The Kerala High Court has held that assessees have a statutory right to file an appeal even after the voluntary payment of GST or penalty.
The single bench of Justice Gopinath has observed that the culmination of proceedings in respect of a person who seeks to make payment of tax and penalty under Section 129(1)(a) does not result in the generation of a summary of an order under Form DRC-07 and cannot result in the right of the person to file an appeal under Section 107 being deprived.
The goods of the petitioner/assessee were the subject matter of seizure under Section 129 of the CGST/SGST Acts and the petitioners in these cases opted to pay amounts in terms of the pre-amended provisions of Section 129(1)(a) to get the goods released pending finalisation of proceedings. On payment of the amount, the goods and the conveyance were released as contemplated by sub-section (1) by issuing Form MOV-05. While an order was issued on Form MOV-09 (issued under sub-section (3) of Section 129), a corresponding summary of the order/demand on Form DRC-07 was not issued. As a result, the petitioners were not in a position to approach the appellate authority by filing an appeal under Section 107 of the CGST/SGST Acts.
The petitioner/assessee raised the issue of whether a person who opts to make payment in terms of Section 129 (1) (a) of the CGST/SGST Acts to get goods/conveyance/documents detained or seized in proceedings under Section 129 released is deprived of his right to file an appeal against the proceedings.
The petitioner contended that the assessee could not be deprived of the right to appeal. On the reading of Section 129(3) of the CGST/SGST Acts with Rule 142 (5) of the CGST/SGST Rules and the provisions of circular dated 13.04.2018, the order under sub-section (3) of Section 129 issued in Form MOV-09 should have been accompanied by a summary of the order in Form DRC-07. It is submitted that without a summary of the order in Form DRC-07, the petitioners were disabled from filing an appeal as the system accepts an appeal only if there is a summary of the order issued on Form DRC-07.
The department contended that, as per Section 129(5) of the CGST/SGST Acts, on payment of amounts, all proceedings which are the subject matter of a notice under Section 129(3) "shall be deemed to be concluded".
The department contended that in the event of an assessee or a person who is the subject matter of proceedings under Section 129 CGST/SGST Acts opting to make payment of tax and penalty in terms of Section 129(1)(a), the proceedings under Section 129 come to an end. This is the effect of sub-section (5) of Section 129. The payments made under Section 129(1) (a) are paid and accepted on Form DRC-03, which is a form for voluntary payment, and such payments cannot be the subject of any refund or adjudication at a later point of time. On payment of the amount under Section 129(1)(a), the entire proceedings should be treated as having concluded and the payment represents an acceptance of the fact that the discrepancies noted by the intercepting officer and leading to the initiation of proceedings under Section 129 were well founded. The provisions of Rule 142 of the CGST Rules deal with the situation where the person concerned seeks to continue with the proceedings by opting to provide a bank guarantee under Section 129(1)(c), in which case the provisions of Section 129(5) do not apply and the proceedings cannot be treated as concluded.
The department submitted that once payment is made under Section 129(1)(a), there is no way in which a summary of order/demand can be generated on Form DRC-07. The language of Rule 142(5) clearly indicates that there cannot be a proceeding under DRC-07 unless there is a demand for tax, interest, or penalty.Form DRC-07 also contemplates the setting out of the amount to be paid and also indicates that action will be taken if the amount shown therein is not paid by the person concerned. Once a payment is made under Section 129 (1) (a), there cannot be a demand raised under DRC-07. When a summary of order/demand is issued under DRC-07, the proper officer can, on being satisfied that the demands have been paid, issue proceedings in Form DRC-08.
Section 129(1)(a) states that if the person subject to the detention order pays the tax and penalty, the goods will be released. Section 129(1)(c) gives an option to a person suffering from an order of detention to provide security instead of making payment of tax and penalty as provided for in Section 129(1)(a). However, the provisions of sub-section (3) of Section 129 contemplate the issuance of a notice and the passing of an order. A reading of sub-section (3) suggests to me that the person suffering the detention chooses to make payment under Section 129(1)(a) or chooses to provide security in terms of Section 129(1)(c). The officer detailing or seizing the goods or conveyance has to issue a notice specifying the tax and penalty payable.
The court noted that Section 107 provides an opportunity for a person aggrieved to challenge any order or any proceedings. The wording of that section does not really make a distinction between people who opt to make a payment under Section 129(1)(a) and people who opt to provide security as provided for in Section 129(1)(c).
The court observed that it is always open to the person who suffers proceedings under Section 129 of the CGST/SGST Acts to challenge those proceedings if he feels that the demand has been illegally raised on him.
Case Title: Hindustan Steel and Cement Versus Assistant State Tax Officer
Citation: 2022 LiveLaw (Ker) 423
Counsel For Appellant: Advocates R.Jaikrishna, Narayani Harikrishnan, C.S.Arun Shankar, Anish P., Vivek Bhat D.
Counsel For Respondent: Senior Government Pleader Thushara James