efficacious alternative remedy and that they ought to have taken recourse to it. For her, the petitioners effort before this Court is premature, and any adjudication at this stage will stultify the statutory authority s efforts at fair adjudication. 16. Heard Sri Mayankutty Mather, the petitioners counsel, and Dr. Thushara James, the Government Pleade
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of the product turn on its classification. Is it simple betel nut ground to a particular size with certain additions for easy human consumption? Has the product lost its character as betel nut? On the other hand, is the petitioners product supari, which is distinctively a different product, having betel nut as one of its ingredients? 20. Granted, Mr. Mather relied on the Supreme Court s Crane Betal Nut Powder Works. Further granted, the Supreme Court in that has held that by crushing betel nuts and processing them with spices and oils, a new product could be said to have come into being which attracted duty separately under the Schedule to the Tariff Act. 21. Then, the Court has held that the process of manufacture employed by the appellant company did not change the nature of the end product: The betel nut remains a betel nut . Sri Mather has also produced literature before the Court, besides the brochures of supari producers, to underline what supari is and how it differs from mere b
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mechanism. Now, we focus on the release of the product, and it lies in narrow confines. Suffice it for me to examine this singular issue: Can the State Tax Officer invoke Section 129 of the Act and detain goods on the ground the tax paid on the product is less? Here, the documents are in order and the product description accords with what the first petitioner has already declared, say, in his returns before the assessing authority. Then, can the ASTO still hold up the consignment because the declaration already made does not suit his notion of what the product is? 25. True, a literal reading of Section 129 of the Act presents a different picture and, perhaps, lends support to the State s view. But purposive interpretation and the practical commercial considerations trump that view. 26. Chapter XVI of the Combined Acts deals with inspection, search, and seizure. Section 129 under Chapter XIX provides the mechanism for detention, seizure, and release of goods and conveyances in transit.
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he first petitioner s purchase and supply invoices. 28. The Exts.P8 and P8(a) are important; they are the first petitioner s recent GST returns for June and August, 2018. In those returns, the first petitioner has assigned the same HSN Code, as he did reflect in the Ext.P9 invoice. He paid tax only at 5%. Thus the documents before the assessing authority and those that accompanied the consignment accord with one another. 29. In this context, we may examine J.K. Synthetics Limited v. Commercial Taxes Officer (1994) 4 SCC 276. On how to interpret Tax Statutes, the Supreme Court has held that charging provisions must be construed strictly, but not the machinery provisions, which should be construed like any other statute . It has also held that the power to levy and collect interest is substantive law though part of machinery provision . 30. In J.K. Synthetics Limited the issue was whether the appellant should pay interest on the additional sales tax. The Revenue, as it has done here, con
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course, the tax so deposited is to be deemed to be provisional and subject to necessary adjustments under the final assessment. 31. To support its ratio, J.K. Synthetics Limited accepts the minority of view in Associated Cement Co. Ltd.. v. CTO (1981) 4 SCC 578. And it has finally held that if the assessee pays the tax, which according to him is due based on the information supplied in his return, there would be no default on his part to meet his statutory obligation. Therefore, it would be difficult to hold that the 'tax payable' by him 'is not paid' and that he is liable for consequences. 32. The correctness of the Exts.P8 and P8(a) accepted, as held in J. K. Synthetics Limited, we will examine what amounts to statutory violation or contravention under Section 129 of the Act. Apt is the case decided by this Court: Rams v. Sales Tax Officer. The petitioner in Rams contracted with the Government of India to print and supply a large number of telephone directories. For
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there was any taxable sale at all. Rams, then, further observes: In such cases it is not for the check-post authority to act on mere suspicion and to find that there is any attempt at evasion of payment of tax, which alone vests him with the jurisdiction to act under S. 29A. At best, he can only alert the assessing authority in Ernakulam to initiate proceedings for assessment of any alleged sale, at which the petitioner will have all his opportunities to put forward his picas on law and on fact. The process of detention of the goods at the check post, cannot be resorted to in such cases when there is a bona fide dispute regarding the very existence of a sale and exigibility for tax. S. 29 A is not intended to subserve such an object. 35. I may examine the impugned Ext.P11 notice, or in other words the act of detention, in the light of the dicta in J.K. Synthetics Limited and Rams. In the former, the Supreme Court has emphatically held that if the dealer furnishes all particulars about
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specting authority can alert the assessing authority to initiate the proceedings for assessment of any alleged sale, at which the petitioner will have all his opportunities to put forward his pleas on law and on fact. Indeed, emphatic is the enunciation of law in Rams that the process of detention of the goods cannot be resorted to when the dispute is bona fide, especially, concerning the exigibility of tax and, more particularly, the rate of that tax. Conclusion: 37. I reckon that the case before me falls within the adjudicatory ambit of both J.K. Synthetics Limited and Rams. I, accordingly, hold that the Ext.P11 is arbitrary and unsustainable, and is accordingly set aside. As a result, the Assistant State Tax Officer will release the goods forthwith. 38. I, however, clarify that this Court has not given any judicial imprimatur to the petitioners' classification of goods or the HSN Code they have applied. The Revenue is at liberty to initiate appropriate proceedings if they deem i
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