The Hon’ble High Court of Calcutta vide its order dated 10.03.2023 in the matter of Sandip Kumar Singhal Vs. Deputy Commissioner, Revenue, Bureau of Investigation North Bengal Headquarters & Ors. in WPA 321 of 2023, set aside the penalty under Section 129 imposed on the assessee for the goods lying in its Godown, finding that Section 67(2) of the Act empowers the proper officer to confiscate goods, if secreted in any place, for evading payment of tax.  The provision relates to a particular ‘place’ where inspection, search and seizure can be made.  However, Section 129 deals with detention, seizure and release of goods and conveyances, ‘in transit’. The said provision is to be invoked when the goods are in movement on a conveyance.  As the goods were not confiscated while on the move, imposition of penalty under Section 129 of the Act is erroneous and bad in law, particularly, when the authority itself is vacillating between Section 67 and 68; whether the goods are in transit or in the Godown

The Petitioner filed the writ petition before the Hon’ble High Court being aggrieved of the adjudicating order and the order passed by the appellate authority affirming the same by holding that the petitioner acted in contravention of Section 67(2) read with Section 129 of the State Goods and Services Tax Act, 2017.

Facts of the Case: – 

• The goods of the petitioner were seized on 22nd February, 2022 at 2 pm. from a Godown upon invoking the provision of Section 67(2) of the said Act. The order of seizure issued in Form GST INS-02 dated 22nd February, 2022 mentions that, on inspection of the goods under Section 67(1) of the Act and on scrutiny of the books of accounts, registers, documents/papers and goods found during inspection/search there were ‘reasons to believe’ that the goods were liable to be confiscated and the same were seized by invoking power under Section 67(2) of the Act.  The e-way bill status of the goods mentions that the e-way bill already expired on the date of inspection and seizure
• The said E-way Bill was generated on 9th February, 2022 for transporting fifteen thousand kilograms of cumin seeds and the same was valid up to 20th February, 2022. The goods were dispatched from Gujrat and were to reach Siliguri, West Bengal. The goods in question were confiscated from a Godown which the petitioner claims to be three kilometres ahead of the final destination point mentioned in the e-way bill.
• Thereafter, a notice under Section 129 of the Act dated 25.02.2022 calling upon the information in the name of transporter and the person in charge of the goods and were also directed to appear in person or through authorized representative on 26^th February, 2022 to show cause why tax and penalty will not be imposed for contravention of Section 129 of the Act.
• The Hearing was conducted and the authorized representative and the authorized representative of the addressees allegedly failed to explain the reason behind the expiry of e-way bills in respect of the goods lying in the Godown.
• After consideration, the adjudicating authority opined that the goods were transported and stored while they were in transit in contravention of Section 129 of the Act and calculated the applicable penalty under Section 129 (1) (a) of the Act. It was the view of the adjudicating authority that the goods were transported in contravention of Section 68 of the Act and confirmed the penalty imposed under Section 129 (1)(a) of the Act. On payment of the penalty amount the goods of the petitioner were released.
• The Petitioner being aggrieved of the adjudication order, filed an appeal before the Appellate Authority and upon hearing the petitioner, the appellate authority observed that RTP could have averted the proceeding had the transporter’s Godown been registered in the registration certificate as additional Godown. The RTP could have easily updated his e-way bill from his mobile app, which was a trivial thing.

