GST Fraud Case: High Court denies Bail in Case of Pankaj Agarwal Vs UOI


Case of Pankaj Agarwal Vs UOI reported in 2019-TIOL-1351-HC-Chhattisgarh-GST


Applicant is the Director/Proprietor of the firms M/s Mangal Commercial Private Limited, Raipur and M/s S.K.T. and Sons, Bilaspur.

Allegation is that M/s Hind Infra Buildcon (HIB) is a bogus entity created for the purpose of originating irregular and inadmissible ITC to pass on to its beneficiaries.

Recipients of M/s HIB were created as an additional layer to create a web of such transactions to misguide the authorities and to shift the burden and responsibility to some pseudo-characters fabricated by master minds of such rackets.

Firms which are major beneficiaries of aforesaid transactions are being created, owned, operated, controlled and managed by the present Applicant.

Allegation is that total quantum of circular/semi-circular transactions made through the aforesaid bogus entities is to the tune of more than Rs.500 Crores which deprived the Government Exchequer of more than Rs.100 Crores of GST by way of creating and utilising irregular and inadmissible ITC by the Applicant.

Applicant has been arrested by the competent authority and he is in jail since 7.5.2019. Bail application is filed u/s 439 of the CrPC by the applicant in the matter of his arrest for offence punishable u/s 132 and s.16 of the CGST Act, 2017.

The Hon’ble High Court held as under-

Allegations made against the Applicant, the evidence collected by the prosecution, the submissions put-forth on behalf of the parties and further considering the seriousness of the offence and involvement of the money in the offence, Bench is not inclined to release the Applicant on bail – Bail application rejected,

FIR can be lodged under Code of Criminal Procedure for GST offences

In the Case of Govind Enterprises Vs State of UP reported in 2019-TIOL-1170-HC-


Facts: Petitioner seeks quashing of first information report (FIR) dated 30.11.2018 lodged by Assistant Commissioner, Commercial Tax at police station Kosi Kalan, District Mathura, under Sections 420, 467, 468, 471, 34, 120-B IPC.

Thrust of the allegations made in the impugned FIR is that the dealer fraudulently, with a dishonest intention, by submitting false documents, with an intention to evade taxes, obtained registration, thereafter, took inward supply and passed on the goods to end users, without generating outward supply bills, received money in cash and deposited the same in bank account which was not declared at the time of seeking registration.

According to the allegations, a bogus firm was got registered by showing false and bogus addresses of business; and, by taking advantage of such registration, inward e-way bills were generated to make purchase of goods worth Rs.35 odd crores and, thereafter, without generating outward supply bills, huge amount of money was deposited in cash in undisclosed bank account, suggesting that goods were sold without proper documentation, with a view to evade taxes.

Petitioner submitted that till date no case had been registered under the provisions of the U.P. Act or under the CGST Act and no recovery demand has been raised and, therefore, lodging of the FIR under the provisions of the IPC is not legally sustainable;

that the GST Act is a complete code in itself as it contemplates and deals with all kinds of situations and offences relating to registration of firms, tax evasion etc and it prescribes a specific procedure for arrest and prosecution, therefore, lodging of the FIR for offences punishable under the IPC by taking recourse to the provisions of the Code of Criminal Procedure, 1973 is not legally justified;

that the power to arrest is to be exercised only where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause

(d) of Section 132(1) of the U.P. Act, and, by order, has authorized any officer of Sales tax to arrest such person; that, under the circumstances, first a proceeding has to be drawn under the provisions of the U.P. Act and, only, thereafter there could be arrest, that too, after recording satisfaction and hence, lodging of the FIR straightaway is not legally permissible; that even assuming that a FIR can be registered, as no demand for recovery has yet been issued, there is no justification to effect arrest of the petitioner pending investigation.

The Hon’ble Allahabad High Court held as under –

Sections 69, 134, and 135 of the U.P. Act are applicable in respect of offences punishable under the U.P. Act. They have no application on offences punishable under the Penal Code – Further, there is no provision in the U.P. Act which may suggest that the provisions of the U.P. Act overrides or expressly or impliedly repeals the provisions of the Penal Code.

