M/S. Arhaan Ferrous And Non-Ferrous Solutions PVT.LTD. vs. The Deputy Assistant Commissioner - 1 (St)

The Court made the following: COMMON ORDER

2 Sankarampet and was sent respondent. respondent, the 1« ^ong as the applicable of 4**' Petitione,^ that the 4“' respondent - -“’"andineaseofdefau.tonhispart respondent may initiate action against the under the guise of initiating proceedings against the 4“ respondent cannot put the petitioners in trouble as - is covered by all relevant and not r *** P^'itioners that the 1” respondent did 0 ow the precedure . an atratght atvay issued proceedings proposing to confiscate “ “■ „ osr „ 05, 06 01, 08 Ob GST MOV 09 bef juv -09 before issuing notice of transaction i documents. ts such as mvotce, way bill, weighntent slip etc., While 800 s we^ vehicles along p oner t.e., *e 4“- respondent has no place of business at ~“dac.rdingly issued irepugned respondent by deliberately ignoring the H . ® documents produced by the drivers at the time ofcheck. (b) It IS fiirther case of the having sold the scrap has not the 1"‘

3 documents served on the 2"^* petitioner do not contain DIN Number. The respondent has no right or juri iction to detain the goods and vehicle of the petitioners. Hence, the writ petition. The respondent filed counter mainly contending thus: 3. respondent was transporting iron scrap from Vijayawada destined to be delivered to M/s Radha Smelters Pvt Ltd., Sankarampet, Medak District, Telangana State. It is noticed that 4**’ respondent without having any place of business in Vijayawada dispatched goods therefrom. The consignment was not accompanied by the purchase voucher/invoice statement of the drivers in Form GST 01. The Joint Commissioner (ST), Kumool was requested to verify the genesis of the goods and bonafides of the seller dealer. Basing on the report of the Joint Commissioner (ST) Ku;mool the registering authority suspended the (a) On 12.06.2023 the 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* confiscation in Form GST MOV -10. It is also contended that the and payment of consideration. Hence the proper officer recorded

4 respondent respondent on 13.06.2023. moved in violation of registration of 4*'’ issued by same shows that the 4‘^ Since the goods are section 113 of APGST Act, notice of confiscation in Fonn GSTMOV-10 was issued proposing to confiscate the goods and conveyance. Subsequently two rentindets were issued to 4* respondent on 23,06.2023 a«l 03.07.2023, However, the seller xemained silent. The transport is covered by bill and way bill issued by the- 4 respondent and verification of the respondent sold iron scrap against bill and purchase details. In the ci- detained by following Commissioner way bill without any circumstances the vehicle and goods were due process of law. Further, the Joint . (ST), Kumool informed that the seller is a &ke dealer who obtained registration by showing fictitious document and hence the same was suspended. The Assistant Commissioner (SiQ, Kumool- I, inspected the business premises of the seller in Kuntool and recorded panchanama through mediators which shows that the seller is a non- existing entity, m such a s^nario, it is questionable as to how the buyer has purchased the goods from a bogus and non-existing seller. (b) It is contended that the tax invoice and e-Way bill wem raised by the 4* respondent implying that he is the owner of dte goods.' The V petitioner failed to establish the ownership of goods under 5 (C) 4. zf i The petitioners filed reply affidavit in W.P.No. 15481/2023 and opposed the counter averments. It is contended that the suspension of registration of 4* respondent on 13.06.2023 pending enquiry relating to its genuineness, basing on the report of the Joint Commissioner (ST), Kumool, is incorrect because the inspection of the premises of the 4‘*’ respondent according to Joint Commissioner’s report was held only on dispute but submitted a letter dated 26.06.2023 without signature claiming ownership of the goods. As the letter is without signature, the 1 respondent issued an endorsement dated 30.06.2023 to the address of the registered person which was returned with the endorsement as address is incomplete. This creates a doubt about the existence of the 1 petitioner also. 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 IS 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. The writ petition is premature as the proceedings are pending and not attained finality. The respondent thus prayed to dismiss the writ petition.

