Daily Fresh Fruits India Private Limited v. Assistant State Tax Officer, Palakkad / Commissioner State Good and Services Tax Department, Thiruvananthapuram / State of Kerala
[Citation -2020-LL-0304-122]

Citation 2020-LL-0304-122
Appellant Name Daily Fresh Fruits India Private Limited
Respondent Name Assistant State Tax Officer, Palakkad / Commissioner State Good and Services Tax Department, Thiruvananthapuram / State of Kerala
Court HIGH COURT OF KERALA AT ERNAKULAM
Relevant Act CGST
Date of Order 04/03/2020
Judgment View Judgment
Keyword Tags goods and services tax • release of goods • levy of penalty • payment of tax • bank guarantee • tax liability • seized goods • tax due


IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR. JUSTICE AMIT RAWAL WEDNESDAY, 04TH DAY OF MARCH 2020 / 14TH PHALGUNA, 1941 WP(C).No.3431 OF 2020(D) PETITIONER/S: DAILY FRESH FRUITS INDIA PRIVATE LIMITED NO. 2/73 NH-7, NAMAKKAL MAIN ROAD, A.K.SAMUTHIRAM, PACHAL POST, NAMAKKAL- TK AND DT, TAMIL NADU 637018. REPRESENTED BY ITS MANAGING DIRECTOR MR.T ISSAC BRIGHT BY ADVS. SHRI.NAVAZ P.C. SHRI.PRABHAKARAN P.M. SRI.KARTHIK S. NAIR RESPONDENT/S: 1 ASSISTANT STATE TAX OFFICER SQUARD NO.VII, STATE GST DEPARTMENT, GROUND FLOOR, BEHIND CIVIL STATION, PALAKKAD, KERALA-678001 2 COMMISSIONER STATE GOODS AND SERVICES TAX DEPARTMENT, 9TH FLOOR, TAX TOWER, KILLPPALAM, KARAMANA.P.O, THIRUVANANTHAPURAM-695002 3 STATE OF KERALA REPRESENTED BY SECRETARY, COMMERCIAL TAX DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695001 OTHER PRESENT: GP DR THUSHARA JAMES THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 10-02- 2020, COURT ON 04-03-2020 DELIVERED FOLLOWING: WP(C).No.3431 OF 2020(D) 2 JUDGMENT petitioner Private Limited Company engaged in manufacture and supply of fruit-based beverages/drinks registered under Tamil Nadu Goods and Services Tax Act, 2017 with GSTIN No.33AACCD9166HIZL. 2. According to petitioner, 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. codes have been specified under Chapter XXII of GST Tariff Codes. In aforementioned code in respect of fruit-based drinks tax is @ 12% ie., 6% under Central GST and another 6% as State GST. On earlier occasions, petitioner had also brought aforementioned drinks within jurisdiction of Kerala and vehicles carrying aforementioned goods were intercepted on premise that aforementioned goods were wrongly classified, in fact they would be falling under head 2202 10, for which GST rate is 28%. WP(C).No.3431 OF 2020(D) 3 Though against aforementioned detention, petitioner after paying tax and penalties, obtained release of vehicles, this time again on 31st January 2020, goods of similar nature being brought within jurisdiction of Kerala State were intercepted and detained on same premise. It is in this back ground, action of authorities in detention has been assailed in present writ petition. Counsel for petitioner in view of aforementioned facts, challenged action by raising following submissions: a. GST authorities in Kerala do not have jurisdiction to issue show cause notice of tax on import as only officers in Tamil Nadu could initiate proceedings. At best authorities at Kerala have remedy of sending intimation to authorities of Tamil Nadu. b. It is not case of evasion but bonafide dispute concerning exigibility of tax ie. rate of tax. bare reading of Section 129 (1) of GST Act states that in contravention of any of provisions of Act or rules made there under, goods liable to be detained can be WP(C).No.3431 OF 2020(D) 4 released on payment of tax and penalty but that situation would only arise when goods were moved without any valid documents, but instant case is covered under valid tax invoice Ext.P6, on which applicable IGST was duly charged and E-way Bill, Ext.P7 was correctly generated by petitioner. authorities in Kerala have powers to verify documents like invoice and E-way bills but infact, there was no discrepancy in respect of quantity or description of goods mentioned in tax invoice. only reason for detention was that lemon drinks were not correctly classified and liable to be tax as 28% and not under 22029920 attracting 12% of GST. c. In support of aforementioned contention learned counsel for petitioner has relied upon decision of this Court in N.V.K Mohammed Sulthan Rawtger and Sons vs. Union of India & Ors., (2018 -VIL-502-KER) and also Division Bench judgment of Hon'ble Gujarat High Court in Synergy Fertichem Pvt. Ltd. v. State of Gujarat (2019-VIL-623-GUJ). 