The Hon’ble High Court of Andhra Pradesh vide its order dated 03.08.2023 in the matter of Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. Vs. Deputy Assistant Commissioner & Others in Writ Petition Nos. – 15841, 15842, 15486 and 15487 of 2023, held that the goods of the assessee cannot be confiscated under Section 130 of the Act, on the pretext of proceedings initiated against the Seller of the said goods for not having any place of business in city from where the goods were transported.

The Petitioners filed the writ petitions before the Hon’ble High Court praying for declaring the action of 1^st respondent in detaining their goods and vehicles while in transit with valid invoices, as illegal and also for setting aside the Form GST MOV – 01 dated 12.06.2023, and confiscation notices in Form GST MOV – 10 dated 14.06.2023 proposing to confiscate the goods and vehicles.

Facts Of the Case: –

• The 1st petitioner is the owner of the goods and 2nd petitioner is the owner of the vehicle in the above writ petitions. 1^st petitioner is a  trader in iron scrap under a valid registered GST No. 37AATCA9148B1ZD.  He purchased the iron scrap from the 4th respondent under invoice, dated 12.06.2023 and in turn sold the same in favour of M/s Radha Smelters Private Limited, Sankarampet, Medak District, Telangana State under valid invoice number.
• The 1st petitioner engaged the vehicles of the 2nd petitioner for transporting goods from Vijayawada to Sankarampet and consignment was sent along with valid documents such as invoice, way bill, weighment slip etc. While the goods were in transit, the 1^st respondent detained the vehicle along with goods on 12.06.2023 alleging that the vendor of the 1st petitioner i.e., the 4th respondent has no place of business at Vijayawada and accordingly initiated impugned proceedings in the name of 4th respondent by deliberately ignoring the documents produced by the drivers at the time of check.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that the 4^th respondent having sold the scrap has no interest and in case of default on his part, the 1^st  respondent may initiate action against the 4th respondent.  However, under the guise of initiating proceedings against the 4^th  respondent, the 1st respondent cannot put the petitioners in trouble as long as the transaction is covered by all relevant and applicable documents.
• The 1^st respondent did not follow the procedure contemplated under APGST/ CGST Act, 2017 and in straight away issued proceedings proposing to confiscate the goods under transit without issuing notices in GST MOV -02, 03, 04, 05, 06 07, 08 or GST MOV -09 before issuing notice of confiscation in Form GST MOV -10.
• It was also contended that the documents served on the 2^nd petitioner do not contain DIN number. The 1st respondent has no right or jurisdiction to detain the goods and vehicle of the petitioners.
• Thereafter, responding to the contentions raised on the behalf of the respondents, it was submitted that the suspension of registration of 4th respondent on 13.06.2023 pending enquiry relating to its genuineness, basing on the report of the Joint Commissioner (ST), Kurnool, is incorrect because the inspection of the premises of the 4^th respondent according to Joint Commissioner’s report was held only on 01.07.2023 and therefore, the suspension of registration cannot precede to 13.06.2023.
• That at the time of interception of vehicle for check-up, the 1^st petitioner is the owner of the goods-cum-seller and M/s. Radha Smelters Private Limited is the buyer and the transaction is covered by valid invoice and e-way bill and those documents were accompanying the goods and therefore, if at all the 1^st  respondent suspected the genuineness of the documents, he ought to have initiated proceedings against the 1st petitioner.
• The 1^st respondent deliberately ignored the documents produced at the time of check which shows the source of goods and issued proceedings in the name of 4^th As per Section 129 of the CGST / APGST Act, 2017, action if any can be initiated against the person who is transporting goods in contravention of the provisions of the Act.  Under law there is no requirement that the petitioner shall verify whether 4^th respondent has any registered place of business at Vijayawada. Having verified the credentials of GST registration number of the 4^th respondent on the Department web portal, the petitioner purchased the goods and paid the consideration through the bank transaction.  However, the subsequent suspicion against the genuineness of a registration of 4^th respondent entertained by the Department has no bearing with the transaction entered into by the petitioner with 4th respondent.
• Further, in respect of goods in transit, the procedure prescribed under Section 129 of the CGST Act has to be followed. And, since no notice was issued to the petitioners, the confiscation proposals against 4th respondent cannot be made applicable against the petitioners.

