GST Evasion by Transporting Gold Jewellery citing Display at Exhibition: Madras HC upholds Confiscation Notice [Read Order]

The Madras High Court recently upheld the confiscation of Gold Jewellery claimed by a jeweller to be transported from Mumbai to Tamil Nadu for the purpose of displaying at exhibitions and to potential resellers, observing violation of Goods and Services Tax (GST) provisions intended to provide leeways for the transport procedure.

Three Petitions were filed by Mukti Gold Private Limited (Mukti Gold) seeking to call for records and quash the impugned notice passed under Section 130 of the Tamil Nadu Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017 effectuating confiscation of Gold Jewellery transported by the Petitioner.

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Mukti Gold operates a jewellery business and moves gold ornaments from Mumbai to Tamil Nadu where they are for displaying the ornaments at exhibitions which may be taken up by potential resellers. The Petitioner entered into an agreement with Sri Bala Vasavi Jewels and Gems, a Coimbatore-based agent for the purposes of procuring orders and handling logistics in the transport of the jewellery.

On 18 July, 2024, the Petitioner sent gold ornaments weighing 11,835.16 grams, valued at Rs.8.37 Crores to Sri Bala Vasavi Jewels with returnable delivery challans. The gold was displayed across Tamil Nadu and at M/s.Bhima Jewellery and was later set for transportation back to Chennai.

En route, the transport vehicle was intercepted by local police at Panruti and the gold ornaments were seized while recording the statement of one Mr.Jayakrishnan was recorded in Form GST MOV-01.

Subsequently, the Petitioner was served with notice under Section 129(3) of the TNGST Act/CGST Act in Form GST MOV-07.

Senior Advocate Vijay Narayan appearing for the Petitioner submitted that the Goods were transported for the purpose of display in order to invite customers for an Exhibition to be held at Mumbai during August, 2024.

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Whereas, Additional Government Pleader C.Harsha Raj contended that the Petitioner had attempted to avert their GST liability by redirecting the gold to another entity under the pretext of showcasing the jewellery to potential customers.

A Single-Judge Bench of Justice Krishnan Ramasamy observed that while the Petitioner claims to have returned the goods after showcasing the same to customers, the route of travel from Chennai from Dindugal is via Villupuram and Dindivanam while the transporting vehicle took a different route leading to its interception at Panruti.

The Madras High Court observed that the Agent lacked any form of delivery challan or receipt of Goods and that the Goods had been transported by the Agent, violating the agreement with the Petitioner which stated that only the employees of the Petitioner would transport the goods.

Quite intriguingly, no details regarding the description of gold of about 11.990 kilograms was found in the delivery challan with it containing the description of “new gold ornaments 22 Charat HSN Code 71131940”.

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The Court observed that the above details coupled with lack of corroborative evidence indicated the transportation of gold jewelleries were done to evade tax under the pretext of showcasing them to customs, misusing the provisions of Rules 138 and 55 of the CGST Rules.

Observing that the overriding effect of Section 129 over Section 130 of TNGST Act would be applicable only for matters regarding detention and seizure of goods and not confiscation, the Court upheld the decision of the Revenue Authorities and dismissed the Writ while granting livery to the Petitioner to file their reply to the confiscation notice within 14 days of the order for appropriate adjudication.

To Read the full text of the Order CLICK HERE

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