01-02-2022 – Taking different route for delivery of consignment & discrepancy in valuation of goods cannot be the grounds for confiscation of consignment

The Hon’ble High Court of Gujarat vide its Order dated 06 January 2022 in the matter of M/s Karnataka Traders Vs. State of Gujarat in R/Special Civil Application No. 19549/2021 held that mere change of route for the delivery of the goods and under valuation of goods does not amount to intent to evade tax, thus, the detention of goods is not sustainable.

Prayer – The Writ application was preferred by the Petitioner challenging the confiscation notice dated 04.12.2021 issued by the Tax Commissioner (Enforcement) Division – 1, Ahmedabad issued under Section 130 of the CGST.

Facts – The facts of the case are that the Petitioner is a seller of goods (Arecanut) and sold goods to a buyer in Ahmedabad. The goods and the vehicle of the petitioner in movement were intercepted by the Respondent at Chandgodar Road, Navapura. The driver/person-in-charge of the vehicle produced the necessary documents, i.e. E-way bill and Tax invoice, however, the Respondent issued GST MOV – 02 to conduct physical verification/inspection of the conveyance, goods and documents. The Respondent on examination the same could not find any discrepancy and anomaly regarding description of goods and conveyance.

Despite the fact there was no anomaly, the Respondent while issuing the impugned notice in Form GST MOV – 10 noticed two discrepancies, which are –

  • Vehicle was travelling to a different direction than the direction of the destination, hence it appears that the goods being transported with intent to evade; and,
  • the value of goods is shown as Rs. 286/- which is less than real market value, i.e. Rs. 330/-.

Petitioner’s Plea – The Petitioner while arguing the matter contended that the two grounds on which the goods and vehicle have been confiscated are not at all tenable in law and placed reliance on the judgments of K. P. Sugandh Ltd vs. State of Chhattisgarh reported in 2020(38) GSTL 317 (Chhattisgarh), Podaran foods India Pvt Ltd vs. State of Kerala reported in 2021 (50) GSTL 412 (Ker) as well as in the case of Kannangayathu Metals vs. Assistant State Tax Officer, SGST Deptt, T hiruvananthapuram reported in 2019 (31) GSTL 391 (Ker).

Held – The Hon’ble High Court after considering the submissions, facts and law on the subject held that merely on the basis of the direction preferred by the Petitioner for delivery of the consignment, it cannot be inferred that the there was an intent to evade tax. Mere change of route without any further supporting document would not necessarily be sufficient to draw an inference that the intention was to evade tax.

Secondly with regard to the second issue of goods being transported to be undervalued, the legal position is settled by the judgment of the same High Court (Gujarat) and other High Courts that undervaluation cannot be a ground for seizure of Goods in transit.

The Hon’ble High Court with the above findings quashed the confiscation proceedings initiated by the Respondents and allowed the Writ application with the directions to hand over the goods and vehicle to the Writ applicants (Petitioners).

This decision pertains to Section 130 of CGST Act, 2017.

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