IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR. JUSTICE AMIT RAWAL THURSDAY, 19TH DAY OF MARCH 2020 / 29TH PHALGUNA, 1941 WP(C).No.5384 OF 2020(W) PETITIONER/S: M/S.HINDUSTAN COCA COLA PRIVATE LIMITED, BUILDING NO.XI/9, NEAR CENTRAL WAREHOUSING, EDATHALA PANCHAYAT, OPP.SOS VILLAGES ALUVA EAST VILLAGE, ERNAKULAM, REPRESENTED BY ITS AUTHORIZED SIGNATORY, MR.SANISH JOHN T.D. BY ADVS. SRI.A.KUMAR SRI.P.J.ANILKUMAR SMTG.MINI(1748) SRI.P.S.SREE PRASAD SHRI.JOB ABRAHAM SRI.AJAY V.ANAND RESPONDENT/S: 1 ASSISTANT STATE TAX OFFICER SQUAD NO.I, SGST DEPARTMENT, PALAKKAD, KERALA-678001. 2 COMMISSIONER OF COMMERCIAL TAXES, TAX TOWER, KILLIPPALAM, KARAMANA P.O., THIRUVANANTHAPURAM-695002. R1 BY GOVERNMENT PLEADER OTHER PRESENT: GP DR THUSHARA JAMES THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04-03- 2020, COURT ON 19-03-2020 DELIVERED FOLLOWING: WP(C).No.5384 OF 2020(W) 2 JUDGMENT petitioner Private Limited Company engaged in manufacture and supply of fruit-based beverages/drinks registered in State of Kerala with GSTIN No.32AAACH3005MIZO. 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. During course of Business of supplying goods interstate, aforementioned drinks were brought within jurisdiction of Kerala from Karnataka manufacturing Plant and vehicles carrying aforementioned goods were intercepted in Walayar, Palakkad on premise that aforementioned goods were wrongly WP(C).No.5384 OF 2020(W) 3 classified, in fact they would be falling under head 2202 10, for which GST rate is 28%. Against aforementioned detention, petitioner vide reply to Ext.P3(d) notice submitted that, allegation of misclassification is without merit, and petitioner has already applied for advanced ruling pertaining to same matter in Gujarat and said matter is pending in Hon'ble High Court of Gujarat is with interim stay favouring petitioner. It is in this back ground, action of authorities in detaining goods 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 Karnataka could initiate proceedings. At best authorities at Kerala have remedy of sending intimation to authorities of Karnataka. 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 WP(C).No.5384 OF 2020(W) 4 contravention of any of provisions of Act or rules made there under, goods liable to be detained can be released on payment of tax and penalty but that situation would arise only when goods in movement without any valid documents, but instant case is covered under valid tax invoice Ext.P1, on which applicable IGST was duly charged and E-way Bill, Ext.P2 was correctly generated by petitioner. authorities in Kerala have powers to verify documents like invoice and E-way bills. Infact, there was no discrepancy in respect of quantity or description of goods mentioned in tax invoice. only reason for detention was that respective 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 WP(C).No.5384 OF 2020(W) 5 (2019-VIL-623-GUJ). 3. Per contra, learned Government Pleader 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. It was further submitted that there is contravention in provision relating to transportation, with wrong description of goods and misclassification of tax, hence it is possible for proper officer to detain vehicle along with goods transported. WP(C).No.5384 OF 2020(W) 6 4. Learned counsel for petitioner in rebuttal submitted that any ambiguity with respect to classification of products has to be resolved in favour of assessee. In support of above contention petitioner relied upon 2018 judgment of Hon'ble Allahabad High Court in Commissioner of Commercial Tax vs. Racket Backizer India Ltd. [2018 (19) GSTL 596 (All.)] , which followed decision of Hon'ble Supreme Court in Voltas Ltd. v. State of Gujarat [(2015) 7 SCC 527], which laid down same principle as reiterated by Hon'ble Allahabad High Court. Hence, levy of penalty arising from ambiguity in classification is arbitrary and illegal, thereupon making demand for penalty illegal. 5. I have heard learned counsel for parties and apprised paper book. facts as narrated above with regard to transit of goods from Karnataka to Kerala, 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 WP(C).No.5384 OF 2020(W) 7 seize goods or at best could have intimated jurisdictional Officer in Karnataka 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 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 WP(C).No.5384 OF 2020(W) 8 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 WP(C).No.5384 OF 2020(W) 9 goods are perishable or hazardous in nature or are likely to 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 WP(C).No.5384 OF 2020(W) 10 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 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. WP(C).No.5384 OF 2020(W) 11 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 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 WP(C).No.5384 OF 2020(W) 12 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 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 WP(C).No.5384 OF 2020(W) 13 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 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 WP(C).No.5384 OF 2020(W) 14 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 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 WP(C).No.5384 OF 2020(W) 15 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, 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 WP(C).No.5384 OF 2020(W) 16 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 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 WP(C).No.5384 OF 2020(W) 17 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.P3(c) and consequential notices 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, Karnataka for taking action, if deem it appropriate, in accordance with law. Sd/- AMIT RAWAL sab JUDGE WP(C).No.5384 OF 2020(W) 18 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF INVOICE DATED 08.02.2020. EXHIBIT P2 TRUE COPY OF E-WAY BILL DATED 08.02.2020. EXHIBIT P3 TRUE COPY OF GST MOV-01 DATED 10.02.2020. EXHIBIT P3(A) TRUE COPY OF GST MOV-02 DATED 10.02.2020. EXHIBIT P3(B) TRUE COPY OF GST MOV-04 DATED 10.02.2020. EXHIBIT P3(C) TRUE COPY OF GST MOV-06 DATED 10.02.2020. EXHIBIT P3(D) TRUE COPY OF GST MOV-07 DATED 10.02.2020. EXHIBIT P4 TRUE COPY OF REPLY DATED 15.02.2020. EXHIBIT P5 TRUE COPY OF LETTER BY 1ST RESPONDENT DATED 15.02.2020. EXHIBIT P6 TRUE COPY OF PENALTY ORDER IN GST MOV-09 DATED 17.02.2020. EXHIBIT P7 TRUE COPY OF REPLY DATED 19.02.2020. Hindustan Coca Cola Private Limited v. Assistant State Tax Officer, Palakkad / Commissioner of Commercial Taxes, Thiruvananthapuram