There is also no bar in the U.P. Act on lodging an FIR under the Code for offences punishable under the Penal Code even though, for the same act/ conduct, prosecution can be launched under the U.P. Act. Rather, section 131 of the U.P. Act impliedly saves the provisions of the Penal Code by providing that no confiscation made or penalty imposed under the provisions of the Act or the rules made thereunder shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of the U.P. Act or under any other law for the time being in force. Argument of petitioner that except for offences specified in section 132(5), section 132(4) of the U.P. Act renders all offences under the U.P. Act non cognizable, therefore no FIR can be lodged, is not acceptable, because sub-section (4) speaks of offences under the U.P. Act and not in respect of offences under the Penal Code.

The Hon’ble Allahabad High Court held as under-

Offences punishable under the IPC are qualitatively different from an offence punishable under the U.P. Act.

The contention of the petitioner that no FIR report can be lodged under the provisions of the Code of Criminal Procedure for offences punishable under the IPC, as proceeding could only be drawn against him under the U.P. GST Act, 2017, is rejected. Prima facie, necessary ingredients of an offence of cheating, by submitting false information and documents, are clearly spelt out in the FIR. Impugned FIR is, therefore, not liable to be quashed.

To ensure that a person’s liberty is not jeopardized, on account of false implication, protection from arrest, pending investigation, may be granted by superior courts but that power is not ordinarily to be exercised in matters relating to economic fraud.

As, in such matters, stay on arrest may become a hurdle in thorough investigation of the matter, particularly in tracing out the money trail. This is not a fit case where any relief should be granted to the petitioner in the writ jurisdiction – Petition is dismissed.

Karnataka high court said no Goods can be confiscated unless tax and penalty is calculated

latest cases of high court judgement on gst image

Case of Shree Enterprises Vs CTO reported in 2019-TIOL-1185-HC- KAR-GST


Petitioners have challenged the order of confiscation as illegal, seeking all consequential reliefs. Petitioners are claiming to be the consignee and transporter of the goods in question.

It is their contention that the Respondent has detained the goods and vehicle illegally for more than a month in violation of the procedure prescribed by the Government of India through Circulars and confiscated the goods and vehicle without there being any order of confiscation or there being arrears of tax and penalty.

The Hon’ble Karnataka High Court held as under

It is not in dispute that the notice under Section 129(1)(b) of CGST/KGST Act, 2017 was issued by the respondent on 2.01.2019, to which objections were filed by the petitioners.

In such circumstances, it was incumbent on the part of the Respondent to consider the said objections and pass a speaking order quantifying the tax and penalty and thereafter to release the goods subject to payment of tax and penalty or to confiscate the goods.

However, the respondent considering the objections filed by the petitioners proceeded to pass the impugned order of confiscation of goods and conveyance under Section 130(1)(ii) r/w 122(1)(ii) and (iv) of the CGST Act, whereby penalty and fine payable by the petitioner is quantified. Reference made by the Revenue counsel to Section 160 of the CGST Act to treat the said impugned order as an order of penalty cannot be countenanced for the reason that it is not mere wrong quotation of provisions of law in passing the order impugned but the procedure prescribed is disturbed.

It is well settled law that unless the tax and penalty are quantified, no confiscation order could be passed. It is necessary to provide an opportunity to the owner of the goods or person incharge of the goods vehicle to make payment of tax and penalty subsequent to the objections filed, if any.

Without providing such an opportunity, proceeding to pass confiscation order directly would not be construed as any mistake, defect or omission to come within the ambit of Section 160 of the CGST Act.

It is a fundamental flaw which goes to the root of the matter and the said lacuna cannot be cured by referring to Section 160 of the CGST Act when the Circular/instructions issued by Government of India clarifies the procedure to be followed by the proper officer while dealing with these matters.

Passing of the penalty order being sine qua non in the proceedings initiated by the respondent under Section 129(1)(b) of the Act and the same being missing, the impugned confiscation order cannot be held to be justifiable.

GST regime being in the initial stages, Court deems it appropriate to quash the order impugned and restore the notice issued by the respondent under Section 129(1)(b) of the Act.