3. Per contra, learned Government Pleader WP(C).No.3431 OF 2020(D) 5 opposed aforementioned prayer of petitioner by relying upon Section 129 of CGST Act, starting with non-obstante clause that officers are empowered in case any person transporting any goods while they are in transit in contravention of provisions of Act or rules made thereunder, such goods and conveyance shall be liable to detention or seizure. They shall be released on conditions enumerated in clauses (a) to (c) of Section 129 and as per provisions of sub Section (6) of Section 129 in case amount of tax and penalty imposed upon any goods or owner of goods is not deposited within 14 days of such detention and seizure, proceedings of confiscation and levy of penalty as provided under Section 130 of 2017 of GST Act would follow. 4. learned counsel for petitioner submits in rebuttal that at best it would be case, falling, within provisions of Section 122 of 2017 Act dealing with minor penalty for offences. Attention of this Court has been drawn to letter dated 12 th of July 2018, Ext.P5 written by petitioner to Central Tax Officer, Goods and Service WP(C).No.3431 OF 2020(D) 6 Tax Department, Range-I, Salem-Tamil Nadu informing that products manufactured by firm under trade mark 'DAILEE' as FRUIT JUICE and FRUIT PULP BASED DRINK under Commodity Code 2107 of TNVAT with tax liability of 5%, and after introduction of GST under HSN & SAC, commodity/product has been classified under HSN code 2202.99.20 (FRUIT PULP OR FRUIT JUICE based DRINKS). classification of same was placed till 12.07.2018 under tax liability of 12%. tax invoice Ext.P6 at Serial Nos.3 and 4 reflects payment of tax as 12% for 200 ml of Dailee Lemon Fruit Drink and 500ml of Dailee Lemon Fruit Drink under codes, aforementioned. observation of authorities of Kerala as reflected in physical verification report dated 31 st January 2020, Ext.P10 is without jurisdiction whereas duty to assess classification of product vested only with officer of Tamil Nadu. 5. I have heard learned counsel for parties and apprised paper book. facts as narrated above with regard to transit of goods from Tamil Nadu to Kerala, WP(C).No.3431 OF 2020(D) 7 reflecting payment of Goods Service Tax as 12% in categorizing drink under code 2202 99 20 are not in dispute. only point to be pondered is whether Officers of Kerala would have jurisdiction to detain and seize goods or at best could have intimated jurisdictional Officer in Tamil Nadu to initiate proper proceedings against petitioner in view of report. To answer aforementioned question, it would be in fitness of things to extract Section 129 of GST Act. 129. 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 provisions of this Act or rules made thereunder, all such goods and conveyance used as means of transport for carrying 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 applicable tax and penalty equal to one hundred per cent. of tax payable on such goods and, in case of exempted goods, on payment of amount equal to two per cent. of value of goods or twenty-five thousand rupees, whichever is less, where owner of goods comes forward for payment of such tax and penalty; (b) on payment of applicable tax and penalty equal to fifty per cent. of value of goods reduced WP(C).No.3431 OF 2020(D) 8 by tax amount paid thereon and, in case of exempted goods, on payment of amount equal to five per cent. of value of goods or twenty-five thousand rupees, whichever is less, where owner of goods does not come forward for payment of such tax and penalty; (c) upon furnishing security equivalent to 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 of seized without serving order of detention or seizure on person transporting goods. 2) provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances, (3) proper officer detaining or seizing goods or conveyances shall issue notice specifying tax and penalty payable and thereafter, pass 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 person concerned opportunity of being heard. (5) On payment of amount referred in sub-section (1), all proceedings in respect of notice specified in sub-section (3) shall be deemed to be concluded. (6) Where person transporting any goods or owner of goods fails to pay amount of tax and penalty as provided in sub-section (1) within 1 [fourteen days] of such detention or seizure, further proceedings shall be initiated in accordance with provisions of section 130: PROVIDED that where detained or seized goods are perishable or hazardous in nature or are likely to WP(C).No.3431 OF 2020(D) 9 depreciate in value with passage of time, said period of 1 [fourteen days] may be reduced by proper officer. 