Kerala High Court
Y. Balakrishnan vs The Enforcement Officer, Enforcement ... on 28 February, 2025
Author: Bechu Kurian Thomas
Bench: Bechu Kurian Thomas
W.P.(C) No.30274/24 1
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
FRIDAY, THE 28TH DAY OF FEBRUARY 2025 / 9TH PHALGUNA, 1946
WP(C) NO. 30274 OF 2024
PETITIONER:
Y. BALAKRISHNAN,
PROPRIETOR, ONAM BEEDY COMPANY,
1/395, THAYYIL RAMAPURAM, KAYAMKULAM,
ALAPPUZHA DISTRICT, KERALA, PIN - 690508
RESIDING AT IV/1305, MAIN ROAD,
VALLOM, THIRUNELVELI DISTRICT,
TAMIL NADU, PIN - 628009
BY ADVS.
AMMU CHARLES
K.MANOJ CHANDRAN
S.A.MANSOOR (PATTANAM)
K.SRIKUMAR (SR.)
RESPONDENTS:
1 THE ENFORCEMENT OFFICER,
ENFORCEMENT SQUAD, KOLLAM,
SGST DEPARTMENT, TAX COMPLEX,
ASRAMAM, KOLLAM, PIN - 691002
2 THE ASSISTANT ENFORCEMENT OFFICER,
ENFORCEMENT SQUAD, KOLLAM,
SGST DEPARTMENT, TAX COMPLEX,
ASRAMAM, KOLLAM, PIN - 691002
3 THE COMMISSIONER OF STATE GOODS AND SERVICE TAX
DEPARTMENT,
9TH FLOOR, TAX TOWER, KILLIPPALAM,
KARAMANA P.O.,
THIRUVANANTHAPURAM, PIN - 695002
4 STATE OF KERALA,
W.P.(C) No.30274/24 2
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REPRESENTED BY THE SECRETARY TO GOVERNMENT,
TAXES DEPARTMENT, SECRETARIAT,
THIRUVANANTHAPURAM, PIN - 695001
5 THE CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS,
REPRESENTED BY THE PRINCIPAL COMMISSIONER GST,
GST POLICY WING, NO.503, B WING,
5TH FLOOR, CBIC, HUDCO VISHALA BUILDING,
BHIKAJI CAMA PLACE, R. K. PURAM,
NEW DELHI, PIN - 110066
6 UNION OF INDIA,
REPRESENTED BY ITS SECRETARY TO GOVERNMENT,
FINANCE DEPARTMENT, RAJPATH MARG,
CENTRAL SECRETARIAT,
NEW DELHI, PIN - 110001
BY ADV R.HARISHANKAR
DR.THUSHARA JAMES, SR. GOVT. PLEADER
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
11.02.2025, THE COURT ON 28.02.2025 DELIVERED THE FOLLOWING:
W.P.(C) No.30274/24 3
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BECHU KURIAN THOMAS, J.
--------------------------------
W.P.(C) No.30274 of 2024
---------------------------------
Dated this the 28th day of February, 2025
JUDGMENT
The writ petition was filed challenging a notice for confiscation of goods
issued under section 130 of the Central Goods and Services Act, 2017 (for
short 'CGST'), along with a notice for detention. Subsequently, the writ
petition was amended, and the order of confiscation of goods and
conveyance was also challenged.
2. Petitioner is the proprietor of 'Onam Beedi Company' and is a
registered taxpayer indulging in wholesale and retail trade of cigars,
cigarettes, tobacco and allied products. Petitioner's son is also conducting a
business establishment under the name 'M/s. SM Beedi Company' which
deals in products of the same nature as that of the petitioner. On 12.08.2024,
during a vehicle check, the vehicle bearing registration No.TN 76 AE 6717
loaded with 40 bags of beedis was intercepted at around 2 a.m. The
documents that accompanied the transport were an invoice dated 11.08.2024
from Onam Beedi Company, Shencottah, Tamil Nadu to Onam Beedi
Company, Kayamkulam, an e-Way bill apart from another invoice and e-Way
bill indicating 15 bags of beedis supplied by 'M/s. SM Beedi Company',
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Shencottah, Tamil Nadu to 'M/s. SM Beedi Company', Kayamkulam.
However, since the driver of the conveyance informed that 10 bags of beedis
containing around 1,100 packets were to be supplied to a shop at Thiruvalla,
which were not supported by any of the documents, a notice of detention was
issued. Later, a proposal for confiscation of the goods was also caused to be
initiated. Immediately, petitioner approached this Court through this writ
petition.
