GARUDA TIMBER TRADERS Versus THE ASSISTANT STATE TAX OFFICER (INTELLIGENCE), SQUAD NO. 1, STATE GSD DEPARTMENT, MALAPPURAM, THE COMMISSIONER, STATE GSD DEPARTMENT, TAX TOWER, KARAMANA, THIRUVANANTHPAURAM, THE SECRETARY CENTRAL BOARD OF EXCISE AND CUSTOMS, NEW DELHI, UNION OF INDIA REPRESENTED BY ITS SECRETARY, NEW DELHI AND THE DEPUTY COMMISSIONER DEPARTMENT OF STATE GST, PALAKKAD
GST
2018 (8) TMI 1142 – KERALA HIGH COURT – 2018 (16) G. S. T. L. 4 (Ker.)
KERALA HIGH COURT – HC
Dated:- 9-8-2018
W. P. (C). No. 26848 of 2018
GST
MR. DAMA SESHADRI NAIDU, J.
For The PETITIONER : ADV. SRI.K.S.HARIHARAN NAIR
For The RESPONDENTS : SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL
JUDGMENT
Introduction:
A trader, an assessee under the new tax regime (GST), wants to carry goods (timber) inter-state. The vehicle intercepted on the route, it faces detention-and a possible confiscation-proceedings. It has not uploaded or carried with it a completed e-way bill: Part B is incom
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ll. But Garuda took a printout of the e-way bill and began its transportation.
4. On 4th August 2018, the Assistant State Tax Officer (Intelligence) [the ASO] intercepted the vehicle. The ASO obtained the driver's statements and issued Ext. P4, P4 (a) and P4 (B) besides passing the Ext.P5 detention order, alleging that the e-way bill accompanying the consignment was not fully filled in. On the same day, the ASO also issued the Ext. P6 notice under section 129 (3) of the combined Acts (CGST and KSGST).
5. After repeatedly failing to upload part B of the e-way bill, Garuda claims to have approached the Deputy Commissioner, SGST. Again, on advice, Garuda tried once more and, at last, uploaded part B. Then it filed the Ext. P8 reply along with the Ext.P7 copy of the e-way bill, incorporating Part B as well. Still, on 6th August 2018, the ASO issued the Ext. P9 demand notice, demanding tax and penalty, both amounting to Rs. 187,916/-.
6. Aggrieved, Garuda filed this writ petition: it wan
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ld not permit a consignor to upload any part of the e-way bill, then that consignor should not suffer the consequences. In other words, any technical glitches must not prejudice the assessee. Sri Nair has taken me through various statutory provisions, including section 129 and section 67 (6) of the Act. He strenuously contends that the officials cannot insist on the assessee's complying with the statutory rigour even for its technical, trivial omissions. More particularly, this triviality does not infringe the substantial statutory provisions or does not result in tax evasion.
9. Sri Nair also contends that Courts should adopt a pragmatic view of the nascent enactment which, according to him, has still been facing many teething troubles. Stressing the need to have the goods released immediately, pending further adjudication, Sri Nair relies on many decisions: Ashok Leyland Ltd. v. Assistant State Tax Officer (KER), [2018] 53 GSTR 364 (Ker) Dhanswaroopdas vs. Assistant State Tax Office
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ttle discretion with either the authorities or the courts. She stresses that once the statutory mandate is clear, its effectiveness cannot be chipped away in the name of judicial review or judicial discretion. Judicial discretion, she continues, can only fill the statutory crevices, if any, but not to stultify the efficacy of the statutory mandate.
12. In the end, Dr. James has drawn my attention to the Division Bench decisions of this Court in Commercial Tax Officer v. Madhu M.B., (2017) 64 GST 9 (Kerala) The Assistant State Tax Officer v. Indus Towers Limited, MANU/KE/1685/2018 Renji Lal Damodaran v. State Tax Officer, Judgment, dt.06.08.2018, in W.A. No.1640 of 2018 and Gati Kintetsu Express Pvt., Ltd., v. Commercial Taxes Department. Judgment, dt.5.7.2018, in W.P. 12399 of 2018, High Court of MP (DB)
Analysis:
13. In a federal constitutional set up, coordination rather than subordination at its heart, the States and the Central as the constituents have demarcated spheres of leg
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tes the notion of justice with the notion of economic efficiency and wealth maximisation. True, nations like France successfully embraced GST regimes in the 1950s. Even federal polities like Canada replaced MST (Manufacturer's Sales Tax) with GST (Goods and Services Tax) in the 1980s. India joined the fiscal reform bandwagon a little late. Tentative it was to begin with, but determined it is in this new federal fiscal path.