6. On perusal of aforementioned Act, it is evident that Section 129 opens with non obstante clause empowering Officers to detain and seize goods, if it found to be in contravention of any of any of provisions of Act and release of vehicles, as per conditions, enumerated, therein. similar question also arose for consideration before Division Bench of Gujarat High Court in Synergy Fertichem Pvt. Ltd.'s case (Supra) wherein paragraph 158 and 159 and 160 held as under: 158. In many matters of present type,we have noticed that goods are detained on ground that tax paid on product was less. In such matters, although documents were found to be in order and description of product also accorded with relevant declaration, still consignment were detained on ground that tax paid was less. 159. In our opinion, detention and seizure of goods on such ground cannot be justified. In such eventuality, correct procedure which inspecting authority is Expected to follow is to alert Assessing Authority to initiate proceedings "for assessment of any alleged sale at which dealer will have his opportunities to put forward his pleas on law and on fact. What we want to convey is WP(C).No.3431 OF 2020(D) 10 that process of detention of goods cannot be resorted to when dispute is bona fide especially concerning exigibility of tax and, more particularly, rate of that tax. In aforesaid context, we may refer to and rely upon decision of Kerala High Court in case of N.V.K. Mohammed Sulthan Rawtger & Sons Dindigul, Tamil Nadu, Represented by Managing Partner, Raja Mohammed & Ors., vs. Union of India & Ors., reported in (2019) 61 GSTR 307-2018-VIL-502-KER, wherein learned Single Judge of Kerala High Court observed as under; "24. Detention under KSGST Act has elaborate remedial mechanism. Now, we focus on release of product, and it lies in narrow confines, Suffice it for me to examine this singular issue: Can State Tax Officer invoke Section 129 of Act and detain goods on ground tax paid on product is less? Here, documents are in order and product description accords with what first petitioner has already declared, say, in his returns before assessing authority. Then, can ASTO still hold up consignment because declaration already made does not suit his notion of what product is? 25. True, literal reading of Section 129 of Act presents different picture and, perhaps, lends support to State's view. But purposive interpretation and practical commercial considerations trump that view. 26. Chapter XVI of Combined Acts deals with inspection, search, and seizure. Section 129 under Chapter XIX provides mechanism for detention, seizure, and release of goods and conveyances in transit. It begins with non- obstante clause and goes on to lay down procedure. If any person transports or stores any goods "contravening this Act" or its rules, all those goods and means of transport and documents relating to those goods and conveyance will be WP(C).No.3431 OF 2020(D) 11 detained or seized. They will, however, be released to owner of goods (a) on its paying applicable tax and penalty equal to one hundred percent of tax payable on goods. If goods belong to exempted category, different rate applies, though. 27. Revenue asserts that there is "contravention", and that contravention concerns misbranding product and paying less tax. Under erstwhile Kerala Value Added Tax Act, first petitioner and those trading in same product-- betel nut--have had many rounds of litigation, Eventually, as seen from Exts.P1 to P5 proceedings, this Court and Revenue accepted that product is not supari and it attracts lesser tax. Exts.P6, P6(a), P7, and P7(a) are first petitioner's purchase and supply invoices. 28. Exts.P8 and P8(a) are important; they are first petitioner's recent GST returns for June and August, 2018. In those returns, first petitioner has assigned same HSN Code, as he did reflect in Ext.P9 invoice. He paid tax only at 5%. Thus documents before assessing authority and those that accompanied consignment accord with one another. 