Disputed Value of Goods

Facts of the Case

1. XYZ Electronics Pvt. Ltd., a registered GST dealer specializing in electronic goods, dispatched a consignment worth INR 5,00,000 from its Delhi warehouse to a retail store in Mumbai on May 1, 2024. The shipment, documented with Invoice No. INV/2024/1001, included mobile phones, laptops, and accessories, and was accompanied by an e-way bill (No. EWB-DEL-MUM-20240501). The consignment had a total invoice value of INR 5,90,000, including 18% GST amounting to INR 90,000. FastTrack Logistics Pvt. Ltd. handled the transportation. During a routine inspection at the Maharashtra border, the GST enforcement team found a discrepancy between the valuation of goods stated in the e-way bill and their market value.

2. ABC Pvt. Ltd was served a notice imposing penaltyof Rs. XXX/-(CGST AND SGST each) under sec-129 of CGST Act, 2017 alleging Tax Evasion.

NOTICEE’S SUBMISSIONS

ABC Ltd. has to prove the before the appropriate authorities that the rate of tax which they have paid is correct through Notifications, Circulars if any.

1. In this regard, it is submitted that , the goods cannot be confiscated on this sole ground that assessee has paid less tax, this is a matter of classification which can be settled after proper adjudication.

2. Reliance has been placed upon the judgment of Hon’ble High Court of Chhattisgarh in the case of K. P. Sugandh Ltd. Vs. State of Chhattisgarh, cited in 2020 Taxo.online 336  (Chhattisgarh), where the petitioners are the manufacturers of ‘Pan Masala and Tobacco Products’. Competent Authority detained goods of assessee under transport as well as vehicle on ground that there were discrepancies in valuation of goods being transported, i.e., valuation did not seem to have been properly conducted, further passed an order under section 129(3) and demanded tax and penalty from assessee., the Hon’ble Court held that:

“14. Given the said facts and circumstances of the case, this Court is of the opinion that under valuation of a good in the invoice cannot be a ground for detention of the goods and vehicle for a proceeding to be drawn under section 129 of the Central Goods and Service Tax Act, 2017 read with Rule 138 of the Central Goods and Service Tax Rules, 2017. In view of the aforesaid the impugned order Annexure P/1 i.e. the order passed under section 129 and the order of demand of tax and penalty both being unsustainable deserves to be and is accordingly set-aside/quashed. The respondents are forthwith directed to release the goods belonging to the petitioners based on the invoice bill as well as the e-way bill.”

3. Further, reliance is placed Daily Fresh Fruits India (P.) Ltd v. Asstt. State Tax Officer, cited in 2020 Taxo.online 281 (Ker.), where the assessee classified the goods, namely, carbonated fruit drinks under Heading No. 2202 99 20 and discharged GST at the rate of 12 per cent. The Competent Authority of Kerala detained the goods of the assessee under transport from Tamil Nadu to Kerala on the ground that the goods were not correctly classified under Heading No. 2202 99 20 and they would fall under Heading No. 2202 10 were liable to tax at the higher rate of 28 per cent. He further issued on the assessee a notice under section 129(3). The Hon’ble Court held that:

“7. From the perusal of the aforementioned findings, it is irresistibly concluded that in case of a bonafide dispute with regard to the classification between a transitor of the goods and the squad officer, the squad officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers and nothing beyond. In the present case, it is a case of bonafide miscalculation as to whether the goods would be exigible to 12% or 28%. The judgment cited in N.V.K Mohammed Sulthan Rawther & Sons & Willson's case (supra) was also a case where the petitioner firm was a manufacturer of ‘Ground Betel Nuts (Arecanuts)' and registered with the Tamil Nadu under the Goods and Service Tax Act. The goods were intercepted by the inspecting authority to be in contravention of the misbranding. By relying upon the decision in J.K Synthetics Ltd. v. CTO [1994] 4 SCC 276, it was held that the charging provisions must be construed strictly but not the machinery provisions which would be construed like any other statute.”

Conclusion

4. Therefore, on perusal of the judgments & submissions made supra, it is clear that the under valuation of goods in the invoice cannot be a ground for detention of the goods and vehicle for a proceeding to be drawn under section 129 of the Central Goods and Service Tax Act, 2017. and hence the demand of tax and penalty cannot be sustained.