16. To put the concept in perspective, GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the later stage of value addition. This process makes GST a tax only on value addition at each stage. The consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
17. In other words, the focus was shifted from taxable event to destination-based taxation. It avoids the evil of cascading t
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or its rules, all those goods and means of transport and documents relating to those goods and conveyance will be detained or seized. They will, however, be released to the owner of the goods (a) on its paying the applicable tax and penalty equal to one hundred percent of the tax payable on the goods. If the goods belong to an exempted category, a different rate applies, though.
21. If a person other than the owner-for example, a transporter-comes forward, it will have the goods released (b) on its paying the applicable tax and penalty equal to the fifty percent of the goods value reduced by the tax amount paid under each Act. Of course, the exempted goods do carry a different rate. Clause (c) of Section 129 permits the consignor or the other party to furnish a security equivalent to the amount payable under clause (a) or clause (b) “in such form and manner as may be prescribed.” The proviso to Section 129 ensures the principles of natural justice: there will be no detention seizure
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ed goods will be released, on a provisional basis, upon the person's executing a bond and furnishing a security, “in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.”
26. Now, we will examine the regnant rules. Rule 140 of the KSGST Rules deals with bond and security for release of seized goods. The consignor or another person may provisionally get the goods and vehicle released by executing a bond for the value of the goods in FORM GST INS-04 and by furnishing as security bank guarantee for the tax, interest, and penalty payable. Indeed, the Explanation to the Rule holds that “applicable tax” will include the Central Tax and State tax, or Central tax and the Union territory tax and the cess, if any, under GST (Compensation to States) Act, 2017.
What are the documents to be carried along with the goods?
27. If the consignor or the consignee transports the goods, either in its own c
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atically identify and track tags attached to objects. The tags contain electronically-stored information embedded on to the conveyance.
29. Here, Garuda did not fill Part B of the e-way bill. It cited technical difficulties as the reason. On interception and after detention, it fulfilled that requirement. It has also pleaded that it approached the officials about the difficulties it faced, but was only advised that it must try again. Tried again, it succeeded; but by then, the authorities detained the goods. At least, thus goes the allegation. Garuda contends that its failure, if any, is trivial, technical. It has not tried to evade the tax, nor has the authorities, he also contends, accused it of tax evasion.
30. Before moving ahead, I may address one issue; that is, about the judicial discretion. Sri Hariharan has persistently pleaded that the officers cannot blindly insist that the consignor or the transporter must follow the provisions without exception. There can be, he argues,
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t act mechanically, but will weigh, reflect, gain impressions, test, and study.
32. The subject is not one, Barak cautions, in which we must create something out of nothing. Instead, it is necessary, at most, to reorganize the “something” that already exists. Id., p.6 Giving the court discretion to carry out the concretization of the law has, along with its advantages, several drawbacks. These stem primarily from the impossibility of foretelling the outcome of exercising discretion, and, as a result, judicial certainty and the ability to plan for the long term suffer. Id., p.15
33. To put the concept of judicial discretion in perspective, I may quote who else than the irrepressible, inimitable Chief Justice John Marshall. He observed in Osborn v. The Bank of the United States 22 U.S. 738, 866 (1824) about the discretion enjoyed by judges thus:
When they are said to exercise a discretion, it is a mere legal discretion, a discretion to be exercised in discovering the course prescribed
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will examine them.
36. In Ashok Leyland, a consignment of motor vehicle chassis were transported. During transit, the respondent authorities detained the goods because the transporter was not carrying a copy of the stock transfer invoice/delivery challan. The transport violated Rule 55 of the CGST Rules. In that context, the petitioner challenged the demand notice, which insisted that the petitioner must make the security deposit, for the release of the goods and the vehicle.
37. A learned Single Judge of this Court has held that the petitioner has made necessary declarations under the CGST Rules. The authorities also have not disputed the genuineness of the invoices, a copy of which accompanied the goods. So Ashok Leyland set aside the demand for security deposit.
38. In Dhanswaroopdas, the petitioner failed to carry the documents prescribed. When the goods were intercepted and detained, the consigner took the plea that the prescribed declaration form could not be generated from t
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Besides, neither the State of U.P nor the Government of India brought on record, the Court found, any notification prescribing the relevant documents to be carried with the goods. Under those circumstances, the Allahabad High Court set aside the detention.