29. In this context, we may examine J.K. Synthetics Limited v. Commercial Taxes Officer, (1994) 4 SCC 276, On how to Interpret Tax Statutes, Supreme Court machinery provisions, "which should be construed like any other statute", It has also held that "the power to levy and collect interest is substantive law though part of machinery provision". 30. In J.K. Synthetics Limited issue was whether appellant should pay interest on additional sales tax. Revenue, as it has done WP(C).No.3431 OF 2020(D) 12 here, contended that when law enjoins on Assessee to files 'return', it can only mean true and correct return, that is, return which reflects tax due on final assessment, Supreme Court in that context has held that information to be furnished in return "must be 'correct and complete', that is, true and complete to best of knowledge and belief, without dealer being guilty of willful omission." dealer, according to J. K. Synthetics Limited, must deposit full tax due, based on information furnished. And that information must be correct and complete to best of dealer's knowledge and belief. If dealer has furnished full particulars regarding his business, without willfully omitting or withholding any particular information affecting assessment of tax, and if he honestly believes to be 'correct and complete', dealer is said to have acted 'bona fide' in depositing tax due and filing return. Of course, tax so deposited is to be deemed to be provisional and subject to necessary adjustments under final assessment. 31. To support its ratio, J.K. Synthetics Limited accepts minority of view in Associated Cement Co. Ltd.. v. CTO, (1981) 4 SCC 578 And it has finally held that if assessee pays tax, which according to him is due based on Information supplied in his return, there would be no default on his part to meet his statutory obligation. Therefore, it would be difficult to hold that 'tax payable' by him is not paid' and that he is liable for consequences. 32. correctness of Exts.P8 and P8(a) accepted, as held in J. K. Synthetics Limited, we will examine what amounts to statutory violation or contravention under Section 129 of Act. Apt is case decided by this Court: Rams v. Sales Tax WP(C).No.3431 OF 2020(D) 13 Officer. petitioner in Rams contracted with Government of India to print and supply large number of telephone directories. For this purpose, he procured paper from Tamil Nadu government agency. When paper was under transport, at Kochi sales tax officer detained lorry, under Section 29A(2) of Kerala General Sales Tax Act, 1963. 33. detention was because petitioner, unregistered dealer, had allegedly attempted to evade sales tax. petitioner's producing all documents had no impact. Instead, detaining officer insisted on petitioner's furnishing bank guarantee for certain sum as condition for release of goods, pending enquiry. 34. order in enquiry affirmed that Enquiry Officer was "satisfied" that there was attempt at evasion of tax. So penalty followed. In this context, learned Single Judge of this Court has observed that when there is scope for genuine dispute regarding any liability for tax, question of detaining goods at check-post or imposing penalty under Section 29A does not arise. There is ground for genuine dispute whether there was any taxable sale at all. Rams, then, further observes: "In such cases it is not for check-post authority to act on mere suspicion and to find that there is any attempt at evasion of payment of tax, which alone vests him with jurisdiction to act under S. 29A. At best, he can only alert assessing authority in Ernakulam to initiate proceedings for assessment of any alleged sale, at which petitioner will have all his opportunities to put forward his picas on law and on fact. process of detention of goods at check post, cannot be resorted to in such WP(C).No.3431 OF 2020(D) 14 cases when there is bona fide dispute regarding very existence of sale and exigibility for tax. S. 29A is not intended to subserve such object. 