Manjunathaa Rock Drills vs. State Tax Officer - Kerala High Court, 08 November 2018

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU THURSDAY ,THE 08TH DAY OF NOVEMBER 2018 / 17TH KARTHIKA, 1940 WP(C).No. 28379 of 2018 PETITIONER/S: 1 M/S MANJUNATHAA ROCK DRILLS 5/571, GOUNDERPALAYAM P.O. SALEM-636105, TAMIL NADU, REPRESENTED BY ITS MANAGING PARTNER. 636105 2 T.MURUGESH, PROPRIETOR,ASIAN AGENCIES,9/657A,SULTHAN BATTERY POST, MYSORE ROAD, SULTHAN BATTERY-673592. BY ADV. TOMSON T.EMMANUEL RESPONDENT/S: 1 STATE TAX OFFICER STATE GOODS AND SERVICES TAX DEPARTMENT,SQAD NO.II ANAPPARA BUILDING, KALPATTA 673121 2 ASSISTANT STATE TAX OFFICER STATE GOODS AND SERVICES TAX DEPARTMENT, SQUAD NO.II, ANAPPARA BUILDING, KALPATTA 673121. 3 THE COMMISSIONER STATE GOODS AND SREVICES TAX DEPARTMENT, TAX TOWER, KARAMANA P.O. THIRUVANANTHAPURAM 695002. 4 STATE OF KERALA TAXES (B) DEPARTMENT, STATE GOODS AND SERVICES TAX DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM 695001. REPRESENTED BY SECRETARY TO GOVERNMENT. 5 UNION OF INDIA, DEPARTMENT OF REVENUE, CENTRAL BOARD OF EXCISE AND CUSTOMS,NEW DELHI 110001, REPRESENTED BY ITS SECRETARY TO GOVERNMENT MINISTRY OF FINANCE 110001 WPC No.28379 of 2018 2 6 DEPUTY COMMISSIONER (APPEALS) STATE GOODS AND SERVICES TAX DEPARTMENT,NIRMAL ARCADE, KOZHIKODE 673006. 7 VIJAY PETROCHEMICALS, 1/419/214,SALEM ROAD,MUDALAIPATTY, NAMAKKAL 637001. BY ADV. GOVERNMENT PLEADER OTHER PRESENT: GP. DR. THUSHARA JAMES THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.11.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

JUDGMENT M/s Manjunathaa Rock Drills—the first petitioner—owns drilling machinery and other equipment. It is in Tamilnadu. Marukesh, the second petitioner in Sulthan Bathery, Kerala, hired that machinery from Manjunathaa, through Ext.P1 agreement, for sinking a borewell. Later, Vijay Petro Chemicals—the 7th respondent—sent a consignment of lubricating oils at Manjunathaa's request for the annual maintenance of the machinery. But, by then, the machinery was under a hire to Murukesh. So, Vijay Petrochemicals sent the consignment from Tamilnadu to Sulthan Bathery, as seen from the Ext.P4 invoice. But on WPC No.28379 of 2018 3 12.2.2018, the Assistant State Tax Officer (ASTO), the second respondent, detained that consignment at the Parcel Office, Sulthan Bathery. Murukesh, to whose address the consignment was sent, was put on notice.

Then, Marukesh and Manjunathaa, as the lessee and the lessor respectively, submitted the Exts.R6 and R6(a) replies to the ASTO. Complaining that the ASTO has not considered their explanations and passed orders, both the lessor and lessee filed WPC No.15256 of 2018 and invited the Ext.P8 judgment, dated 24.5.2018. This Court, in fact, directed the State Tax Officer to adjudicate the issue keeping in view the explanation submitted by the lessor and lessee. Thereafter the STO passed the Ext.P11 order. In the meanwhile Vijay Petro Chemicals submitted the Ext.P10 claiming ownership of the goods and expressed its willingness to provide the bank guarantee and get the goods released. But the STO passed the Ext.P11 order, imposing penalty on Murukesh, the lessee alone. Aggrieved, both the lessor and the lessee have filed this writ petition.

At any rate, Murukesh has also filed a statutory appeal against the Ext.P11 order, passed under Section 107 of SGST Act.

WPC No.28379 of 2018 4

Now, the petitioners’ singular grievance is this: Murukesh—the lessee—has disowned the consignment. Vijay Petro chemicals—the owner —wants the consignment back. So it is willing to provide the bank guarantee. According to Sri Tomson T.Emmanuel, the petitioners’ counsel, Murukesh could pursue his statutory appeal. There is no conflict of interest, he further asserts, between Murukesh and Manjunathaa Rock Drills on one hand and Vijay Petro Chemicals on the other. To conclude, he has submitted that the authorities must allow Vijay Petro Chemicals to submit the bank guarantee and get the goods released. And that must be subject to the outcome of the appeal pending before the Deputy Commissioner (Appeals)—the sixth respondent.

