The Gujarat High Court held that mere undervaluation of goods or change of route of consignment cannot be sufficient grounds to detain goods, vehicle under GST.
The petitioner, Karnataka Traders challenged the confiscation notice issued by the Tax Commissioner (Enforcement) in exercise of powers conferred under Section 130 of the Central Goods and Services Tax Act, 2017 read with the relevant provisions of the Integrated Goods and Services Tax Act, 2017. The petitioner has also prayed for direction of issuance of a writ of mandamus to forthwith release the goods and vehicle without demanding any security.
The petitioners have submitted that two grounds on which the department proposes to confiscate the goods and vehicle referred to above are not tenable at all in law.
The department vehemently objected to the grant of relief in favour of the petitioners by submitting that the route preferred by the petitioner reflects that he had intention to evade tax. Such intention can be presumed from the fact that the route which was preferred by the petitioner was travelling in a different direction than the direction of destination or way to the destination. Hence, it was submitted not to entertain the writ application.
The division bench of Justice J.B.Pardiwala and Justice Nisha M.Thakore held that merely the direction preferred by the petitioners for delivery of consignment to the place destined for, an inference cannot be drawn with regard to the intention of the petitioners to evade tax. So far as the second ground with regard to the goods being transported to be undervalue is concerned, no material has been placed on record. Even otherwise, as held by this Court as well as other High Courts, it is a settled legal position that undervaluation cannot be a ground for seizure of goods in transit by the inspecting authority. In the instant case, there is no such indication.
“We clarify that we have quashed the entire confiscation proceedings keeping in mind two things: first, mere change of route without anything more would not necessarily be sufficient to draw an inference that the intention was to evade tax. Sometime, change of route may assume importance provided there is cogent material with the department to indicate that an attempt was sought to be made to dispose of the goods indirectly at a particular place. If such is the case, then probably, the authority may be justified in initiating appropriate proceedings, but mere change of route of the vehicle by itself is not sufficient. In the same manner, mere undervaluation of the goods also by itself is not sufficient to detain the goods and vehicle far from being liable to confiscation,” the court said.
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