Respondent shall consider the objections/reply filed by the petitioners and pass appropriate orders in accordance with law in an expedite manner (preferably within seven days) after quantifying the tax and penalty for the purpose of Section 129 of the Act – On quantification of penalty, goods and conveyance shall be released to the petitioners subject to payment of the penalty quantified.

Power to issue summons under GST: Supreme Court upholds decision passed by Telangana High Court

Case of P.V. Ramana Reddy Vs Union of India & Ors reported in 2019-TIOL-216-SC-GST


The petitioner had approached the High Court, challenging summons issued by the Superintendent (Anti Evasion) u/s 70 of the CGST Act as well as invocation of penal provisions u/s 69 of the Act.

In a plea akin to one seeking anticipatory bail, the petitioner and others sought that directions be issued to the Revenue to not arrest them through exercise of powers u/s 69(1) of the Act.

The main allegation of the Revenue was that the petitioners were guilty of circular trading by claiming ITC on materials never purchased & that the petitioners passed on such ITC to companies to whom the goods were never sold.

The High Court observed that to say that prosecution could be launched only after completing assessment would run contrary to provisions of Section 132. The list of offences u/s 132 are not co-related to assessment.

It was also noted that issuing invoices or bills without supplying goods & availing ITC by using such invoices were made offences u/s 132(1)(b) & (c) & that the prosecution for these offences was not dependent upon completion of assessment.

The High Court also rejected the petitioner’s contention of there being no necessity to arrest a person for an alleged offence which is compoundable. All technical objections raised by the petitioners were rejected.

The High Court then observed that despite the petitions being maintainable & that protection u/s 41 & 41A of CrPC being available to the persons who are said to have committed cognizable & non-bailable offences & despite the findings of incongruities within Section 69 & 132 of the Act, it was not inclined to grant relief to the petitioners.

Decision of the Hon’ble Supreme Court
The Hon’ble Supreme Court held as under:
No intervention is warranted in this case. The SLP and pending interlocutory applications stand dismissed.

GST High Court Judgement : Interest is mandatorily payable for delayed payment of GST

Case of Megha Engineering And Infrastructures Ltd Vs CCT reported in 2019-TIOL-893-HC-Telangana-GST

Facts: Case of the petitioner is that the GST portal is designed in such a manner that unless the entire tax liability is discharged, the system will not accept the return in Form GSTR-3B.  That, for example, even if an assessee was entitled to set off to the extent of 95% by utilizing ITC, the return cannot be filed unless the remaining 5% is also paid.  

There was an delay on the part of the petitioner in filing the return for the period October 2017 to May 2018 and which was due to shortage of ITC available to offset the entire tax liability.   Total tax liability of the petitioner for the period July 2017 to May 2018 was Rs.1014,02,89,385/- and the ITC available during this period was Rs.968,58,86,133/- and the shortfall to the extent of Rs.45,44,03,252/- was required to be paid by way of cash.

However, due to certain restraints they could not make the payment and file return within the due date but the entire liability was discharged in May 2018 – Consequently, the dept demanded interest @18% in terms of s.50 of the CGST Act, 2017.

Petitioner replied that interest is to be calculated only on the net tax liability after deducting ITC from the total tax liability and thereafter they paid an amount of Rs.30,92,522/- towards interest on their net tax liability. However, since the department has demanded interest on the total tax liability, the petitioner is before the High Court.

Decision of the Hon’ble High Court

There can be no doubt about the fact that even in respect of input tax credit available in the electronic credit ledger, there is a necessity to make payment. Once it is statutorily prescribed that payment can be made either by way of cash or from out of the credit available in the electronic credit ledger, the date of payment in respect of both assumes significance for determining the liability to pay interest.

In view of s.50(1), the liability to pay interest arises automatically, when a person who is liable to pay tax fails to pay the tax to the Government within the prescribed period – liability to pay interest is in respect of the period for which the tax remains unpaid.

Moreover, liability to pay interest u/s 50(1) arises even without any assessment as the person is required to pay such interest on his own. It is, therefore, clear that liability to pay interest u/s 50(1) is self-imposed and also automatic without any determination by any one.

Stand taken by the department that the liability is compensatory in nature appears to be correct.  In terms of s.39(1) and s. 39(7), period prescribed for payment of tax in respect of every month is on or before the 20th day of the succeeding calendar month.  In the entire scheme of the Act, three things are of importance viz.

