No Detention Under Section 129 Of CGST Act On Mere Suspicion Of Mis-Classification Of Goods : Kerala High Court

The Kerala High Court has held that mere suspicion of mis-classification of goods cannot be the basis for a detention of goods under Section 129 of the Central Goods and Services Tax Act 2017.A single bench of Justice A Jayasankaran Nambiar held so referring to the Gujarat High Court in M/s Synergy Fertichem Private Limited v. State of Gujarat and earlier decisions of the Kerala High Court in NVK Mohammed Sulthan Rawther& Sons v. UOI & Ors and Rams v. STO."Taking cue from the aforesaid decisions, I am of the view that a mere suspicion of mis-classification of goods cannot be the basis for a detention under Section 129 of the Act", Justice Jayasankaran Nambiar held in the judgment delivered in the case.The Court said that it a detention under Section 129 can be justified only if there is "contravention of the provisions of the Act in relation to transportation of goods or their storage while in transit".The Court clarified that the authorities can detain goods if it is a case of "patent mis-description". "Such instances,however, must necessarily be confined to glaring mis-descriptions such as 'Apples' being described as 'Oranges' or 'Coconuts' being described as 'Betel Nuts', where the two goods can never be perceived as the same by ordinary persons endowed with reasonable skills of cognition and comprehension", the Court said.In one case before the court, the petitioner was transporting a consignment of "papads". Though the consignment was covered by a bill of supply and e-way bill, declaring the goods as exempted goods, the GST officials detained the consignment saying that the goods ought to have been classified as "un-fried fryums". which attract 18% GST.In the other case, a consignment transported under the classification "fruit drinks" was detained by the authorities saying the goods were actually classifiable as 'aerated soft drinks with added flavours' attracting a different HSN classification and rate of tax.The Court held that the misclassification alleged in these cases were not blatant enough to for the basis for detention under Section 129 GST Act."I am of the view that a mere suspicion of mis-classification of goods cannot be the basis for a detention under Section 129 of the Act. It has to be borne in mind that Section 129 forms part of the machinery provisions under the Act to check evasion of tax and a detention can be justified only if there is a contravention of the provisions of the Act in relation to transportation of goods or their storage while in transit. No doubt, it may be open to an inspecting authority to detain goods if there is a patent mis-description of the goods in the transportation documents, to such an extent that it can only be seen as referring to an entirely different commodity. Such instances,however, must necessarily be confined to glaring mis-descriptions such as'Apples' being described as 'Oranges' or 'Coconuts' being described as'Betel Nuts', where the two goods can never be perceived as the same by ordinary persons endowed with reasonable skills of cognition and comprehension". Scheme of detention explainedAt the start of the judgment, Justice Nambiar said that he was making a detailed pronouncement on detention and seizure of good since people are resorting to filing writ petitions in the High Court challenging detention orders when the scheme of the Act clearly provides an effective alternate remedy."I also believe that an enunciation of the scope and ambit of the statutory provision would help clarify the doubts arising in the minds of proper officers, who are entrusted with the task of overseeing the transportation of taxable goods with a view to check the evasion of tax, as regards the procedure to be followed while going about their assigned duties", the Court said.The Court said that the Act provides for appellate remedies against detention order and writ petitions ought not to be ordinarily preferred challenging such orders.Bank guarantee should not be invoked for three months to make appellate remedy effectiveTo make the appellate remedy effective, the Court read into a condition that the bank guarantee furnished by the consignee for provisional release of goods should not be invoked for a period of 3 months.Three months is the time provided by the statute to file appeal."...although not expressly provided for under the statute, I am of the view that to render the appellate remedy effective, a requirement ought to be read into the statutory framework that the proper officer should not invoke the bank guarantee for a period of three months from the date ofservice of the adjudication order under Section 129 (3). The said requirement would safeguard the interests of the person concerned, as also the revenue that holds the bank guarantee,while simultaneously obviating the need for persons concerned to approach the writ court challenging the detention orders", the Court...

No Detention Under Section 129 Of CGST Act On Mere Suspicion Of Mis-Classification Of Goods : Kerala High Court

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