Age Industries (P) Limited VS The Assistant State Tax Officer

Petitioner is a private limited company involved in the manufacturing and selling of surgical gloves, duly registered under both the Central Goods and Services Tax Act (CGST Act) and the Kerala State Goods and Services Tax Act (SGST Act).

The petitioner dispatched a consignment of surgical gloves to three different parties for quality appraisal purposes. This shipment was sent on a job work basis and accompanied by Ext.P1 series delivery chalans. However, the consignment was detained by the respondent, exercising their authority under Section 129 of the SGST Act. In response, the respondent issued Ext.P2 notice to the petitioner, as mandated by the same section of the SGST Act.

The Ext.P2 notice outlined two reasons for the detention of the goods. Although the details of these reasons are not provided in the summary so far, it is implied that there were compliance issues related to the shipment that prompted the respondent to detain the consignment. This situation has led to a legal contention between the petitioner and the respondent concerning the lawful execution of their duties under the CGST and SGST Acts.

Petitioner, a private limited company engaged in manufacturing and selling surgical gloves, is registered under the Central Goods and Services Tax Act (CGST Act) and the Kerala State Goods and Services Tax Act (SGST Act). They sent a consignment of surgical gloves to three parties for quality appraisal on a job work basis, using delivery chalans (Ext.P1 series). This consignment was detained by the respondent under Section 129 of the SGST Act, which allows for detention of goods under certain circumstances.

The respondent issued a notice (Ext.P2) to the petitioner, citing two reasons for the detention. Firstly, the petitioner failed to upload a required declaration according to Rule 138(2) of the Kerala State Goods and Services Tax Rules (State SGST Rules) before transporting the goods, as necessitated by sub-rule (3) of Rule 55. Secondly, the respondent suspected tax evasion because the goods were allegedly intended for supply to an unregistered firm.

The petitioner challenged this detention in a writ petition, arguing that under Section 129 of the SGST Act, detention is permissible only for goods liable to confiscation under Section 130. The petitioner contended that there was no taxable supply involved as the goods were transported on delivery chalans, and the authenticity of these chalans was not in question.

The Court heard arguments from both the petitioner’s counsel and the Government Pleader. Referencing a previous case (W.P.(C) No.196 of 2018), the Court noted that the power of detention under Section 129 of the SGST Act is limited to goods subject to confiscation under Section 130. It further emphasized that goods transported with delivery chalans are not taxable supplies if the chalans are authentic, thus such goods should not be detained under the cited provisions.

The petitioner, a private limited company manufacturing and selling surgical gloves, is registered under both the Central Goods and Services Tax Act (CGST Act) and the Kerala State Goods and Services Tax Act (SGST Act). The case revolves around a consignment of surgical gloves sent by the petitioner to three parties for quality appraisal on a job work basis. This consignment was detained by the respondent under Section 129 of the SGST Act, as detailed in Ext.P2 notice. The notice cites two reasons for the detention: (1) the goods were transported using a delivery chalan without uploading a declaration as required by Rule 138(2) of the State SGST Rules, and (2) there was a suspicion of tax evasion as the goods were allegedly intended for an unregistered firm.

In the court hearing, the petitioner’s counsel challenged the detention based on these reasons. They argued that, according to a previous judgment in W.P.(C) No.196 of 2018, the detention power under Section 129 of the SGST Act applies only to goods liable for confiscation under Section 130. Furthermore, there is no taxable supply when goods are transported on delivery chalans if the authenticity of the chalan is not in doubt, making the first reason for detention (failure to upload a declaration under Rule 138(2)) unsustainable.

Regarding the second reason for detention, the petitioner clarified that the consignment was for quality appraisal on a job work basis, a transaction not prohibited by the CGST and SGST Acts, and such goods are to be transported on delivery chalans regardless of the registration status of the receiving party. The Government Pleader did not defend the detention on the grounds of the recipient’s registration status, instead attempting to justify the detention based on issues with the delivery chalan itself.

Ultimately, the court found that the first reason for detention was invalid as it contradicted the previous judgment regarding the necessity of documents under Rule 138(2). The second reason was also dismissed since the nature of the transaction (quality appraisal on job work basis) was lawful and unrelated to the registration status of the recipients. Therefore, the detention of goods as per Ext.P2 notice was deemed unjustifiable.

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