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6 Mar 2018

No detention of goods during transportation or storage while in transit, merely on the ground of violation of procedural compliances under GST

In the latest judgment of “Indus Towers Limited Vs. The Assistant State Tax Officer(2018)90 Taxmann.com 417(Kerala)”, the Kerala High Court held that the power of detention contemplated under Section 129 of the CGST and SGST Acts can be exercised only in respect of goods which are liable to be confiscated under Section 130 of the CGST and SGST Acts.

In the present case, the petitioner company was engaged in the establishment and maintenance of towers for telecom service providers, and transporting procured batteries to various tower locations as per the requirements on the strength of delivery challans. However, the Department officials detained the vehicle by invoking section 129 of the CGST and SGSTs Act stating that the petitioner has not declared the movement of goods as per the requirements of Rule 55 and 138 of the State GST Rules.

The petitioner assessee contended that the non-submission of KER-1 was the only defect pointed out by the Revenue and the same had been furnished subsequently on receipt of the notice and there is no point for the continued detention of goods, and also, since transaction does not involves a taxable supply, the goods could not be detained by invoking section 129 of the CGST and SGSTs Act. On the other hand, the revenue contended that as per section 129, the goods can be detained for violation of CGST, SGST Acts and the Rules and therefore, goods can be detained even if transactions does not involve taxable supply.

The Hon’ble High Court after analyzing the provisions of Section 7 of the CGST Act, observed that when a taxable person transports the goods procured by them for own use to the site where the goods were to be consumed, the transaction would not involve any consideration. Such transactions would not fall within the ambit of Schedule 1 and would not fall within the scope of taxable supply. While allowing the petition, it was observed that a combined reading of section 129 and 130 would indicate that the goods can be detained only when it is suspected that the goods are liable to confiscation. Further, according to section 130, the goods can be confiscated when a taxable supply is made and there is a violation of procedure with the intention to evade the payment of tax. Therefore, it was clarified that goods cannot be detained merely for infraction of Rule 138(2) of the SGST Rules when there is no taxable supply when goods are transported on delivery challans so long as the authenticity of the delivery challan is not doubted.