6 be initiated against the person who is transporting goods in contravention of the provisions of the Act. In the instant case, the 01.07.2023 and that being so, the suspension of registration cannot precede to 13.06.2023. It is further contended that at the time of interception of vehicle for check up, the 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 waybill and those documents were petitioner is transporting goods with valid documents. Instead of issuing proceedings in the name of petitioner, the respondent issued notices against 4* respondent who has no interest in the matter after selling the consignment for valuable consideration to the petitioner. Under law there is no requirement that the petitioner shall verify whether 4* respondent has any registered place of business at Vijayawada. Having verified the credentials of accompanying the goods and therefore, if at all the 1* respondent suspected the genuineness of the documents, he ought to have initiated proceedings against the petitioner. The 1®‘ 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*** respondent. As per Section 129 of the COST / APGST Act, 2017, action if any can

7 ■a 129 of the COST Act has to be followed. At any rate, since no notice 5. will have overriding effect on Section 130 of the said Act arid thereby, in respect of goods in transit, the procedure prescribed under Section of deletion of non-obstante clause in Section 130 of the COST Act, 2017, by virtue of the Finance Act, 2021, Section 129 of the GST Act was issued in the name of the petitioners, the confiscation proposals against 4“* Heard Sri V.Siddharth Reddy, learned counsel for petitioners, and learned Government Pleader for Commercial Taxes-1 representing the respondents. Both the learned counsel reiterated their pleadings in the respective arguments. respondent cannot be made applicable against the petitioners. GST registration number of the 4* 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*^ respondent entertained by the Department has no bearing with the transaction entered into by the petitioner with 4* respondent. It is further contended that in view

8 6. ! respondent had any Severely fulminating the action of the 1" 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, learned counsel for' petitioners would submit that the aforesaid notices were issued to 4*** respondent on the main allegations, as if, the consignor i.e., the 4* 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. Learned counsel strenuously argued that in fact the petitioner has purchased the subject goods from the 4‘*’ respondent and sold to M/s Radha Smelters Private Limited and . transporting through conveyance of the 2"** petitioner and therefore as on the date of interception i.e.,. 12.06.2023 the 1« petitioner was the owner of the goods but not the 4* respondent. Driver of the goods produced all relevant documents before the 1®* respondent but he selectively perused only the invoice issued by the 4"* respondent and came to conclusion as if die details of the Vendor of the 4* respondent and concerned bills were not produced and detained the vehicle. Learned counsel would lament that if the 9 CST/APGST Act and initiated proceedings. 7. showed that the consignment •fi I suspicion about the genuineness of the business of the 1®* petitioner and his GST registration, he ought to have issued notice U/s 129 of In oppugnation learned Government Pleader would argue, the vehicles were intercepted at Auto Nagar, Vijayawada on 12.06.2023 by the respondent and having found they contained iron scrap, he enquired the drivers who produced the invoices dated 12.06.2023 which was destined from Vijayawada to Sankarampet, Medak, Telangana. The invoices further showed that M/s K.S Enterprises, i.e., the 4* respondent is the owner of the consignment and the 1®‘ petitioner is the buyer and the consignee is M./s Radha Without doing so he straight away issued notice of confiscation against the 4“* respondent while detaining the goods pertaining to the petitioner which is illegal and unjust. He further argued that without initiating proceedings U/s 129 against the petitioners, resorting to Section 130 of the Act against 4*’’ respondent and on that ground proposing to confiscate the goods of the petitioner is illegal. He placed reliance on the order dated 16.08.2022 in W.P.No.100849/2022 (T.Res) (M/s Rajeev Traders v. Union of India) passed by learned single Judge of the High Court of Karnataka, Dharwad Bench.

10 respondent The on 13.06.2023 8. were was no such person. Therefore, the respondent was suspended pending further enquiry and notice of confiscation in Form GST MOV - 10 was issued U/s 130 of CGST/APGST Act, 2017 to 4* respondent. ' ' Refuting the argument of the petitioners that no notice was issued and action was initiated against the petitioners but their stock and vehicle illegally detained by initiating proceedings against the d® respondent, learned G.P would submit that si as per the invoice is relatable to 4‘*’ fictitious was not doing business in the int Commissioner (ST) i.,, the 4‘*’ respondent. -- since the origin of the goods respondent who happens to be a person, proceedings were initiated .against him by issuing notices. The 4 respondent shall appear and prove the authenticity of his Smelters Pvt Ltd. Learned G.P would weightily point out that since the 4“' respondent hastao place of business at Vijayawada wherefrom the goods were sought to be transported and as the driver at that time could not show the bill of purchase, the mode of payment of purchase price by f petitioner to 4” respondent and mode of transportation from Kumool to Vijayawada, the 1“ respondent suspected the bonafides of 4'" and detained the vehicles and informed the Joi Kumool to examine bonafides of seller i.e enquiry revealed that the 4*” respondent given address at Kumool and there GST registration of the 4*'’

11 business. I I 1 i Be that as it may, since the petitioner claims to be the purchaser from the 4“" or Vijayawada or respondent, though proceedings were not separately launched against him, he owes a responsibility to establish the authenticity of the transaction between him and the 4“’ respondent by producing invoice and purchase bill issued by the 4** respondent and also the mode of payment of consideration to him and further, produce relevant document as to the place of purchase of the goods i.e., Kumool some other place and mode of transportation to Vijayawada if delivery was obtained at some other place. Learned G.P would thus argue that the burden of proving the genuineness of the transaction between the 1« petitioner and the 4* respondent lay on the former. He would submit that the petitioners can attend the enquiry and establish their innocence by producing the relevant documents. Learned GP defended the action of the 1®‘ respondent in straight away initiating proceedings U/s 130 of CGST/APGST Act on the submission that the very existence of 4* respondent and his obtaining GST registration Were doubtful.

12

13 i. ii. nil- I The invoice or bill of supply or delivery challan, as the case may be; and A copy of the e-way bill in physical form or the e-way bill number in electronic form or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Chief Commissioner: Provided that nothing contained in clause (b) of this sub-rule shall apply in case of movement of goods by rail or by air or vessel. Provided further that in case of imported goods, the person in charge of a conveyance shall also carry a copy of the bill of entry filed by the importer of such goods and shall indicate the number and date of the bill of entry in Part A of FORM GST EWB-01 xxxxx

14 Per contra, the contention of 1®‘ petitioner is that he is the bonafide purchaser from 4'*’ respondent for valuable consideration on verifying GST registration of the 4“* respondent on the web portal and sold the goods to MZs. Radha Smelters Private Limited, Medak in Telangana and was transporting the goods from Vijayawada to the consignee through the conveyance of 2"^* respondent backed by invoice and e-way bill etc. and in spite of producing the relevant records by the driver, the respondent did not consider them and issued confiscation proceedings against 4^ respondent, the original seller. Their prime contention is that since the interception was made while the goods were in transit, if at all any doubt MOV-IG under Section 130 of the CGST / APGST Act, 2017. The contention of the Revenue is that since the existence and business activities of the 4“’ respondent are highly doubtful, confiscation proceedings U/s 130 of the CGST / APGST Act, 2017 can be launched directly against 4**' respondent without reference to the petitioners and as the 1" petitioner claims, to be the purchaser from 4* respondent, he has to establish that he is a bonafide purchaser from 4* respondent for valuable consideration by paying the due tax without knowing the credentials of 4 respondent by participating in the enquiry proceedings initiated against the 4‘*’ respondent.

15 13. respondent. 14. ■■U I is entertained against the bonafides of the petitioners, the respondent shall issue notice u/s 129 of the COST / APGST Act against the petitioners and proceed accordingly, but the Revenue cannot impose the proceedings initiated against 4* respondent on the petitioners. “103. It is to be stated that the power to detain under Section 129 cannot be converted to a proceeding under Section-130 of the Act since both these provisions operate independently of each other and in completely different contexts. The power to detain is only to stop the transit of the goods and thereby prevent its movement till the tax and penalty is paid. However, the power to confiscate is the process of divesting the owner of the goods of all title to the goods for a contravention of the provisions of the Act and Rules. The intent behind conferring power to detairi the goods under Section 129 is fundamentally to ensure that, the applicable tax and. penalty is recovered whereas the intent behind confiscation under In M/s Rajeev Traders’ case (Supra) High Court of Karnataka, (Dharwad Bench) a learned single Judge has drawn the distinction between Section 129 and 130 of COST Act as follows: In the light of the above respective contentions, the bone of contention in this case is whether the Revenue can confiscate the goods of the petitioners basing on the proceedings initiated against the 4‘*'

16 IS. 16. ‘ 2020(33) G.S.T.L 513 (Guj.) = MANU/GJ/3200/201-O Section 130 is to divest the owner of the goods itself and also impose liability of payment of the applicable tax and penalty.” In Synergy Fertichem Pvt Ltd v. State of Gujarat* a division bench of Gujarath High Court also explained the distinction between Section 129 and 130 COST Act as follows: Thus as can be seen from the two provisions and their narration given in the above two decisions, it is clear that the proceedings for detention of goods can be initiated while the goods are in transit in contravention of provisions of the CGST/APGST Act. In the instant case also the 1 respondent has detained the goods of the 1®* petitioner while they were in transit from Vijayawada to Sankarampet, Medak, Telangana State. That being the factual scenario, the question is whether (i) Section 129 of the Act talks about detention, seizure and release of goods and conveyances in transit. On the other hand. Section 130 talks about corffiscation of goods or conveyance and levy of tax, penalty and fine thereof. Although, both the sections start with a non-obstante clause, yet, the harmonious reading of the two sections, keeping in mind the object and purpose behind the enactment thereof, would indicate that they are independent of each other. Section 130 of the Act, which provides for confiscation of the goods or conveyance is not, in any manner, dependent or subject to Section 129 of the Act. Both the sections are mutually exclusive.”

17 documents. In essence, the ! respondent through authenticated Except that he cannot be expected to speak about the business activities of the 4* respondent and also whether he obtained GST registration by producing fake documents. respondent can confiscate the goods of the petitioner without initiating any proceedings against him U/s 129 but initiating proceedings U/s 130 of CGST/APGST . Act against the 4'*’ respondent on the ground of dubious credentials of the 4“* respondent. In our considered view though the respondent may initiate proceedings against the 4**' 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 petitioner merely on the ground that the P' petitioner happen to purchase goods from the 4* respondent. Even assuming that the petitioners, particularly the petitioner partakes in the enquiry proceedings against the 4* respondent, his responsibility will be limited to the extent of establishing that he bonafidely purchased goods from the 4* respondent for valuable consideration by verifying the GST registration of the 4 respondent available on the official web portal and he was not aware of the credentials of the 4“’ respondent. Further, he has to establish the mode of payment of consideration and the mode of receiving of goods from the 4*

s 18 petitioners have to establish their in roping the 17. These writ petitions are accordingly disposed of giving liberty to the 1 respondent to initiate proceedings against the petitioners U/s 129 of CGST/APGST Act, 2017 within two weeks from the date of receipt of a copy of this order 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« respondent shall release the detained goods in favour of l^.pefitioner on his deposit of 25% of their value and executing personal bond for the balance and he own credentials but not the 4‘*’ respondent. In that view, the 1* respondent is not correct in roping the petitioners in the proceedings initiated against the 4*” respondent without initiating independent proceedings U/s 129 of CGST/APGST Act against the petitioners. As the 1 petitioner claims to have purchased goods from the 4* respondent whose physical existence in the given address is highly doubtful as per the enquiry conducted by the Joint Commissioner (ST), Kumool, the 1* petitioner as observed supra, owes a responsibility to prove the genuineness of the transactions between him and the 4*” respondent. Therefore, the respondent can initiate proceedings U/s 129 of CGST/APGST Act against the petitioners and conduct enquiiy by giving opportunity to the petitioners to establish their case.

I 19 shall also release the vehicles in favour of the 2"'* petitioner in the respective writ petitions on their executing personal security bonds for determined by concerned Road Transport Authority. No costs. As a sequel, interlocutory applications pending, if any, shall stand closed. \ //// SECTION OFFICER

HIGH COURT DATED:03/08/2023 03 COMMON ORDER WP.No.15481,15482,15486 &15487 of 2023 DISPOSING THE WP WITHOUT COSTS 2 1 SEP 2023 . Current Section ^^s^spatcH^