The Kerala High Court, in M/S Indus Towers Limited Vs. The Assistant State Tax Officer, held that the power of detention contemplated under Section 129 of the SGST Act can be exercised only in respect of goods which are liable to be confiscated under Section 130 of the SGST Act.
While allowing the petition, Justice P.B Suresh Kumar clarified that goods cannot be detained merely for infraction of Rule 138(2) of the State SGST Rules when there is no taxable supply when goods are transported on delivery chalans so long as the authenticity of the delivery challan is not doubted and
The petitioner-Company engaged in the establishment and maintenance of towers for telecom service providers, transported batteries under the strength of Tax Invoice. However, the Department officials detained the vehicle by invoking section 129 of the Act finding that the petitioner has not fulfilled the requirements of Rule 55 and 138 of the State GST Rules.
The Counsel appeared on behalf of the Assessee, contended that non-submission of KER-1 was the only defect pointed out by the Revenue and the same had been furnished subsequently on receipt of the notice.
On behalf of the Revenue, it was contended that as per section 129, the goods can be detained for violation of CGST, SGST Acts and the Rules and therefore, goods can be detained even in transactions which do not involve taxable supply.
After analyzing the provisions of section 7 of the Act, the Court found that when a taxable person transports the goods procured by them for own use to the site where the goods are to be consumed, the transaction would not involve any consideration. Such transactions would fall within the ambit of Schedule 1 and would not fall within the scope of taxable supply.
The Court noted that the Revenue has not suspected the genuineness of the delivery challan issued by the petitioner at the time of transportation.
Considering the question whether the detention if goods under the present case was justified on ground of non-compliance of Rule 55 and 138 of the SGST Act, the Court answered in negative.
Allowing the petition, the bench, relying on the FAQs by the Central Board of Excise and Customs (CBEC) released on 31.03.2017, observed that a combined reading of section 129 and 130 would indicate that the goods can be detained only when it is suspected that the goods are liable to confiscation. Further, according to section 130, the goods can be confiscated when a taxable supply is made and there is a violation of procedure with the intention to evade the payment of tax.
“If that be so, mere infraction of the procedural rules like Rules 55 and 138 of the State GST Rules cannot result in detention of goods though they may result in imposition of penalty. In other words, detention of goods merely for infraction of the procedural rules in transactions which do not amount to taxable supply is without jurisdiction.”
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