The Punjab and Haryana High Court has held that the GSTC authorities cannot detain goods on grounds of inadmissible ITC which is an issue to be gone into assessment.
The petitioner, M/s. Shiv Enterprises sold copper scrap to one M/s. Mittal Engineering Industries, Jagadhri. While the goods were in transit in vehicle, the same were checked. Driver of the vehicle produced requisite documents, i.e. invoice and E-way Bill. Despite the documents being in order, the same were detained on the pretext that the ‘genuineness of the tendered documents need verification from regular bills of A/c’. Form MOV-02 was issued and the petitioner was directed to station the conveyance carrying goods at the office of Assistant Commissioner. The petitioner appeared on the date fixed. He was informed that an investigation is underway and was asked to appear on 03.09.2021. On 05.09.2021, the petitioner filed a reply to GST MOV-02 through email.
The petitioner received a communication whereby he was informed that on verification, it has been found that inward supply to the sellers/suppliers of the petitioner is from one Balbir Enterprises. Said Balbir Enterprises is not having inward supply and is only engaged in outward supply without paying any tax. Thus, the petitioner is liable to proceed under Section 130(1) of the PGST/CGST Act, 2017.
The Division Bench of Justice Ajay Tewari and Justice Pankaj Jain has held that the authorities are well within their power to check the goods in transit. In case goods in transit are being transported in contravention of any provision of the Act or the rules framed thereunder, the goods are liable to be seized and detained as per provision of Section 129 of the Act. However, in case the goods in transit are accompanied with the documents as prescribed under the Act, authorities need not proceed under Section 129 of the 2017 Act.
“The provisions prescribing time limit to conclude inspection in circular dated 13.04.2018 are mandatory. The goods/conveyance cannot be detained without passing appropriate orders in accordance with law. In case, the authorities find that action of the person falls within four corners of Section 130(1), the authorities have right to proceed under Section 130 of the Act. However, the opinion of the authorities which forms basis of proceedings under Section 130 must have reasonable nexus with the action of the person against whom proceedings are being initiated. Such nexus must be manifest from the record and conveyed to the person in compliance of Section 130(4) of the Act. A bonafide issue which is subject matter of assessment under the Act cannot be a ground to proceed under Section 130 of the Act unless the same falls within four corners of Section 130(1) of the 2017 Act,” the court noted.
M/s. Shiv Enterprises vs State of Punjab and others
CITATION: 2022 TAXSCAN (HC) 196
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