41. In Raj Iron & Building Materials, another Division Bench of the Allahabad High Court has found no allegation of evasion of tax; none of the documents-the show cause notice, the seizure order, or the penalty order-referred to any tax evasion. The Court, then, has also found there were admittedly some difficulties about downloading the e-way bill and that doubts remained on the requirement and submission of the e-way bill. So it quashed the detention order.
42. In Rivigo Services, again the Allahabad High Court has examined, I reckon, an identical issue as we have now faced. It concerns incomplete Part B of the e-way bill. In fact, the Division Bench has relied on the UP Governments clarification: when the goods were re-loaded in
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-on the distance norm. Incidentally, SBGC Logistics, discussed above, is another judgment of Allahabad High Court on the same point, with the same conclusion.
45. The High Court of Madhya Pradesh has, in the end, held that the petitioner “admittedly violated the provisions of the Rules and Act of 2017 and, learned Authority rightly imposed the penalty and directed the petitioner to pay the same. The order is not in violation of any of the provisions of the Rules and Act of 2017.”
46. Now, let me examine the precedential position at the home front: this very Court. A Division Bench in Madhu considered the scope and ambit of section 129 of the CGST Act read with Rule 140 of the CGST Rules. To begin with, a learned Single Judge directed the release of detained goods on the petitioner's paying of 50% of the demanded tax, besides his executing a simple bond. The Department appealed. The Division Bench analysed Section 129 of the then Simultaneous Ordinances. It also noted that Rule 140 p
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rned Single Judge noted that the detaining officer did not dispute the delivery challan. Nor did the transaction amounted to a taxable supply. So the finding goes thus: a mere infraction of the procedural Rules like Rules 55 and 138 of the State GST Rules cannot cause the detention of goods, though they may cause the imposition of penalty. The goods were ordered to be released. The Department assailed the direction.
49. The learned Division Bench, after examining the statutory and the precedential positions, has observed that sub-section (3) of section 55 specifically speaks of a declaration as specified in Rule 138. When goods are transported on a delivery challan, instead of an invoice; that violates the Act and Rules. The Division Bench did not agree with the learned Single Judge's view that the Department accepted the genuineness of the delivery challan. A delivery challan under section 55, it observes, is not one issued by the Department but is one “prepared by the assessee, who
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nt has no say in it. Nor can it vouch for its genuineness. The Division Bench, then, felt unable to sustain the finding that mere infraction of the procedural rules cannot cause the detention of goods. Finally, the learned Division Bench has held:
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 released unconditionally, further notice shall be issued and the adjudication under sub-section (3) completed; upon which if penalty is imposed
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goods, as directed under Rule 140 of the KSGST Rules, the authorities will provisionally release the goods.
Does any more adjudication remain under Section 129 (1) of the Act?
53. When I dictated the judgment affirming the Department's stand, then, Sri Hariharan has submitted that the Act itself contemplates expeditious disposal of the entire inquiry under Section 129-in seven days. So he wants this Court to direct the authorities to complete the inquiry and pass orders in one week from today. He has also expressed an apprehension: unless an authority superior to the inspecting authority undertakes the inquiry under section 129, prejudice may creep into the proceedings.
54. Yet Dr. Thushara James, the Government Pleader, has submitted that the goods detained, notice issued under Section 129(1), and the Garuda's reply received, the Assistant State Tax Officer completed the adjudication. To elaborate, Dr. James contends that, in the name of an interim release of the goods, Garuda ac
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s an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).
57. Dr. James has drawn my attention to the proceedings of the Commissioner of Sales Tax, Kerala, in Order No.GSTC 24614/201/CT dated 06.07.2017. At item 89, it clarifies that the Assistant Commissioner of State Tax or the Assistant State Tax Officer is the adjudicating authority under Section 129(3) of the Act. So she contends that unless there is a specific challenge to Section 129 (3) and the Government Order, dt.06.07.2017, Garuda's plea of prejudice or bias cannot be accepted. Indeed, the power of detaining and that of adjudicating vest in the same authority. The advisability of the arrangement or the legality of adjudicatory machinery is not in the challenge before me. I leave the issue untouched, for this Court will not indulge in a collateral adjudication of a vital issue having wide ramifications.
Conclusion:
58. I, therefore, hold that, once the petitioner provides the bank guarantee f
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