Dr. Thushara James, the Government Pleader, on the other hand, contends that Vijay Petro Chemicals, an assessee in Tamilnadu, sent the goods in transit to a place in Kerala. Therefore, it is a transaction attracting IGST. According to her, as the machinery is in Murukesh's possession, the authorities have rightly initiated the proceedings against Murukesh and also passed the Ext.P11 order against him, under law. She also submits that the authorities have taken note

WPC No.28379 of 2018 5 of the Ext.P1 agreement between Manjunathaa and Murukesh. Therefore, it is either Manjunathaa or Murukesh that should provide the bank guarantee and get the goods released. According to her, once Murukesh has assailed the orders, it cannot be said that he has disowned the transaction.

I reckon, the issue of detention and the nature of transaction are matters to be gone into in the appeal and other departmental proceedings. It is premature for this Court to pronounce on that count. Now, this Court has been seized of one issue: who should provide the bank guarantee and get the goods released? So long as there is no conflict of interest among the parties here—that is, the consignor, the consignee and the addressee—it is idle to indulge in hairsplitting technicalities. The Department may ensure that the release of the goods should not affect its remedies vis-à-vis the detained goods. Therefore, the statute provides for bank guarantee and other safety mechanism.

The proceedings may have been in Murukesh's name. But, evidently, the goods belong to Vijay Petro Chemicals. So, if Vijay Petro Chemicals provide the bank guarantee, the Department will release the detained goods in its favour, after notifying Murukesh, in whose name

WPC No.28379 of 2018 6 the Ext.P11 proceedings were issued. If Murukesh does not object to the goods getting released, the authorities will entertain Vijay Petro Chemicals's request for the release on its providing the bank guarantee. Once Vijay Petro Chemicals gets the goods released by providing the bank guarantee, it may re-transport the consignment to its original destination subject to other statutory stipulations, if any. The writ petition is disposed of. DAMA SESHADRI NAIDU JUDGE css/ APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 COPY OF AGREEMENT DATED 1.6.2017 INTO BETWEEN IST PETITIONER AND M/S. ASIAN BORE WELLS, SULTHAN BATHERY FOR HIRING OF RIG MOUNTED LORRY. EXHIBIT P2 COPY OF REGISTRATION CERTIFICATE DATED 1.9.2017 ISSUED UNDER GOODS AND SERVICES TAX ACT TO IST PETITIONER. EXHIBIT P3 COPY OF REGISTRATION CERTIFICATE DATED 25.9.2017 ISSUED UNDER GOODS AND SERVICES TAX ACT TO 2ND PETITIONER. EXHIBIT P3 A COPY OF REGISTRATION CERTIFICATE DATED 26.9.2017 ISSUED UNDER GOODS AND SERVICES TAX ACT TO M/S. ASIAN BORE WELLS, WAYANAD, WHEREIN 2ND PETITIONER IS MANAGING PARTNER.

WPC No.28379 of 2018 7 EXHIBIT P4 COPY OF TAX INVOICE NO.G17-18/702 DATED 7.2.2018 ISSUED TO IST PETITIONER, ACCOMPANIED WITH THE GOODS TRANSPORTED TO WAYANAD. EXHIBIT P5 COPY OF NOTICE DATED 12.2.2018 U/S. 129(1) OF KERALA GST ACT AND RULES IN DETAINING GOODS TRANSPORTED AS PER LORRY RECEIPT NO.66526729 ISSUED BY 2ND RESPONDENT TO 2ND PETITIONER AND WHICH WAS REVISED BY NOTICE DATED 23.2.2018. EXHIBIT P6 COPY OF REPLY DATED 9.3.2018 SUBMITTED BY IST PETITIONER BEFORE 2ND RESPONDENT AGAINST EXT.P5. EXHIBIT P6 A COPY OF REPLY DATED 15.3.2018 SUBMITTED BY 2ND PETITIONER BEFORE 2ND RESPONDENT AGAINST EXT.P5 NOTICE. EXHIBIT P7 COPY OF COMMUNICATION DATED 23.3.2018 ISSUED TO 2ND PETITIONER BY 2ND RESPONDENT, IN REFUSING TO RELEASE THE DETAINED GOODS. EXHIBIT P8 COPY OF JUDGMENT DATED 24.5.2018 PASSED BY THIS HON'BLE HIGH COURT IN WPC NO.15256 OF 2018 IN DIRECTING TO CONDUCT ADJUDICATION BY IST RESPONDENT. EXHIBIT P9 COPY LETTERY DATED 15.6.2018 ISSUED BY IST PETITIONER TO 7TH RESPONDENT IN CANCELLING PURCHASE ORDER. EXHIBIT P10 COPY OF LETTER DATED 15.6.2018 SUBMITTED BY 7TH RESPONDENT BEFORE IST RESPONDENT AT THE TIME OF ADJUDICATION. EXHIBIT P10 A COPY OF LETTER DATED 22.6.2018 SUBMITTED BY IST PETITIONER BEFORE IST RESPONDENT AS PART OF ADJUDICATION. EXHIBIT P11 COPY OF ORDER DATED 22.6.2018 PASSED BY IST RESPONDENT IN IMPOSING PENALTY ALONG WITH IGST ON 2ND PETITIONER, WITHOUT CONSIDERING EXT P10 AND P10(A).

EXHIBIT P12OF APPEAL U/S 107 OF CENTRAL GOODS AND SERVICES TAX ACT 2017 SUBMITTED BY 2ND PETITIONER BEFORE 6TH RESPONDENT AGAINST EXT.P11 PENALTY.