Assessee directed to approach competent authority to prove ownership of the detained goods by moving proper application

The Hon'ble Allahabad High Court in M/sShiv Scrap Sales v. State of U.P. & Anr. [Writ Tax No. 1519 of 2022 dated December 7, 2022] has directed the assessee to approach the competent authority by moving a proper application for giving the details of the ownership of the detained goods, in a matter challenging the order of detention of the goods for alleged non-existence of purchaser firm and for carrying fake invoice by driver, wherein, the notice was issued to the driver of the vehicle instead of the owner of the goods. Further directed the Revenue Department to duly deal with the application in accordance with Section 129(3) of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). 

Facts

M/s Shiv Scrap Sales ("the Petitioner") is engaged in the business of supplying mixed scrap to the dealers situated at different places, whose goods were seized in transit. The seized goods were sent in transit after generation of an E-way bill on November 14, 2022 which was valid till November 17, 2022. Further, the driver was carrying the valid tax invoice and E-way bill when the goods were intercepted on November 15, 2022. 

The Petitioner submitted that no reason was assigned for the seizure of goods. It was further submitted that in Form GST MOV-06, it was stated that the purchaser firm is non-existent and it was a fake sale and invoice, which is false. Therefore, as the detention order was illegal, the Revenue Department ("the Respondent") had no jurisdiction to proceed under Section 129(3) of the CGST Act. Further, it was submitted by the Petitioner that he had submitted a claim of him being the owner of the goods before the Respondent by moving an application that was appended with this petition.

However, the notice under Section 129(3) of the CGST Act was issued to the driver of the vehicle carrying goods of the Petitioner, instead of the Petitioner. The Petitioner contended that once a claim of being the owner of the goods has been put forth before the Respondent, all proceedings under Section 129 of the CGST Act were required to be conducted after giving due opportunity to the Petitioner.

Being aggrieved this petition has been filed by the Petitioner.

Issue

Whether the goods of the Petitioner were liable to be seized under Section 129(3) of the CGST Act?

Held

The Hon'ble Allahabad High Court in Writ Tax No. 519 of 2022 held as under:

• Noted that, the Petitioner had submitted claim before the Respondent by moving an application of being the owner of the seized goods. However, the notice was still issued in the name of the driver. 
• Observed that, once the Petitioner put forth its claim before the Respondent of being owner of the seized goods, all proceedings under Section 129 are required to be conducted after giving due notice or opportunity to the Petitioner.
• Further noted that, the remedy before the Petitioner is to approach the competent authority by moving a proper application giving details of its name about the ownership of the goods. 
• Stated that, the claim application was undated and there is no proof of the receipt of the same in the office of the Respondent.
• Held that, the Petitioner shall approach the competent officer putting forth his claim of being owner of the seized goods by a moving proper application. 
• Directed that the Respondent to duly deal with the application and grant opportunity of hearing to the Petitioner by giving proper notice in accordance with Section 129(3) of the CGST Act.

Relevant Provisions

Section 129 of the CGST Act

"Detention, seizure and release of goods and conveyances in transit

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released––

(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;

(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;

(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).

(4) No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3):

Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:

Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer."