GST UPDATE NO. 315 DETENTION ORDER TO BE SERVED ON OWNER OF GOODS AND NOT TRUCK DRIVER

The cases of detention and confiscation of goods during their movement has been a regular feature in GST regime. However, the root cause of concern is not following the proper procedure as prescribed by Circular No. 41/15/2018-GST dated 13.04.2018. It is often observed that the interception officers not issue show cause notice or other prescribed documents in prescribed format or fail to properly serve the notices or orders to the owner of goods. Recently, similar issue was raised before the hon’ble Gujarat High Court in the case of M/S TANAY CREATION VERSUS STATE OF GUJARAT [W.P. NO. 15195 OF 2021]. The outcome of this decision is the subject matter of discussion of our present update.
The petitioner is engaged in the trading of grey fabrics. It purchases goods from various manufacturers from different parts of the country and sell the same to various manufacturers.
It is averred that the petitioner sent goods under four tax invoices to the processors at Jetpur under the instructions of the buyers in the truck bearing No.GJ-01-JT-0689 through Kailash Translogistics Pvt. Ltd. The driver of the truck was carrying the goods mentioned in the tax invoice issued by the petitioner, which was intercepted by mobile squad on 22.08.2021 for at 11:10 a.m. at Kamrej Toll Plaza, Kamrej, Surat. According to the petitioner, the driver produced all the required documents relating to the goods, including tax invoice evidencing description, the value of the goods and rate of IGST of such transaction and tax on such goods. However, the truck was detained on the grounds that neither in the bill nor in the e-way bill, the receiver’s name and full address was mentioned.Moreover, there was mismatch in the quantity mentioned in the bill and the e-way bill. It was alleged that the goods were being transported to the unknown recipient for evasion of tax. Therefore, mobile squad directed physical verification of the conveyance, goods and documents.
The petitioner contended that on the directions of the buyers, goods were being sent to Jetpur for processing. However, while preparing tax invoice, inadvertently, the name of the supplier of the goods from whom the petitioner had purchased the goods had been mentioned as Consignee instead of the processors at Jetpur, but in the E-way bill, the correct place of delivery was mentioned i.e. Jetpur, Gujarat. It was alleged that no copy of SCN or order was served on the petitioner but the documents were served on the truck driver. The petitioner stated that inspite of the fact that they had paid the tax and penalty, goods were not provisionally released and rather order of confiscation under section 130 of the CGST Act, 2017 was being passed.
It is contended that though the total amount of tax and penalty had been already paid, the respondents are not inclined to release the goods without payment of redemption of fine, as there is clear violation of the principles of natural justice.
The revenue authorities justified the orders passed and contended that present petition is not sustainable as alternate remedy is available to the petitioner.
The hon’ble High Court denied the contention of availability of alternate remedy of appeal to the petitioner on the grounds that Court may entertain writ petition in case of exception such as violation of the principles of natural justice. It was held that the notice and order was served to the truck driver and not to the petitioner or truck owner. It was also reckoned that petitioner has already paid the amount of tax and penalty. Reliance was placed on the decision given in the case of SITARAM ROADWAYS (URP) and SYNERGY FERTICHEM PVT. LTDWhile in the case of SITARAM ROADWAYS (URP), show cause notice was issued to the petitioner and the date had also been fixed for hearing but the only allegation was of passing the non-speaking order without affording opportunity of hearing; in the present case, petitioner being the owner of goods was not even served the SCN and opportunity was afforded to the driver. The detention order was also served on the person-in-charge of the conveyance. Hence, no opportunity of hearing was given to the petitioner and the order is complete breach of the principles of natural justice.
Therefore, the confiscation order was quashed and matter is restored to the revenue authorities to issue the notice under section 130 and decide the matter afresh in accordance with law, after affording an opportunity of personal hearing to the petitioner by passing a reasoned order.
Furthermore, it was held that as the petitioner has deposited the amount of tax and penalty, the conveyance and goods shall be released by the competent authority within 7 days from the date of receipt of the copy of this order.
The above decision is yet another example of intervention of High Court where the principle of natural justice has been violated. The fundamental right of the taxpayer is to receive SCN or order so as to defend themselves by taking appropriate course of action. It is hoped that the revenue authorities strictly follow these decisions so as to avoid unnecessary disputes in future.

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GST UPDATE NO. 315 DETENTION ORDER TO BE SERVED ON OWNER OF GOODS AND NOT TRUCK DRIVER

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