3. Since no interim relief was granted, the proceedings before the
statutory authority continued and culminated in an order of confiscation. The
writ petition was subsequently amended, and the aforementioned order,
produced as Ext.P21 has also been challenged. Petitioner pleaded that the
goods at the time of interception were covered by proper invoices and e-Way
bills and that the IGST on the transaction had already been paid, which is
already on the radar of the GST Network and therefore confiscation of the
goods and the conveyance merely for the reason of a deviation in the route,
was without authority. It is also pleaded that the petitioner is a registered
person regularly filing returns and remitting substantial amounts as tax and
that while the goods were in transit, he received an order from a shop at
Thiruvalla and therefore the driver of the vehicle was directed to divert the
vehicle to Thiruvalla for unloading 10 bags of beedis and since such sale in
transit is not uncommon in practice, the order of confiscation of the goods is
without legal authority. According to the petitioner, a mere deviation of the
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goods in transit cannot be a reason to invoke the power of confiscation
especially when the same is covered by proper e-Invoice and e-Way bill. The
petitioner also questions the alleged statement given by the driver of the
vehicle and contends that a blank form was signed by the driver from whom a
statement has been incorporated. According to the petitioner, a mere
suspicion of evasion of tax was not sufficient for the authority to invoke the
provisions of confiscation which would be a drastic remedy. Petitioner also
alleges that the impugned order was issued without granting an opportunity of
cross-examination of a third party, as requested by the petitioner, whose
statement was relied upon and also that there is nothing to indicate any
evasion of tax as the entire consignment was covered by the required
documents. Petitioner also has a case that the entire goods need not have
been confiscated especially in the light of Circular No.493/2023 dated
21-06-2018.
4. A counter affidavit has been filed to the amended writ petition
wherein it is pleaded that the e-Invoice and e-Way bill produced at the time of
interception indicated transport of 25 bags of beedis from Onam Beedi
Company, Shencottah to Onam Beedi Company, Kayamkulam and 15 bags
of beedis from M/s. SM Beedi Company, Shencottah to M/s. SM Beedi
Company, Kayamkulam. However, since the vehicle was intercepted at
Chengannur, 10 km away from Thiruvalla, which was certainly a diversion,
the driver of the vehicle gave a statement that 10 bags of the goods in transit
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were for supply to a shop by name M/s.Alna Stores at Thiruvalla and the
other goods to various other shops in and around Thiruvalla. The
respondents pleaded that the modus operandi adopted by the petitioner is to
supply beedis to various shops in and around Thiruvalla without GST invoices
under the guise of transporting goods from Tenkasi in Tamil Nadu to
Kayamkulam. Subsequent to the interception of the vehicle, petitioner
generated an e-Invoice and e-Way bill for the supply of 10 bags of beedies to
M/s.Alna Stores, Thiruvalla at 7.55 a.m. with the malafide intention of limiting
the penalty amount. Respondents also pleaded that there have been several
other instances when the petitioner and his son have been identified as
indulging in defective transportation of goods apart from several notices
issued for confiscation. It is also pleaded that the petitioner is a habitual
offender and has been involved in the transportation of goods without valid
GST documents or with defective documents with the malafide intention of
evading tax.
5. Respondents alleged that the petitioner has violated section 31 of the
CGST Act read with rules 46, 47 and 48 of the CGST Rules, 2017 apart from
section 68 of the CGST Act read with rules 138 and138A of the CGST Rules,
by failing to issue a tax invoice for the entire taxable supplies provided by
them and also by engaging in the transportation of goods without proper tax
or invoice. According to the respondents, the petitioner is indulging in
transporting goods worth crores of rupees from Tenkasi, Tamil Nadu to
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Kerala and supplying them to various shops without issuing GST invoices
with the intention of evading tax causing a huge dent in the state exchequer.
Respondents also alleged that whether the defaulting dealer should be
proceeded against under section 130 of the CGST Act is a matter of
discretion of the officer and the dealer cannot question such exercise of
discretion, especially when there are materials to arrive at a prima facie
satisfaction of an intention to evade payment of tax. Respondents also
pleaded that when a person supplying goods without any valid document, as
mandated in the GST Act and transports such goods creating a genuine
suspicion in the mind of the proper officer to proceed under section 130, the
said procedure adopted ought not to be interfered with especially since the
conduct of the petitioner creates a huge loss to the state exchequer.
