The Kerala High Court held that the basis for calculating a fine in lieu of confiscation under the GST Act is only market value and not the Maximum Retail Price (MRP).
A review petition against the interim order is preferred by the State Tax Officer in respect of the issue of whether section 130(2) of the Act contemplates the release of goods by payment of the fine in lieu of confiscation, even before orders of confiscation are issued. In addition, an incidental question that arises is on the quantum payable as fine in lieu of confiscation.
The genesis of the dispute emerges from an inspection conducted by the officers of the Kerala State GST Department on 03-08-2021, who seized, as per Rule 139(2) of the Central Goods and Services Tax Rules, 2017, beedis, stored by the respondent in this review petition in his different godowns. Orders of prohibition were later issued under Rule 140 of the Rules. For easier comprehension, the review petitioners are hereafter referred to as ‘Tax Officer’, while the respondent will be referred to as the ‘dealer’.
It is appropriate to mention that beedi is an indigenous smoking product like a cigar or a cigarette, made by rolling a dried leaf filled with flaked tobacco and is undoubtedly perishable in nature, with a limited shelf life.
The single bench of Justice Bechu Kurian Thomas held that if the goods that are subject to confiscation proceedings carries an invoice and the Proper Officer has no dispute on the value mentioned in the invoice based upon a preliminary appreciation of the amount payable for goods or services of a like-kind or quality, at or about the same time and at the same commercial level, then that shall be the market value. If on the other hand, the tentative amount or the amount assumed to be the market value preliminarily is disputed by the taxpayer, it calls for a determination during adjudication, where an opportunity for showing the true market value of the property will be available to the taxpayer. A reading of the definition, no doubt, reveals that the statute does not reckon MRP as the criteria for determining the fine leviable. The intention and the explicit words used in the statute clearly indicate that the proper officer cannot base the fine on the MRP imprinted on the goods if there are other materials available to fix the market value.
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