In a significant ruling relating to confiscation under the Central GST Act, the Karnataka High Court has held that the power of confiscation under the Act can be invoked in extra-ordinary circumstances.
The ruling was delivered by Justice N.S. Sanjay Gowda while considering a writ petition by M/s Rajeev Traders wherein the petitioners were aggrieved by the order for confiscation. Seven trucks of the petitioner were intercepted while they were in transit and transporting Areca nuts. The Proper Officer intended to inspect the conveyance, goods and documents, and he accordingly passed an order for physical verification/inspection of the conveyance, Goods and documents on the same day and issued Form GST MOV-02.
Holding that when goods are detained while in transit, the proper officer cannot embark on an enquiry which is contemplated under Section 73 or Section 74 or Section 130, the Court observed that “It is to be kept in mind when a specific provision is enacted for dealing with a specified situation such as the goods being in transit and that very provision demarcates the extent of the power that the proper officer can exercise, that provision cannot be sidestepped and resort be had to some other provision which enables the very confiscation of the goods.”
Quashing the impugned order, the Court held that “It is to be kept in mind the predominant principle under the Act is to ensure that the registered person is given a chance to rectify his wrongdoing whenever the wrongdoing is noticed and pay the applicable tax and penalty or interest as the case may be. The proper officer cannot snatch away that right conferred on the registered person by invoking proceedings to confiscate the goods itself. The power of confiscation being the ultimate and the most extreme punishment can only be invoked in extraordinary circumstances, and definitely not when the goods are detained in transit, given the design of the statutory framework. It is to be noticed here that the statute consciously leans towards giving an opportunity to the wrongdoer to rectify his wrongs voluntarily.”
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