6. I have heard the arguments of Sri. K.Srikumar, learned Senior
Counsel instructed by Smt. Ammu Charles, the learned counsel for the
petitioner apart from Dr. Thushara James, the learned Senior Government
Pleader.
7. On 12-08-2024, at around 2 a.m., a vehicle loaded with 40 bags of
beedis was intercepted at Chengannoor, about 10 km before Thiruvalla. The
invoice possessed by the driver showed the consignee as situated at
Kayamkulam. The invoice showed that the goods were being transported
from Tenkasi (in Tamil Nadu) to Kayamkulam (in Kerala). Admittedly there
was a deviation in the route. However, a mere route deviation cannot amount
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to tax evasion and traders have the freedom to choose the route to reach the
destination. The decisions in Veer Pratab Singh v. State of Kerala (2021)
123 taxmann.com 110 (Kerala) and Joint Commissioner of Commercial
Taxes (Appeals)-3, Bengaluru v. Transways India Transport (2024) 164
taxmann.com 673 (Karnataka) are authorities to substantiate the above
proposition. Though there can be no quarrel with the said proposition, and the
traders do have the freedom to choose the route to the destination, whether
the route deviation was an attempt to evade tax or not is a factual question,
which will depend on the facts and circumstances arising in each case.
8. Normally, in an inter-state transaction, when IGST has already been
paid, there may not arise a situation of an attempt to evade tax. However, the
above principle cannot be applied in every situation. There can be
circumstances when evasion of tax could be detected even if IGST had been
paid. In the instant case, the driver of the vehicle was none other than the
brother of the petitioner himself. Statements and materials are allegedly
obtained from the driver suggesting that the goods or a portion of them were
being transported for delivery to another store, which was not mentioned in
the documents carried by the driver. No invoice was also generated in the
name of that consignee prior to interception. The subsequent generation of
an invoice and whether it was an attempt to overcome the statutory
prescriptions are all matters which will fall within the realm of disputed facts
and can well be appreciated by the statutory appellate authority, especially
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since an order of confiscation has already been issued.
9. The learned Senior Counsel had referred to the decision in Maa
Mahamaya Alloys (P.) Ltd. v. State of U.P. (2023) 150 taxmann.com 158
(Allahabad) and had contended that the liability to pay the tax arises only at
the point of supply and not at any point earlier than that and hence in the
absence of any supply in the instant case there cannot be any evasion of tax.
True that generally the liability to pay GST arises at the point of supply.
However, there can be situations when goods are not transported without
proper documentation in such a manner to doubt attempts to evade tax.
Artificial splitting up of transactions and consignments can also be methods
adopted to evade tax. Considering the circumstances arising in the instant
case, this Court is of the view that the issues raised are better left to be
decided by the statutory appellate authority.
10. Even the contention of the petitioner that the consignment was
supported by all documents required under Rule 138A of the CGST Rules is
also a matter that can be considered by the statutory authorities. No special
circumstances exist to interfere under Article 226 of the Constitution of India.
11. Petitioner also contended that the statements of a third parties have
been used against him to arrive at the conclusion that there was evasion of
tax and those persons were not even permitted to be cross-examined. The
main person whose statement has been used against the petitioner is the
driver of the vehicle that was intercepted. The said driver is none other than
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petitioner's own brother. In the said circumstance, this Court is of the view
that since the petitioner has a statutory remedy of an appeal, the said
question also can be agitated before the said forum.
12. As regards the claim of the petitioner for release of the goods, this
Court is of the view that under the scheme of the statute, opportunities are
available for release, either during the proceedings or even after an order of
confiscation.
13. Having considered the rival contentions and bearing in mind the
circumstances of this case, I am of the view that this is not a fit case to
exercise the extraordinary jurisdiction under Article 226 of the Constitution of
India and the petitioner must be relegated to pursue his statutory remedies.
In the result, this writ petition is dismissed, reserving the liberty of the
petitioner to pursue his statutory remedies. The period spent by the petitioner
in pursuing this writ petition until today shall stand excluded while calculating
the period of limitation for filing the appeal.