Respondents’ Submissions: –

• On 12.06.2023 the 1^st respondent while conducting check of vehicles at Mahanadu Road, Auto Nagar, Vijayawada found the lorries of the petitioners transporting iron scrap covered by Bill and E-way Bill, which on verification revealed that 4^th respondent was transporting iron scrap from Vijayawada destined to be delivered to M/s Radha Smelters Pvt Ltd., Sankarampet, Medak District, Telangana State.
• It was noticed that 4^th without having any place of business in Vijayawada dispatched goods therefrom. The consignment was not accompanied by the purchase voucher/invoice and payment of consideration. Hence the proper officer recorded statement of the drivers in Form GST 01.
• Thereafter, on the basis of the report of Joint Commissioner (ST) Kurnool, the registering authority suspended the registration of 4^th respondent on 13.06.2023.  Since the goods were moved in violation of Section 113 of the APGST Act, a notice of confiscation in for GST MOV-10 was issued proposing to confiscate the goods along with vehicle.
• Subsequent to which, two reminders were issued to 4th respondent on 23.06.2023 and 03.07.2023. However, the seller remained silent.
• It was submitted that verification of bill and e-way bill shows that the 4^th respondent sold iron scrap against the said bill and e-way bill without any purchase details. In the circumstances, the vehicle and goods were detained by following due process of law.
• It was also informed by the Joint Commissioner Kurnool the seller is a fake dealer who obtained registration by showing fictitious document and hence the same was suspended. The Assistant Commissioner (ST), Kurnool- I, inspected the business premises of the seller in Kurnool and recorded panchanama through mediators which shows that the seller is a non-existing entity. In such a scenario, it is questionable as to how the buyer has purchased the goods from a bogus and non-existing seller.
• The tax invoice and e-way bill were raised by the 4^th respondent implying that he is the owner of goods. The 1^st petitioner failed to establish the ownership of goods;
• It was submitted that since the notices in this case were issued through the GST portal by generating reference number and date, DIN need not be generated for them.
• It was also contended that since the petitioners failed to establish the ownership of goods and genuineness of the purchases allegedly made from the non-existing dealer, it is not obligatory on the part of proper officer to issue notice to the petitioners. Thus, prayed to dismiss the writ petition.