  • Entitlement of a person to take credit of eligible input tax as assessed in his return,
  • The credit of such eligible input tax in his electronic credit ledger on a provisional/regular basis and the utilisation of credit so available in the electronic credit ledger for making payment of tax.
  • Iinterest and penalty etc.

Until a return is filed as self-assessed, no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place.   It is only after a claim is made in the return that the same gets credited in the electronic credit leger and it is only after a credit is entered in the electronic ledger that a payment could be made even though the payment is only by way of paper entries.

For example, an amount available in the account of a person, though available with the bank itself, is not taken to be the money available for the benefit of the bank.  Money available with the bank is different from money available for the bank till the bank is allowed to appropriate it to itself.

Similarly, the tax already paid on the inputs of supplies of goods and services available somewhere in the air should be tapped and brought in the form of credit entry in the electronic credit ledger and payment has to be made from out of the same. 

If no payment is made, the mere availability of the same will not tantamount to actual payment, as the payment of the tax liability, partly in cash and partly in the form of claim for ITC was made beyond the period prescribed, the liability to pay interest u/s 50(1) arises automatically and the petitioner cannot escape from this liability.   Only when the payment is made, the Government gets a right over the money available in the ledger.

Since ownership of such money is with the dealer till the time of actual payment, the Government becomes entitled to interest up to the date of their entitlement to appropriate it.

Recommendations of the GST Council in its 31st meeting that interest should be charged only on the net tax liability of the taxpayer after taking into account the admissible input tax credit as communicated in the Press Release of the Ministry of Finance are still on paper and, therefore, High Court cannot interpret section 50 of the CGST Act in the light of the proposed amendment. 

The claim made by the respondent for interest on the ITC portion of the tax cannot be found fault with – Writ Petition is dismissed.

Gujarat High Court Strikes down Para 4 of Circular No.34/8/2018-GST dated 01.03.2018

The validity of Para 4 of Circular No.34/8/2018-GST dated 01.03.2018 was challenged in R/Special Civil Application No. 5343 of 2018. The Gujarat HC in the said case held as under:

“Meaning of “transmission and distribution of electricity” does not change, either for the negative list regime or the GST regime .

Services which stood included within the ambit of transmission and distribution of electricity during the pre-negative list regime cannot now be sought be excluded by merely issuing a clarificatory circular 34/8/2018-GST, that too, with retrospective effect.

Services provided by the petitioner are in the nature of composite supply and, therefore, in view of the provisions of clause (a) of section 8 of the CGST Act, the tax liability thereof has to be determined by treating such composite same as a supply of the principal supply of transmission and distribution of electricity.

Consequently, if the principal supply of transmission and distribution of electricity is exempt from levy of service tax, the tax liability of the related services shall be determined accordingly – Paragraph 4 (1) of the impugned Circular No. 34/8/2018-GST dated”

1.3.2018 is hereby struck down as being ultra vires the provisions of section 8 of the Central Goods and Services Tax Act, 2017 as well as Notification No. 12/2017-CT (R) serial no. 25 – summons dated 28.3.2018 is set aside – respondents shall drop the proceedings under the Finance Act, 1994 as well as under the CGST/SGST Acts sought to be initiated by virtue of the impugned summons to the extent the same is based upon item No. 4 (1) of the impugned circular dated 1 st March, 2018

Case reported in 2019-TIOL-15-HC-AHM-GST

1.GST leviable on Supply of Goods at Domestic Airport to transit passengers

Case of A-1 Cuisines Pvt Ltd Vs UoI reported in 2018-TIOL-176-HC-Mum-GST


Petitioner seeks issuance of Writ directing the respondent UOI to exempt the petitioner from charging applicable taxes under the GST legislations on sale of cosmetic products, perfumes etc. to the International passengers and claim refund of any input tax paid on input supplies and input services from the retail shop which the petitioner intends to set up at the Domestic Security hold area of the Nagpur Airport –

It is the case of the Petitioner that lot of international passengers take their flights from the Nagpur Airport to travel outside India through a transit International Airport – and the same should be considered export of goods and the treatment applicable to duty free shop should be made applicable to the Petitioner as well.

