Goods in Transit cannot be confiscated on the ground that there has been a contravention of the law by another person in the supply chain: High Court of Punjab.
| Case Details: | Shiv Enterprises vs. State of Punjab ([2022] |
| Appeal No.: | CWP-18392-2021 |
| Ruling pronounced by: | Honorable Punjab and Haryana High Court |
| Date of Ruling: | February 04, 2022 |
Facts of the Case
⦁ M/s Shiv Enterprises is engaged in the business of selling copper scrap. Some of his goods were detained by the officer on 30th August 2021, while in transit despite having all the requisite documents (Tax Invoice and E-way bill) related to the goods.
⦁ Form MOV-02 dated 30th August 2021 was issued for detention and physical verification of goods, and the goods were stationed at the office of the assistant commissioner. No order was passed and neither the goods were released even after 14 days, so the petitioner filed a reply to Form MOV-02 by E-mail on 05th September 2021.
⦁ The petitioner was informed that the seller or supplier of the petitioner did not have inward supply and was only engaged in outward supply and is not paying any tax. Therefore, proceedings under Section 130(1) CGST Act have been initiated against the Petitioner.
⦁ However, there were no findings with respect to a contravention of any provision by the petitioner with intent to evade payment of tax.
⦁ Also, an SCN was issued against him under the allegation of invading the tax by making fraudulent invoices to claim inadmissible ITC.
⦁ On 14.09.2021, the petitioner has filed a petition, challenging the detention of the goods under section 129 of the CGST Act and for the release of the same.
Observations
⦁ The Hon’ble Punjab and Haryana High Court in CWP-18392-2021 dated February 04, 2022, held that it was not possible for the petitioner to virtually verify whether the tax has been paid by its predecessors in the supply chain or not and the petitioner can only be alleged with the opinion to invade tax when he has directly or intentionally contravened a provision of CGST Act related to goods in transit.
⦁ Further noted that the wrongful claim of ITC only cannot be held as an intention to evade payment of tax, and also it is also not one of the conditions of Section 130 of the CGST Act that could entail confiscation of the goods.
Ruling/Judgement
⦁ Held that, in case the goods in transit are accompanied by the documents as prescribed, the department need not proceed under Section 129 of the CGST Act. Further, it is mandatory to conclude the inspection within a prescribed time limit.
⦁ Invocation of Section 130 must have a nexus with the action of the person against whom proceedings are initiated. Therefore, the petitioner cannot be held liable for a contravention of the provision of law by any other person in the supply chain.
⦁ Thus, the action of the department in initiating proceedings under Section 130 on the basis of show cause notice dated 14.09.2021 cannot be sustained. The department was further directed to release the goods and conveyance.