35. I may examine impugned Ext.P11 notice, or in other words act of detention, in light of dicta in J.K. Synthetics Limited and Rams. In former, Supreme Court has emphatically held that if dealer furnishes all particulars about his business, assesses tax as he honestly believes to be correct, and pays it; his conduct cannot be faulted as mala fide or as effort to evade tax. Here, Exts.P8 and P8(a) are returns for two recent months. first petitioner declared HSN Code he has felt his product would attract and paid tax accordingly. returns are very much on record before assessing officer. Therefore, to that extent first petitioner's conduct cannot be faulted, nor can he be accused of evading tax. 36. Then, I may examine dictum of Rams, judgment rendered by this Court. In somewhat analogous situation as we face here, Rams held that inspecting authority may entertain suspicion that there is attempt to evade tax. But if records he seizes truly reflect transaction and assessee's explanation accords with his past conduct, for example, returns he has filed earlier, detention is not answer. In words of Rams, at best inspecting authority can alert assessing authority to initiate proceedings "for assessment of any alleged sale, at which petitioner will have all his opportunities to put forward his pleas on law and on fact. Indeed, emphatic is enunciation of law in Rams that process of detention of goods cannot be resorted to when dispute is bona fide, especially, concerning exigibility of tax and, WP(C).No.3431 OF 2020(D) 15 more particularly, rate of that tax." 160. We are in full agreement with aforesaid enunciation of law laid down by Kerala High Court. Thus, in case of bona fide dispute with regard to classification between transporter of goods and Squad Officer, Squad Officer may intercept goods, detain them for purpose of preparing relevant papers for effective transmission to jurisdictional Assessing Officer. It is not open to Squad Officer to detain goods beyond reasonable period. process can, at best, take few hours. It goes without saying that person, who is in charge of transportation, will have to necessarily cooperate with Squad Officer for preparing relevant papers. [See Jeyyam Global Foods (P.) Ltd. vs. Union of India & Ors., (2019) 64 GSTR 129 (Mad.)-2019-VIL-47-MAD] 7. From perusal of aforementioned findings, it is irresistibly concluded that in case of bonafide dispute with regard to classification between transitor of goods and squad officer, squad officer may intercept goods and detain them for purpose of preparing relevant papers for effective transmission to judicial assessing officers and nothing beyond. In present case, it is case of bonafide miscalculation as to whether goods would be exigible to 12% or 28%. judgment cited in N.V.K Mohammed Sulthan Rawtger's case (supra) was WP(C).No.3431 OF 2020(D) 16 also case where petitioner firm was manufacturer of 'Ground Betel Nuts (Arecanuts)' and registered with Tamil Nadu under Goods and Service Tax Act. goods were intercepted by inspecting authority to be in contravention of misbranding. By relying upon decision in J.K Synthetics Limited V. Commercial Taxes Officer, 1994 (4) SCC 276, it was held that charging provisions must be construed strictly but not machinery provisions which would be construed like any other statute. 8. upshot of reasoning aforementioned is that impugned order of detention Ext.P1 and consequential notice Ext.P2 in Form GST MOV-07 are not sustainable and hereby quashed. goods are directed to be released to petitioner with further direction that inspecting authority of Kerala would prepare report and submit same to assessing authority, Tamil Nadu for taking action, if deem it appropriate, in accordance with law. Sd/- sab AMIT RAWAL JUDGE WP(C).No.3431 OF 2020(D) 17 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF DETENTION ORDER DATED 31.01.2020 IN FORM GST MOV-06 PASSED BY FIRST RESPONDENT EXHIBIT P2 TRUE COPY OF NOTICE DATED 31.01.2020 ISSUED IN FORM GST MOV-07 BY IST RESPONDENT EXHIBIT P3 TRUE COPY OF LETTER DATED 19.02.2019 TO DEPUTY COMMISSIONER, STATE GST DEPARTMENT, THIRUVANANTHAPURAM EXHIBIT P4 TRUE COPY OF LETTER DATED 20.01.2020 EXHIBIT P5 TRUE COPY OF LETTER DATED 12.07.2018 TO CENTRAL TAX OFFICER, SALEM EXHIBIT P6 TRUE COPY OF INVOICE NO.UNIT 1/4639 DATED 31.01.2010 EXHIBIT P7 TRUE COPY OF E-QY BILL NO.501164681088 DATED 31.01.2020 EXHIBIT P8 TRUE COPY OF FORM GST MOV-01 DATED 31.01.2020 EXHIBIT P9 TRUE COPY OF FORM GST MOVE-02 DATED 31.01.2020 EXHIBIT P10 TRUE COPY OF FORM GST MOV 04 DATED 31.01.2020 EXHIBIT P11 TRUE COPY OF LETTER DATED 01.02.2020 EXHIBIT P12 TRUE COPY OF REPLY DATED 03.02.2020 FILED TO EXHIBIT P2 NOTICE Daily Fresh Fruits India Private Limited v. Assistant State Tax Officer, Palakkad / Commissioner State Good and Services Tax Department, Thiruvananthapuram / State of Kerala
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