Petitioner’s Submissions: –

• It was specifically contended on the behalf of the petitioner that that the initial seizure was made under Section 67(2) of the Act whereas the penalty has been imposed under Section 129 of the Act. The same is impermissible in law.
• That Section 67 can be invoked in respect of goods stored in a warehouse or a Godown which has escaped payment of tax or is likely to cause tax evasion. The same implies that the goods were in a static position inside a warehouse or a Godown but not in transit. Section 129 can be invoked only in respect of goods and conveyances which are in transit.
• Therefore, it was contended that if the goods were inspected and seized in transit then provision of Section 68 ought to have been invoked and not Section 67, as has been done in the present case. Since Section 67 was invoked, Form GST INS 02 has been issued. Had the goods been in transit, then corresponding Form MOV had to be issued.
• There is violation of principles of natural justice by not affording an opportunity of hearing to the petitioner prior to passing the order of penalty under Section 129 of the Act. The right to trade under Article 19(1)(g) of the Constitution of India has been infringed by the illegal seizure of goods.
• Further, there is no conclusive finding of the authority that the petitioner intended to evade payment of tax or the goods which were seized, escaped payment of tax. However, On the contrary, the appellate authority opined that it was a trivial lapse on the part of the petitioner for which, penalty equal to two hundred percent of the tax payable on such goods ought not to have been imposed.
• It was argued that the time mentioned in the order of seizure and the report of satisfaction clearly implies that the authority, with a biased and determined mind, decided the issue and the reason for seizure is recorded after the seizure is actually made.
• It was stressed upon that it is only after the officer is satisfied that there are ‘reasons to believe’ that the RTP intended to evade tax, can an order of inspection, search and thereafter seizure be made. In the present case, the seizure was made even before the officer came to the finding that inspection, search and seizure was necessary.
• The petitioner, out of the aforesaid quantity, sold a part of the goods, and as such, at the time of search and seizure only 12,840 kilograms were found in the Godown. Though, the e-way bill was generated for transporting fifteen thousand kilograms of cumin seeds but due to shortage of storage space at the Godown mentioned in the e-way bill, the petitioner had to offload the goods at a Godown which is located just three kilometres ahead of the final destination.
• It is not the contention of the authority that the aforesaid 12,840 kilograms of cumin seeds is not the goods transported via the e-way bill generated on 9th February, 2022. The petitioner alleges infringement of Section 129(4) of the Act. It has been argued that no opportunity was given to the petitioner prior to imposition of penalty under Section 129.
• To support the contentions, reliance was placed on the judgments of Hon’ble Supreme Court in Civil Appeal Nos. 9597-9599 of 20 11 in Union of India & Ors. Vs. M/s. Magnum Steel Limited Ltd. Thus, it was prayed for setting aside the impugned orders and refund of the penalty amount collected contrary to law.

Respondent’s Submissions: –

• On the behalf the respondent authority, the prayer of the petition was opposed. It was submitted that the authority invoked Section 67(1)(b) as it was found that the petitioner was keeping goods in the Godown on the basis of an e-way bill which had expired and thereafter seized the goods from the said Godown.
• It was submitted that according to Section 67(7) of the Act, the authority may issue notice to show cause within a period of six months which can be further extended to another six months. In the instant case, the authority issued the order of seizure under Section 67(2) on 22nd February, 2022. There has been no delay on the part of the authority.
• The goods that were seized from the disputed Godown did not carry a valid e-way bill. The bill produced by the petitioner was issued in respect of fifteen thousand kilograms of cumin seeds whereas at the time of seizure only 12,840 kilograms of cumin seeds were found. The petitioner failed to produce any document in respect of the 12,840 kilograms of cumin seeds.
• It was submitted that as the aforesaid quantity of cumin seeds was found without a proper e-way bill, the authority invoked the provision of Section 129(1)(a) of the Act and thus, there has been no error on the part of the authority in imposing the said penalty.
• The opportunity of hearing was granted prior to imposition of penalty. After the petitioner stepped in and claimed to be the owner of the goods, a further opportunity was given to him prior to the imposition of penalty and thereafter the goods were released upon payment by the petitioner.
• It has been denied that there has not been compliance of the statutory provision and the constitutional mandate. The petitioner had a fair opportunity to defend himself before the adjudicating and the appellate authority. He was unsuccessful before both. Therefore, it was prayed to dismiss the writ petition.