Decision of the High Court

The High Court held that the precedents cited are clearly applicable only in respect of supplies to or from the duty free shops situated after the passenger crosses the immigration counter beyond the Customs frontiers, at arrival or departure hall of International Airport terminals,

where the transaction would be said to have taken place outside India – same would be a “non-taxable” supply u/s 2(78) of the Act and such duty free shops located at the International Airports would be in “non-taxable” territory as defined in s.2(79) of the Act.

The aforesaid judgments would squarely apply for the sale/purchase/supplies of goods or services to or from duty free shops situated after the passenger crosses the immigration counter at arrival or departure hall of International Airports but would have no application to shops located at a domestic Airport or Domestic Security hold area,

which are before even the immigration clearance by a passenger, where the transaction cannot be said to have taken place in any area beyond the customs frontiers of India or outside India – Even otherwise, a passenger travelling on a domestic flight from Nagpur may or may not travel abroad and the Customs Authorities would not be able to have effective check and control to verify whether the goods purchased from Domestic Airport at Nagpur are actually taken abroad by the passenger – No merit in the petition – No case made out even on prima facie basis to issue any directions or any notice in that regard.

The High Court thus dismissed the Petition.

2.GST leviable on Supply of Goods and Services to Duty free shops at International Airports in India.

Case of Vasu Clothing Pvt Ltd Vs UoI reported in 2018-TIOL-191-HC-MP-GST


Petitioner is a manufacturer and exporter of garments in India and he intends to supply goods to Duty Free Operator (DFO), who in turn is selling the goods from Duty Free Shops (DFSs) -Petitioner seeks indulgence of the High Court for grant of relief from payment of goods and service tax by way of exemption and on the goods and service supply to the Duty Free Shops (DFSs) at the international Airports in India – Petitioner’s contention is that after enactment of Central Goods and Services Tax Act, 2017 and the Rules framed thereunder, the petitioner is entitled to supply goods and services to Duty Free Shops without payment of taxes and similar supplies from all over the world except India are permitted without payment of taxes.

The Hon’ble High Court held as under

For the purpose of CGST Act, India extends up to the Exclusive Economic Zone up to 200 nautical miles from baseline.

The location of the Duty Free Shop (DFS), whether within customs frontier or beyond, shall be within India as long as it is not beyond EEZ (200 nautical miles). Therefore, DFS cannot be said to be located outside India.

Instead, the DFS is located within India. As the supply to a DFS by an Indian supplier is not to ‘a place outside India’, therefore, such supplies do not qualify as ‘export of goods’ under GST. Consequently, such supplies cannot be made without payment of duty by furnishing a bond/letter of undertaking (LUT) under rule 96-A of the CGST Rules, 2017. Also, the petitioner cannot claim refund of unutilized input tax credit (ITC) under Section 54 of the CGST Act, 2017.

The High Court held as under

It is true that we cannot export our taxes but the facts remains that it is not the petitioner, who is exporting the goods or taking goods out of India. Petitioner is liable to pay GST on supply of indigenous goods to DFS.

A statute is an edict of the legislature and the Courts do not have the power to enact a statute and the Court can only do interpretation of statute and once the Court does not have power to legislate, the question of granting exemption in absence of any statutory provision to the petitioner under the GST Act does not arise.

3.High Court upholds jurisdiction of Mumbai CGST Commissionerate even in case where parallel proceedings were commenced in Jaipur.

In the Case of Shafi Khan Khokhar Vs State Of Maharashtra reported in 2018-TIOL-192-HC-MUM-GST


During the period of dispute, the assessee, an individual, was subjected to enquiry proceedings under CGST Act, initiated by the Commissionerate at Mumbai. He was issued summons in this regard, u/s 14 of the CEA 1944 and Section 70 of the CGST Act. The Assessee claimed that he was already facing enquiry by the GST authorities at Jaipur Commissionerate. Accordingly, he filed the present writ, contesting what he termed to be parallel proceedings running against him

The Hon’ble High Court held as under

The Assessee is registered at Mumbai & is subject to jurisdiction of the Mumbai Commissionerate. Merely because the Assessee has his primary business at Jaipur, this does not determine the issue of jurisdiction. Moreover, Section 25 of the CGST Act provides for separate registration for each state. Hence where both registration taken & services rendered are at Mumbai, the Assessee is subject to jurisdiction of Mumbai Commissionerate. Thus no intervention is warranted in the proceedings launched by it

4.High Court directs constitution of expert committee to examine grievance of Adlabs Entertainment Ltd.

