The Gujarat High Court recently comprising of a bench of Justice J.B.Pardiwala and Justice Nisha M. Thakore has held that mere undervaluation of the goods or change of route of the consignment can't be sufficient grounds to detain the goods and vehicle under the Central Goods and Services Tax Act, 2017. (M/S. Karnataka Traders v. State Of Gujarat)
Facts of the Case
The challenge in the present writ application is to the confiscation notice dated 4th December 2021 issued by the Tax Commissioner (Enforcement) Division – 1, Ahmedabad, in the exercise of powers conferred under Section 130 of the Central Goods and Services Tax Act, 2017 (for short, “the CGST Act”) read with the relevant provisions of the Integrated Goods and Services Tax Act, 2017 (for short, “the IGST Act”).
The petitioner has also prayed for the direction of issuance of a writ of mandamus to forthwith release the goods and vehicle without demanding any security. Being aggrieved by the aforesaid action of respondent No.3, the petitioners are here before this Court with the present writ application.
Contention of the Parties
The counsel for the petitioners submitted that two grounds on which the department proposes to confiscate the goods and vehicle referred to above are not tenable at all in law.
He relied on the case of Chhattisgarh in the case of K. P. Sugandh Ltd vs. State of Chhattisgarh reported in 2020(38) GSTL 317 (Chhattisgarh) and it was submitted that undervaluation of seized goods in transit cannot be a ground to confiscate the goods and vehicle. The learned advocate has further submitted that similarly, the second ground raised by respondent No.3 – authority is also not sustainable in the eye of law.
On the other hand, the counsel has vehemently objected to the grant of relief in favor of the petitioners by submitting that the route preferred by petitioner No.1 reflects that he had the intention to evade tax. Such intention can be presumed from the fact that the route which was preferred by the petitioner was traveling in a different direction than the direction of destination or way to the destination. Hence, it was submitted not to entertain this writ.
Courts Observation & Judgment
The bench taking note of the facts and circumstances noted, “On careful consideration of the facts and circumstances of the case and the submissions made by the respective advocates for the parties, we find the force in the contention of the learned advocate appearing for the petitioners that there cannot be any mechanical detention of a consignment in transit solely on the basis of the two reasons as stated by the respondent No.3 in the impugned notice. We find that merely the direction preferred by the petitioners for delivery of consignment to the place destined for, an inference cannot be drawn with regard to the intention of the petitioners to evade tax. So far as the second ground with regard to the goods being transported to be undervalue is concerned, no material has been placed on record. Even otherwise, as held by this Court as well as other High Courts, it is a settled legal position that undervaluation cannot be a ground for seizure of goods in transit by the inspecting authority. In the instant case, there is no such indication.”
The bench allowing the writ petition remarked, “The confiscation proceedings initiated by the respondents are hereby quashed and set aside. The vehicle as well as the goods shall be released at the earliest and handed over to the writ applicants.
We clarify that we have quashed the entire confiscation proceedings keeping in mind two things: first, mere change of route without anything more would not necessarily be sufficient to draw an inference that the intention was to evade tax. Sometime, change of route may assume importance provided there is cogent material with the department to indicate that an attempt was sought to be made to dispose of the goods indirectly at a particular place. If such is the case, then probably, the authority may be justified in initiating appropriate proceedings, but mere change of route of the vehicle by itself is not sufficient.
In the same manner, mere undervaluation of the goods also by itself is not sufficient to detain the goods and vehicle far from being liable to confiscation.”
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