The Hon’ble HC, Kerala in the matter of Daily Fresh Fruits India Private Limited v. Assistant Tax Officer [WP(C). No.3431 of 2020(D) dated March 4, 2020] quashed detention order and subsequent show cause notice in FORM MOV-07 issued on the ground of misclassification of the goods relying on the case of Synergy Fertichem [ 2019 (12) TMI 1213 – GUJARAT HIGH COURT]
Facts:
Daily Fresh Fruits India Private Limited (“the Petitioner”) is engaged in manufacture and supply of fruit-based beverages/drinks.
According to the Petitioner, the carbonated fruit drinks manufactured by them was classified under HSN 2202 9920 under GST and discharging GST @ 12% on all intra State and inter-State supplies. On earlier occasions, the Petitioner had also brought the aforementioned drinks within the jurisdiction of Kerala and the vehicles carrying the aforementioned goods were intercepted on the premise that the aforementioned goods were wrongly classified, in fact they would be falling under the head 2202 10, for which the GST rate is 28%.
Though against the aforementioned detention, the Petitioner after paying the tax and penalties, obtained the release of the vehicles, this time again on January 31, 2020, the goods of similar nature being brought within the jurisdiction of the Kerala State were intercepted and detained on the same premise and subsequently issue MOV-07.
Issue:
Whether the Officers of Kerala (“Respondents”) have a jurisdiction to detain and seize the goods.
Held:
The Hon’ble HC, Kerala in WP(C). No.3431 of 2020(D) dated March 4, 2020 held as under:
- Section 129 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) opens with a non obstante clause empowering the Officers to detain and seize the goods, if it found to be in contravention of any of the any of the provisions of the CGST Act and release of the vehicles, as per the conditions, enumerated, therein.
- In case of a bonafide dispute with regard to the classification between a transitor of the goods and the squad officer, the squad officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers and nothing beyond. In the present case, it is a case of bonafide miscalculation as to whether the goods would be exigible to 12% or 28%. Similar question was considered in the case of Synergy Fertichem [ 2019 (12) TMI 1213 – GUJARAT HIGH COURT].
- The detention order and Form GST MOV-07 are not sustainable and hereby quashed. The goods are directed to be released to the Petitioner with a further direction that the inspecting authority of Kerala would prepare a report and submit the same to the assessing authority, Tamil Nadu for taking action, if deem it appropriate, in accordance with law.
Relevant provision:
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 the applicable tax and penalty equal to one 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 tax and penalty;
(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon 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 tax and 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.
(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).
(4) No tax, interest or 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 the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130:
Provided 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 seven days may be reduced by the proper officer.”