Dept. Vacillating Whether Goods Were In Transit Or In Godown: Calcutta High Court Directs Refund Of Penalty

The Calcutta High Court has directed the refund of the penalty and held that the department was vacillating between Sections 67 and 68 of the GST Act, depending on whether the goods are in transit or in the godown.

The bench of Justice Amrita Sinha has observed that initially the authority invoked the provision of Section 67 but thereafter shifted its stand and relied upon Section 68 read with Section 129 for the imposition of penalty. The authority was confused as to which provision to invoke for the imposition of a penalty. At one point in time, the goods were held to be stored in the godown without the proper documents and without a valid e-way bill, and immediately after, the goods were held to be in transit. A single consignment of goods cannot be held to be stored in the godown and in transit at the same time.

The goods of the petitioner were seized on February 22, 2022, at 2 p.m. from a godown upon invoking the provisions of Section 67(2). The order of seizure issued in Form GST INS-02 mentions that, upon inspection of the goods and scrutiny of the books of accounts, registers, documents or papers, and goods found during the inspection or search, there were reasons to believe that the goods were liable to be confiscated, and the same were seized by invoking power under Section 67(2) of the Act. On the same date at 4.30 pm, a report of satisfaction that the goods were liable to be confiscated was prepared. The e-way bill status of the goods mentions that the e-way bill had already expired on the date of inspection and seizure.

The adjudicating authority opined that the goods were transported and stored while they were in transit in contravention of Section 129 and calculated the applicable penalty under Section 129 (1) (a).

The petitioner, being the owner of the goods, submitted to the jurisdiction of the adjudicating authority. Upon hearing the petitioner, the adjudicating authority was of the opinion that the goods were transported in contravention of Section 68 and confirmed the penalty imposed under Section 129 (1)(a). On payment of the penalty amount, the goods of the petitioner were released.

Section 67(2) of the Act empowers the proper officer to confiscate goods, if secreted in any place, for evading payment of tax. The place may be searched and goods seized, and the same shall be released on payment of applicable taxes. The proper officer, if he has reason to believe that the goods are stored in a warehouse, godown, or any other place without paying tax or without paying the requisite tax, may cause an inspection, search, and seizure. The provision relates to a particular "place" where inspection, search, and seizure can be made.

Section 129 deals with the detention, seizure, and release of goods and conveyances "in transit". The provision is to be invoked when the goods are in movement on a conveyance.

The goods in question were not seized while in transit. They were seized from a godown, two days after the expiry of the E-way bill. The godown from where the goods were seized is approximately three kilometres ahead, as claimed by the petitioner, from the final destination mentioned in the e-way bill. As the goods were seized from a godown, the authority issued the order of seizure in Form GST-INS-02.

The court noted that it was not the case of the respondent that the goods that were seized from the godown were the goods that were transported by the expired e-way bill. On the contrary, the e-way bill number is recorded in the report filed by the concerned officer. The petitioner admitted that the rest of the goods were sold out by him. It does not appear that the petitioner had the intention to evade tax, as the petitioner already paid the taxable amount at the time of the generation of the e-way bill. The department has also failed to make out a case that there was any connivance between the buyer and seller in dealing with the goods without the payment of necessary taxes.

Case Title: Sandip Kumar Singhal Versus Deputy Commissioner, Revenue, Bureau of Investigation North Bengal Headquarter & Ors.

Case No: WPA 321 of 2023

Citation: 2023 LiveLaw (Cal) 62

Date: 10.03.2023

Counsel For Petitioner: Advocates Sandip Choraria, Rajeev Parik, Esha Acharya

Counsel For Respondent: Advocates Subir Kumar Saha, Bikramaditya Ghosh

Click Here To Read The Order