Case of Adlabs Entertainment Ltd Vs UoI reported in 2018-TIOL-193-HC-MUM-GST


The Assessee-company, set up a theme park and a water park. As part of State Govt policy, it was offered incentives such as waiver of entertainment tax, since the Assessee was heavily investing capital. Moreover, such waiver gave an advantage to the Assessee over other entities in the same line of business. Upon implementation of GST, entertainment tax was subsumed, due to which the Assessee lost the incentive of waiver of such tax . Further, it became liable to pay GST @ 18%, at par with others. The Assessee claimed that its business became unviable & was unable to return borrowed funds, while also failing to recover its capital investment. Hence the present writ seeking relief.

 The Hon’ble High Court held as under

The issue warrants examination by the Government. Chief Secretary of State Govt directed to constitute committee comprising of Principal Secretary of Finance and the Secretary of Tourism. Assessee be permitted to make representations before it. Recommendations of committee be presented before this court on next date of hearing, i.e., Feb 21, 2019

5.Satisfaction to be Recorded before passing order of attachment of Assets under GST.

Case of Patran Steel Rolling Mill Vs Assistant Commissioner of State Tax reported in 2018-TIOL-197-HC-AHM-GST


The Assessee company is engaged in manufacturing & supplying TMT bars and paid GST on the same. The Revenue visited the Assessee’s factory & compared stock of raw material & finished goods with recorded quantity of the same. Investigation at the end of the transporters revealed that the Assessee supplied & received goods without payment of tax. The Assessee was also compelled to give post-dated cheques towards payment. Later the Revenue passed an order of attachment against the stock found to be in excess. Several bank accounts operated by the Assessee & its executives were also attached –

The Assessee claimed that the attachment of the bank accounts had crippled the day-to-day activities of the Assessee & was impeding upon its ability to pay taxes . Hence the present writ.

The Hon’ble High Court held as under

As per mandate of Section 83(1) of the GGST Act, the Commr. must record written reasons before attaching any property or bank accounts or taking any such drastic action. Besides, the Commr. must record satisfaction that such action was justified so as to protect the Revenue’s interests.

In the present case, the Commr. recorded no such satisfaction. Hence no opinion could be formed to validate the provisional attachment of property. Hence the attachment order is unsustainable.

Besides, the sum already deposited by the Assessee need not be construed as admission of dues on its part. Before exercising powers u/s 83 of the GGST Act, the Revenue must balance the interest of the Revenue with those of the assessee, so as to ensure that while the Revenue’s interests are safeguarded, the functioning of the Assessee does not get crippled. Drastic action u/s 83 of the Act is justified if the assessee is a fly-by-night operator or habitual offender, which is not the case here.

Powers under this provision must be exercised after due application of mind. Hence the attachment of the bank accounts is directed to be lifted.

6. The following decision has been taken in the Case of Kun Motor Co Pvt Ltd Vs ASTO reported in 2018-TIOL-185-HC-Kerala GST


In the present case the challenge was to the judgment of the Kerala HC in the case reported in 2018-TIOL-163-Ker-HC.

A person from Trivandrum goes to Pondicherry, purchases a car, and entrusts it to the car dealer to transport it to Trivandrum.

On the way, in Kerala, the officials under the GST Act, intercept the vehicle and detain the goods, for no e-way bill accompanies the consignment.

After responding to the statutory notice and after suffering a penalty order under section 129 of the GST Act, both the dealer and the purchaser file this writ petition.

The High Court in its order dated 10 September 2018 had held as under

Law, at times, can be harsh, and the Courts, usually, defer to the legislative wisdom –

if the conditions under the CGST Act and Rules are not complied with, definitely Section 129 operates and confiscation would be attracted – Respondents are entitled to adjudication, but they would have to prove that the goods being transported stand exempted from the rigours of the GST regime – either of the petitioners can get the goods released by complying with section 129 and the relevant rules, and seek an early adjudication of the dispute.