Sd/-
BECHU KURIAN THOMAS
JUDGE
vps
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APPENDIX OF WP(C) 30274/2024
PETITIONER'S/S' EXHIBITS
Exhibit P1 TRUE COPY OF THE TAX INVOICE NO. 40 DATED
11.08.2024 ISSUED BY THE PETITIONER IN
SUPPORT OF THE TRANSACTION
Exhibit P2 TRUE COPY OF THE E-WAY BILL NO551690139829
DATED 11.08.2024 RAISED BY THE PETITIONER IN
SUPPORT OF THE TRANSACTION
Exhibit P3 TRUE COPY OF THE TAX INVOICE NO.38 DATED
11.08.2024 RAISED BY M/S S.M. BEEDY, THENKASI
IN SUPPORT OF 15 BUNDLES OF BEEDY TO
KAYAMKULAM
Exhibit P4 TRUE COPY OF THE E-WAY BILL NO.591690140245
DATED 11.08.2024, RAISED IN SUPPORT OF 15
BUNDLES OF BEEDY BY M/S SM BEEDY' THENKASI TO
KAYAMKULAM
Exhibit P5 TRUE COPY OF THE E INVOICE NO ACK
152418892644444 DATED 12.08.2024 ISSUED BY
THE PETITIONER TO M/S ALNA STORES
Exhibit P6 TRUE COPY OF THE E-WAY BILL NO.561690173619
DATED 12.08.2024 IN SUPPORT OF THE SALE IN
TRANSIT
Exhibit P7 TRUE COPY OF THE PHYSICAL VERIFICATION REPORT
DATED 12.08.2024, ISSUED BY THE 2ND
RESPONDENT, AND SIGNED BY BOTH THE 2ND
RESPONDENT AND THE SALESMAN MR.RAMAR
Exhibit P8 TRUE COPY OF THE STATEMENT DATED 12.08.2024,
IN ENGLISH, OF THE DRIVER WHO KNOWS 'TAMIL'
ONLY, AND CLAIMED TO BE EXPLAINED IN
MALAYALAM
Exhibit P9 TRUE COPY OF THE COMPUTER TYPED STATEMENT OF
DRIVER, DATED 12.08.2024, ISSUED BY THE 1ST
RESPONDENT
Exhibit P10 TRUE COPY OF THE LETTER SENT THROUGH E MAIL
ON 13.08.2024,BY THE PETITIONER TO THE 1ST
RESPONDENT
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Exhibit P11 TRUE COPY OF THE ORDER DATED 14.08.2024 FOR
PHYSICAL VERIFICATION OF THE GOODS ISSUED BY
THE 1ST RESPONDENT TO THE PETITIONER
Exhibit P12 TRUE COPY OF THE INTIMATION/NOTICE OF
PERSONAL HEARING DATED 14.08.2024, ISSUED BY
THE 1ST RESPONDENT TO THE PETITIONER
Exhibit P13 TRUE COPY OF THE HEARING NOTE DATED
16.08.2024, SUBMITTED BY THE PETITIONER IN
RESPONSE TO THE PERSONAL HEARING NOTICE
Exhibit P14 TRUE COPY OF THE NOTICE OF DETENTION UNDER
SEC.129 (1) OF THE ACT, DATED 19.08.2024,
ISSUED BY THE 1ST RESPONDENT TO THE
PETITIONER
Exhibit P15 TRUE COPY OF THE SHOW CAUSE NOTICE PROPOSING
CONFISCATION UNDER SEC.130 OF THE ACT, DATED
19.08.2024, ISSUED BY THE 1ST RESPONDENT TO
THE PETITIONER
Exhibit P16 TRUE COPY OF THE NEWSPAPER REPORT IN MALAYALA
MANORAMA DAILY, DATED 15.08.2024
Exhibit P17 TRUE COPY OF THE REPLY TO SHOW CAUSE NOTICE
DATED 30.08.2024 WITHOUT ITS EXHIBITSIS
Exhibit P18 TRUE COPY OF THE HEARING NOTE DATED
03.09.2024 SUBMITTED BY THE PETITIONER
Exhibit P19 TRUE COPY OF THE MALAYALAM TRANSLATION OF THE
EXHIBIT C STATEMENT IN EXT.P18 DATED
12.08.2024 PROVIDED BY SRI. T.RAMAR RECORDED
BY ENFORCEMENT OFFICER GST KOLLAM IN TAMIL
LANGUAGE
Exhibit P20 TRUE COPY OF THE HEARING NOTE DATED
16.08.2024 WITHOUT ITS ANNEXURES SUBMITTED BY
THE PETITIONER BEFORE THE ENFORCEMENT OFFICER
SGST DEPARTMENT, KOLLAM
Exhibit P21 TRUE COPY OF THE ORDER NO.
SCN/ENF/TVM/SKLM/2024/33-EO DATED 01.10.2024
Exhibit P22 TRUE COPY OF THE COMPLAINT SENT BY
MR. RAGHUMARI RAJ DATED 21.09.2021