Held: –

• The Hon’ble Court after considering the submissions and facts of the case, found that from the documents placed on record, it appears that an e-way bill was generated in respect of the vehicle no. RJ04GC1737 on 9th February, 2022 for transporting fifteen thousand kilograms of cumin seeds by road from Gujrat to Siliguri. The e-way bill was valid up to 20th February, 2022.  The Authority on receiving the information about illegal storage of goods, inspected a Godown on 22nd February, 2022, where 12,840 kilograms of cumin seeds were found. The stock of the goods was assessed. The person in charge of the Godown produced the tax invoice, consignment note and the e-way bill of the said goods.
• That on scrutiny of goods, the authority was of the opinion that as the goods did not reach the end point as mentioned in the e-way bill, the goods were in transit. According to the respondent authority, the goods ought to have been covered with valid e-way bills till the time of delivery to the recipient.
• Thereafter, a proposed order under Section 129(3) of the Act was prepared and served upon the transporter and the person in charge of the goods and penalty under Section 129(1)(a) was imposed. However, when the petitioner disclosed himself as the owner of the goods, the authority invoked the provision of Section 68 and imposed penalty under Section 129(1)(a) of the Act.
• It was found by the Hon’ble Court that from the perusal of the order under Section 129(3) of the Act dated 28th February, 2022 it appears that though initially the authority invoked the provision of Section 67 and imposed penalty under Section 129, but later the authority shifted their stand and invoked Section 68 read with Section 129 of the Act.
• Section 67(2) of the Act empowers the proper officer to confiscate goods, if secreted in any place, for evading payment of tax. The proper officer, if has reasons to believe that the goods are stored in a warehouse or Godown or any other place without paying tax or not paying requisite tax, may cause inspection, search and seizure.  Whereas, Section 129 deals with detention, seizure and release of goods and conveyances, ‘in transit’. The said provision is to be invoked when the goods are in movement on a conveyance.
• However, in the present case the goods in question were not seized while in transit. They were seized from a Godown, two days after the expiry of the e-way bill, approximately three kilometres ahead, as claimed by the petitioner, from the final destination mentioned in the e-way bill. As the goods were seized from a Godown, the authority issued the order of seizure in form GST INS 02.
• It was found by the Hon’ble court that When the goods were held to be in transit, then notice under Form GST MOV ought to have been issued. The authority, as an afterthought, held the goods to be in transit but, for reasons best known, did not issue either order or notice in Form GST MOV. Further, there is no mention of any vehicle or conveyance for transporting the goods. Under the Act a specific form has to be applied in case of a particular offence.   And, not issuing any order/notice in Form GST MOV makes it clear that the authority was satisfied that the goods were not in transit.
• It was further found by the Hon’ble Court that Law does not require a E-way bill to remain valid for such period the goods remain in the Godown. Though, it has been very confidently, submitted on the behalf of the petitioner that from where the goods were seized is the final destination and the goods were duly delivered to the recipient. The authority has not come up with a case that the goods ought not to have been offloaded and stored at the said Godown but should have been transported to the place mentioned in the e-way bill.
• The Hon’ble Court taking note of the findings of the appellate forum i.e., the RTP could have averted the proceedings had the transporter’s godown been mentioned in the registration certificate as additional Godown and the same was a trivial thing to be done on the part of the RTP’ found that despite the said findings, the authority erroneously opined that as the goods were yet to reach the final destination mentioned in the e-way bill, accordingly, the same may be treated as ‘on transit. The authority ought not to have imposed penalty without resorting to the proper provision.
• It was found by the Hon’ble Court that from the facts of the presents and the documents placed on record, it is quite evident that the authority never questioned the identity and quantum of the goods mentioned in the expired e-way bill.
• It was found that it is not the case of the respondent that the goods which were seized from the Godown were not the goods which were transported by the expired e-way bill. On the contrary, the e-way bill number is recorded in the report filed by the concerned officer.  Therefore, it does not appear that the petitioner had the intention to evade tax as the petitioner already paid the taxable amount at the time of generation of the e-way bill. The authority has also failed to make out a case that there was any connivance between the buyer and seller in dealing with the goods without payment of necessary taxes.
• The authority itself was in dilemma as to which provision to invoke for imposition of penalty. It appears that though initially the authority invoked the provision of Section 67 but thereafter shifted stand and relied upon Section 68 read with Section 129 for imposition of penalty.  A single consignment of goods cannot be held to be stored in the Godown and to be in transit, simultaneously, at the same time.
• It was found by the Hon’ble Court that there is no doubt that the petitioner was at fault in not recording the additional Godown at the time of generation of the e-way bill, but at the same time, the petitioner ought not to be penalized with two hundred percent penalty for such trivial offence. As the goods were not confiscated while on the move, imposition of penalty under Section 129 of the Act is erroneous and bad in law.
• The Hon’ble Court taking note of the judgment relied upon by the Petitioner in the matter Magnum Steel (supra) the Hon’ble Supreme Court, wherein it was held that ‘the person authorizing the search must express his satisfaction that the material is sufficient for conducting a search and a reasonable belief that some objective material exists on the official record to trigger searches’, found that in the present case, the report of the proper officer is an unsatisfactory one, not enough to initiate search in the Godown.
• Further, in Mahabir Polyplast (supra) the Court was of the opinion that ‘provision of Section 129(3) of the Act would not be invoked to subject a Godown premises to search and seizure operation’. Therefore, for invoking Section 67 of the Act existence of “reasons to believe” to subject the premises to search and seize goods is mandated. And in the present case, the authority is vacillating between Section 67 and 68; whether the goods are in transit or in the Godown.
• Also, in this case, it does not appear that the authority acted in accordance with the appropriate legal provisions and instead penalised the petitioner in a mechanical manner without proper application of mind.

The Hon’ble Court with the above findings and observations, disposed of the Writ petition by setting aside the impugned order of the adjudicating authority and the appellate forum.   Further, the respondent authority was directed to refund the amount collected from the petitioner as penalty.  However, it was kept open for the authority to assess the penalty, if any, payable by the petitioner for offloading goods and storing the same at a place not mentioned in the e-way bill.