GST : No Detention Of Goods If There Is Bona Fide Dispute On Tax Rate, Holds Kerala HC [Read Judgment]
If the records truly reflect the transaction and the assessee's explanation accords with his past conduct, then detention is not the answer and at best the inspecting authority can alert the assessing authority to initiate the assessment proceedings, the Court held.
A single bench of Kerala High Court in N.V.K.Mohammed Sulthan Rawther and Sons v. Union of India,held that the process of detention of the goods under section 129 of the Goods and Services Tax Act cannot be resorted to when the dispute is bona fide, especially, concerning the exigibility of tax and,more particularly, the rate of that tax.The judgment was rendered by Justice Dama Sheshadri Naidu.
As per the facts of the case, the dispute arose when the consignment of the first petitioner containing betel nuts was detained by the Assistant State Tax Officer ("ASTO"), alleging that the first petitioner's product fits the description "HSN 2106" and attracts 18% tax and not 5% tax as stated in the tax invoice.
Aggrieved, the petitioner filed a writ petition praying inter alia for a direction to the ASTO not to detain the petitioners' commodity en route.
It was argued on behalf of the petitioner that, the dispute about the rate of tax, is not a matter for adjudication in a proceeding under Section 68 or 129 of the GST Act. The adjudication of the rate of tax is a matter to be undertaken by the assessing officer alone, and not by the inspecting officials exercising powers under Sections 67, 68, 69 or 129 of the CGST Act/ KGST Act, 2017. It was further argued by the petitioner that Section 122 of the GST Act defines the offences warranting imposition of penalty and misclassification of goods in the invoice is not an offence falling under either Section 122, 67, or 68 of the Act.
On the other hand, it was argued by the revenue that the ASTO has plenary powers under Section 129 to intercept any goods and detain them on any ground enumerated in that section. As Section 129 provides the mechanism for detention, seizure, and release of goods and conveyances in transit in contravention of the provisions of the Act or its rules, it was argued by the revenue that there is "contravention" as envisaged under section 129. It was argued that the contravention in the instant case concerns the misbranding of the product and paying less tax and hence there is no illegality in detaining the petitioner's goods.
Hearing both sides, the court held the detention order to be arbitrary and unsustainable and ordered the release of the petitioner's goods. On the basis of various precedents, the court noted that "if a dealer furnishes all particulars about his business, assesses the tax as he honestly believes to be correct, and pays it; his conduct cannot be faulted as mala fide or as an effort to evade tax".
"If the records truly reflect the transaction and the assessee's explanation accords with his past conduct, then detention is not the answer and at best the inspecting authority can alert the assessing authority to initiate the assessment proceedings", noted the court.