On Appeal, the Division Bench of the High Court overruled the decision of the Single judge.

The Division Bench of the HC held as under

Incidence of tax is on the supply and not on the nature of transport – When a person residing in one State goes to another State and purchases goods for his own use.

The supply with respect to the transaction terminates on the individual taking possession of the goods in that other State – goods have come into the possession of the purchaser and the vehicle having been used.

However negligible the distance run, it is a “used personal effect” – there can be alleged no taxable transaction insofar as the movement of goods from Puthuchery to Trivandrum in Kerala, especially since the car had been registered in the name of the purchaser – “personal effects” includes a car – intra-State sale having occasioned and the transport being of used personal effects.

The detention was illegal – notice issued and the order passed u/s 129 of the Act being illegal and totally without jurisdiction, same is quashed – judgment of the Single Judge set aside and the appeal is allowed

7.High Court Says Detention is not the Answer When the dispute is not clear

This is in the Case of Case of NVK Mohammed Sulthan Rawther And Sons Vs UoI reported in 2018-TIOL-170-HC-Kerala-GST


The first petitioner consigned a load of Roja betel nut to the second petitioner, at Kerala. It entrusted the consignment to the ABT Parcel Service for transportation. In the invoice, the first petitioner described the commodity with “HSN 0802”, and paid the tax at 5%. The first petitioner also raised the e-way bill.

On 26.09.2018, the Assistant State Tax Officer (ASTO), intercepted the lorry when it reached Palakkad. The lorry had been carrying other goods, too. The ASTO detained the goods, alleging that the first petitioner’s product fits the description “HSN 2106” and attracts 18% tax-not 5%. In other words, the ASTO detained the goods because the petitioners had allegedly been trying to evade tax by mis-describing the product.

Decision of the High Court

The HC held that if the records he seizes truly reflect the transaction and the assessee’s explanation accords with his past conduct, for example, the returns he has filed earlier, the detention is not the answer.

At best the inspecting authority can alert the assessing authority to initiate the proceedings “for assessment of any alleged sale, at which the petitioner will have all his opportunities to put forward his pleas on law and on fact.” The process of detention of the goods cannot be resorted to when the dispute is bona fide, especially, concerning the exigibility of tax and, more particularly, the rate of that tax.

The High Court while deciding as above relied on the case of J.K. Synthetics Limited Vs Commercial Tax Officer – (1994) 4 SCC 276 and Rams vs Sales Tax Officer.  The order of detention was held arbitrary and unsustainable, and was accordingly set aside.

8. High Court Discourages insist of Manual payment by the officers

This is in the Case of Pioneer Polyleathers Ltd Vs Assistant State Tax Officer reported in 2018-TIOL-168-HC-Ker-GST

Facts of the case

Goods belonging to the Petitioner, a registered dealer, were detained u/s 129(3) and tax demanded of Rs.5,28,834/-. Petitioner paid the amount through the portal and obtained payment receipt but the State Tax officer refused to release the goods and he insists that the tax and penalty ought to have been paid through cash or demand draft.

Therefore, the present petition is filed. Counsel for Revenue submitted that the amount must be apportioned between the Centre and state as the liability is under the head IGST.

That it is not within the State’s purview to effect the apportionment and that if the Court could have before it the GST Network, the problem would be solved.

Counsel for GST Network submitted that they are only an infrastructure provider and have no statutory role to play in apportionment of taxes between Centre and State.

Decision of the High Court

The Court observed that Government both at the Centre and in the State, have accompanied in the GST Tax regime to ensure that everything is made online with minimum manual interventions.

Yet strangely, the authorities still insist that the payment should be by physical means i.e. either in cash or through Demand Draft.

Such insistence seems to be archaic and out of tune with the very spirit of the GST regime . In apportionment, there may be delays and difficulties, but the taxpayer cannot be made to suffer, on that count – applying the ratio of the judgment in Fashion Marbles and Granites Pvt. Ltd. 2018-TIOL-62-HC-KERALA-GST , the Assistant State Tax Officer is directed to release the goods and the vehicle forthwith.

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