The Hon’ble High Court of Kerala vide its order dated 20th July 2022 in the matter of Hindustan Steel And Cement & Anr. Vs. Assistant State Tax Officer, 24 *7 Mobile Squad Vatakara, State Goods and Service Tax Department, Mini Civil Station & Others in WP (C) No. 17454 of 2022, held that whether or not a person opts to make a payment under Section 129 (1) (a) or to provide security under Section 129 (1) (c), the person against whom any proceeding has been initiated under Section 129 of the CGST, has the right to challenge those proceedings and to challenge any order passed under Section 129(3) of the Act, before the concerned Appellate Authority under Section 107 of the Act.
The Petitioners filed the Writ Petition before the Hon’ble High Court challenging the actions of the respondent authorities, whereby it was communicated to the petitioner that on payment of tax under Section 129 (1) (a), all proceedings which are the subject matter of a notice under Sub-Section (3) of Section 129 ‘Shall be deemed to be concluded’.
Petitioners’ Submissions: –
- It was submitted on the behalf of the petitioners that in view of sub-section (3) of Section 129 read with rule 142(5) as well as the circular No.41/15/2018-GST, dated 13.04.2018, the order passed under Section 129(3) in Form MOV – 09 should have been accompanied with summary of order in Form DRC – 07.
- That the Petitioners without the summary in DRC-07 are not able to file the appeal as the system accepts an appeal only with summary in Form DRC – 07.
Respondents’ Submissions: –
- On the other hand, it was submitted on the behalf of the respondents that the petitioners in the present matter opted to make a payment of tax and penalty, so the proceedings under Section 129 came to an end. Further the payment under Section 129 (1) (a) in DRC – 03, which is in the form of voluntary payment, cannot be subject matter of any refund or adjudication at later stage.
- That the payment made under Section 129 (1) (a) amounts to conclusion of proceedings and represents the acceptance of the discrepancies noted by the intercepting officer, on the behalf of the petitioners.
- It was submitted that Rule 142 of the CGST Rules deals with a situation where the person concerned is willing to continue the proceeds and provides Bank Guarantee under Section 129 (1) (c), in that case sub-section 5 would not applicable and the proceedings would not be treated as concluded.
- Further it was submitted that once the payment is made under Section 129 (1) (a), there is no way in which a summary of order/demand can be generated in Form DRC-07, and also sub-rule 5 of Rule 142 provides that unless there is a demand for tax or interest or penalty, there cannot be a proceeding under DRC – 07.
- It was submitted that Form DRC-07 indicates the amount to be paid by a person and if the same is not paid, action will be taken against the concerned person. That the proper officer would issue DRC – 08, if he is satisfied that the amount stated in DRC – 07 has been duly paid.
- However, it is fairly pointed out that Section 107 provides an opportunity to a person aggrieved to challenge any order or any proceedings issued under any provision of the Act and the wording of that Section does not really make a distinction between persons who opt to make a payment under Section 129(1)(a) and persons who opt to provide security as provided for, in Section 129(1)(c).
Held: –
- The Hon’ble Court after considering the submissions and facts of the case, took note of law stated in Section 129 (1) (a), (3) & (5). It was found that Section 129 provides for provide for the detention, seizure and release of goods, conveyance and documents. The goods and conveyances are liable to detention or seizure, if the goods have been transported in violation or contraventions of the provisions of the Act or Rules made thereunder.
- It was found that reading of sub-section (3) of Section 129 prescribes whether the person against whom any detention proceeding is initiated, chooses to make a payment under Section 129 (1) (a) or chooses to provide security in terms of Section 129 (1) (c), the officer seizing the goods or conveyance has to issue a notice specifying the tax and penalty payable.
- Thereafter the Hon’ble Court on perusal of Rule 142 (5) and circular No.41/15/2018-GST dated 13.04.2018 along with sub-section (3) of Section 129, held that whether or not a person opts to make payment under section 129(1)(a) or to provide security under Section 129(1)(c), the responsibility of the officer to pass an order under sub-section (3) of Section 129 and to upload a summary of the order/demand in Form DRC-07 continues.
- Further sub-section 5 of Section 129 states about the conclusion of procedure of detention or seizure of goods or a conveyance, and it is always open to a person who is suffering proceeding under Section 129, to challenge the proceedings if he feels that the demand has been illegally raised against him. Any other interpretation of the provisions referred would be violative of Article 265 of the Constitution of India.
- It was found that Section 107 of the Act is widely worded and any person aggrieved of any order passed under the act, by the adjudicating authority, may appeal to the concerned Appellate Authority within three months of the receipt of order. Further it has been rightly contented on the behalf of the petitioner that whether or not a payment is made under Section 129 (1) (a) or security is provided under Section 129 (1) (c), a person against whom any proceeding under section 129 has been initiated and an order has been passed, has the right to appeal against the same before the concerned Appellate Authority under Section 107 of the Act.
- Lastly, It was found by the Hon’ble Court that a person cannot be deprived of it right to file an appeal under Section 107, for the reason that DRC-07 is not generated once the payment of tax has been made under Section 129 (1) (a).
The Hon’ble Court with the above findings, allowed the writ petitions with the directions to the respondent authorities to do the needful within one month of the receipt of this judgment. It was also directed to the Commissioner, office of the State Goods & Service Tax Department, Thiruvananthapuram to issue an appropriate circular taking note of the aforesaid findings.