Held: –

• The Hon’ble Court after considering the facts of the case, submissions made and the provisions of the law applicable, found that severely objecting the action of the 1^st respondent in issuing notice dated 12.06.2023 in Form GST MOV-01 and notice dated 14.06.2023 in Form GST MOV-10 U/s 130 of CGST/APGST Act proposing to confiscate the goods and conveyance, it was submitted on the behalf of the petitioners that the aforesaid notices were issued to 4th respondent on the main allegations, as if, the consignor i.e., the 4th respondent has no place of business at Vijayawada but making movement of goods i.e., MS Scrap without any details of purchase and further, his registration was suspended for obtaining the registration with fabricated documents. That the 1^st petitioner has purchased the subject goods from the 4th respondent and sold to M/s Radha Smelters Private Limited and transporting through conveyance of the 2nd petitioner and therefore as on the date of interception i.e., 12.06.2023 the 1st petitioner was the owner of the goods but not the 4th respondent.
• Thereafter, the Hon’ble Court after considering the submissions made on behalf of the petitioners and the respondents, found that the point of consideration in the present petition is Whether 1st respondent is legally justified in detaining the goods and vehicles of petitioners without initiating any proceedings against them but only against the 4th respondent U/s 130 of CGST/APGST Act, 2017?
• The Hon’ble Court considering the provisions of Section 68 and Rule 138A of the APGST/CGST Rules, 2017, found that in the instant case the proper officer/1st respondent intercepted the lorries at Auto Nagar, Vijayawada, on 12.06.2023 which were found carrying iron scrap covered by bill and e-way bills. They revealed that the consignor i.e., the 4th respondent without having place of business at Vijayawada, transporting the goods from Vijayawada to Sankarampet, Medak in Telangana State.
• It was found by the Hon’ble Court that according to the 1^st respondent, the enquiry conducted by Joint Commissioner (ST), Kurnool, revealed the 4^th respondent was not doing business in the given address at Kurnool and there was no such person and therefore, his GST registration was suspended w.e.f. 13.06.2023 and enquiry was initiated against 4^th respondent by issuing notice of confiscation in Form GST MOV-10 under Section 130 of the CGST / APGST Act, 2017. Therefore, it was the contention of the Revenue that since the existence and business activities of the 4^th respondent are highly doubtful, confiscation proceedings U/s 130 of the CGST / APGST Act, 2017 can be launched directly against 4^th respondent without reference to the petitioners and as the 1st petitioner claims to be the purchaser from the 4^th respondent, he has to establish that he is a bonafide purchaser from 4th respondent.
• On the other hand, it was contended on the behalf of the 1^st petitioner that that he is the bonafide purchaser from 4^th respondent for valuable consideration on verifying GST registration of the 4th respondent on the web portal and sold the goods to M/s. Radha Smelters Private Limited, Medak in Telangana and was transporting the goods from Vijayawada to the consignee through the conveyance of 2^nd  respondent backed by invoice and e-way bill etc., and in spite of producing the relevant records by the driver, the 1st respondent did not consider them and issued confiscation proceedings against 4th respondent, the original seller.
• It was noticed by the Hon’ble Court that the prime contention on the behalf of the 1^st petitioner was that since the interception was made while the goods were in transit, if at all any doubt is entertained against the bonafides of the petitioners, the 1st respondent shall issue notice u/s 129 of the CGST / APGST Act against the petitioners and proceed accordingly, but the Revenue cannot impose the proceedings initiated against 4th respondent on the petitioners.
• The Hon’ble Court taking note of the referred decisions in the matter of M/s Rajeev Traders’ case (Supra) High Court of Karnataka, (Dharwad Bench) & Synergy Fertichem Pvt Ltd v. State of Gujarat 2020(33) G.S.T.L 513 (Guj.) – MANU/GJ/3200/2019, found that as can be seen from the two provisions i.e., Section 129 & 130, and their narration given in the above two decisions, it is clear that the proceedings of detention of goods can be initiated while the goods are in transit in contravention of provisions of the CGST/APGST Act.
• In the present case also, the 1st respondent has detained the goods of the 1^st petitioner while they were in transit from Vijayawada to Sankarampet, Medak, Telangana State. That being the factual scenario, the question is whether 1^st respondent can confiscate the goods of the 1st petitioner without initiating any proceedings against him U/s 129 but initiating proceedings U/s 130 of CGST/APGST Act against the 4th respondent on the ground of dubious credentials of the 4^th    Therefore, it was the view of the Hon’ble Court that though the 1st respondent may initiate proceedings against the 4th respondent U/s 130 of the Act in view of his absence in the given address and not holding any business premises at Vijayawada, however, he cannot confiscate the goods of the 1st petitioner merely on the ground that the 1st petitioner happens to purchase goods from the 4th respondent.
• Further, it was found by the Hon’ble Court that even if the 1^st petitioner joins in the enquiry proceedings against the 4^th respondent, his responsibility will be limited to the extent of establishing that he bonafidely purchased goods from the 4th respondent for valuable consideration by verifying the GST registration of the 4th respondent available on the official web portal and he was not aware of the credentials of the 4th respondent. He has to also establish the mode of payment of consideration and the mode of receiving of goods from the 4th respondent through authenticated documents. Except that he cannot be expected to speak about the business activities of the 4th respondent and also whether he obtained GST registration by producing fake documents.
• It was also found by the Hon’ble Court that the petitioners have to establish their own credentials but not the 4th respondent. In that view, the 1^st respondent is not correct in roping the petitioners in the proceedings initiated against the 4th respondent without initiating independent proceedings U/s 129 of CGST/APGST Act against the petitioners. Therefore, the 1st respondent can initiate proceedings U/s 129 of CGST/APGST Act against the petitioners and conduct enquiry by giving opportunity to the petitioners to establish their case.

The Hon’ble Court with the above findings and observations, disposed of the writ petitions with the liberty to the 1^st respondent to initiate proceedings against the petitioners’ U/s 129 of CGST/APGST Act, 2017 and conduct enquiry by giving an opportunity of hearing to the petitioners and pass appropriate orders in accordance with governing law and rules.  In the meanwhile, the 1^st  respondent shall release the detained goods in favour of 1^st  petitioner on his deposit of 25% of their value and executing personal bond for the balance and he shall also release the vehicles in favour of the 2^nd  petitioner in the respective writ petitions on their executing personal security bonds for the value of the vehicles as determined by concerned Road Transport Authority.