Transporting Goods to Unregistered Person not prohibited under GST, Tax Evasion can’t be suspected: Kerala HC [Read Judgment]

The Kerala High Court, while quashing an order of the Kerala GST authorities, has held that the goods cannot be seized merely for the reason that the goods were intended to be supplied to an unregistered firm. The Court, while allowing a writ petition by M/s Age Industries Pvt Ltd, held that transporting goods to an unregistered person is not prohibited under the GST regime.

In the instant case, the Goods and Services Tax (GST) department seized the goods transported by the petitioner on the following two grounds. Firstly, the goods were transported on the strength of delivery challan and without a declaration in accordance with Rule 138(2) of the State SGST Rules before transporting the goods. Secondly, the goods transported by the petitioner are intended to be supplied to an unregistered firm.

Justice P B Suresh Kumar recalled the Court’s earlier decision wherein it was 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. It further said that the 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 challans so long as the authenticity of the delivery challan is not doubted.

In the light of the said judgment, the Court held that the first reason on which the goods are detained, viz, that the goods were not accompanied by the document provided for under Rule 138(2) State SGST Rules is unsustainable.

While quashing the detention order, the Court pointed out that the fact that the goods were intended to be supplied to an unregistered firm alone cannot be a reason for detention under GST.

“The specific case of the petitioner is that the consignment was intended to be supplied to three parties for the quality appraisal on job work basis. Such transactions are not prohibited. Such goods in terms of the provisions contained in the CGST and SGST Act are to be transported on delivery challans. The question whether the person to whom such goods are supplied has registration is irrelevant in the context of the statutes.”