Sohams Foundation Engineering Private Limited VS The Joint Commissioner (Ct), Vellore

The petitioner in this case has contested a notice issued under Section 129(3) of the Central Goods and Services Tax Act, 2017, dated September 24, 2022. The notice requires the petitioner to justify why a penalty should not be levied under Clause A of Sub Section 1 of Section 129 of the Act. Section 129 pertains to the detention, seizure, and release of goods and conveyances in transit under the GST regime.

The petitioner has contested a notice issued under Section 129(3) of the Central Goods and Services Tax Act, 2017, dated September 24, 2022. This notice requires the petitioner to explain why a penalty should not be imposed under Clause A of Sub Section 1 of Section 129, which pertains to the detention, seizure, and release of goods and conveyances in transit. According to this clause:

Under Section 129, despite provisions in other parts of the Act, if any person transports or stores goods in transit in violation of the Act or its rules, the goods and conveyances used for transportation may be detained or seized. These goods and conveyances can be released upon payment of a penalty. For goods subject to tax, the penalty amounts to two hundred percent of the tax payable on the goods. In cases involving exempted goods, the penalty is either two percent of the goods’ value or twenty-five thousand rupees, whichever is less, provided the owner of the goods opts to pay this penalty.

The petitioner’s challenge to the notice centers on disputing the grounds for the penalty under these statutory provisions.

The petitioner has contested a notice issued under Section 129(3) of the Central Goods and Services Tax Act, 2017, dated September 24, 2022. This notice requires the petitioner to explain why a penalty should not be imposed under Clause A of Sub Section 1 of Section 129, which pertains to the detention, seizure, and release of goods and conveyances in transit.

Section 129 of the Act specifies that despite provisions elsewhere in the Act, if any person transports or stores goods in transit in contravention of the Act or its rules, the goods and conveyances used for transportation may be detained or seized. These goods and conveyances can be released upon payment of a penalty. For goods subject to tax, the penalty amounts to two hundred percent of the tax payable on the goods. In cases involving exempted goods, the penalty is either two percent of the goods’ value or twenty-five thousand rupees, whichever is less, provided the owner of the goods opts to pay this penalty.

The petitioner’s challenge to the notice revolves around disputing the grounds for the penalty under these statutory provisions, contesting the alleged violation as stated in the notice issued by the authorities.

The petitioner, challenging a notice issued under Section 129(3) of the Central Goods and Services Tax Act, 2017 dated September 24, 2022, contests the imposition of a penalty under Clause A of Sub Section 1 of Section 129. This section pertains to the detention, seizure, and release of goods and conveyances in transit. According to the provisions:

Under Section 129, despite other provisions of the Act, goods and conveyances used for transporting or storing goods in transit in contravention of the Act or its rules may be detained or seized. These goods and conveyances can be released upon payment of a penalty. For goods subject to tax, the penalty equals two hundred percent of the tax payable on such goods. For exempted goods, the penalty is either two percent of the value of the goods or twenty-five thousand rupees, whichever is less, if the owner opts to pay the penalty.

The petitioner’s case revolves around the following facts:

The petitioner entered into a contract with M/s. Vishwa Samudra Engineering Private Limited, Kerala, for a road widening project in Kerala. An agreement was signed on January 20, 2022.

The petitioner’s excavator was transported from Maharashtra (head office) to the project site in Kerala (XXIII/752, Near CSI Church, Mission Compound, Chovva, Kerala-670 006). An E-way bill valid until June 4, 2022, was generated on April 11, 2022, for this transportation.

Subsequently, due to a new contract in Odisha, the petitioner needed to move the excavator from Kerala to Odisha. A fresh E-way bill valid until October 1, 2022, was generated on September 21, 2022, from the head office in Maharashtra for this purpose.

While the excavator was in transit from Kerala to Odisha, it was seized by the State Tax Officer, Roving Squad Special RS Vellore, Tamil Nadu, on September 26, 2022. On the same date, the impugned notice under Section 129(3) was issued.

The petitioner contends that there was no supply as defined under the Central Goods and Services Tax Act, 2017, or the Integrated Goods and Services Tax Act, 2017, in this case. Furthermore, it is argued that even if considered otherwise, the

proceedings initiated under Section 129(3) of the Central Goods and Services Tax Act, 2017, dated September 24, 2022. The petitioner contests this notice, which demands justification for the imposition of penalties under Clause A of Subsection 1 of Section 129. This clause addresses situations where goods are transported or stored in transit in violation of the Act or its rules, leading to the detention or seizure of such goods and conveyances.

The petitioner’s case revolves around the movement of an excavator from Maharashtra to a project site in Kerala, pursuant to a contract with M/s. Vishwa Samudra Engineering Private Limited. An E-way bill was generated for this transport, valid until June 4, 2022. Subsequently, due to a new contract in Odisha, the petitioner initiated the movement of the excavator from Kerala to Odisha, issuing a fresh E-way bill valid until October 1, 2022. During transit, the excavator was seized on September 26, 2022, by the State Tax Officer, Roving Squad Special RS Vellore, Tamil Nadu, coinciding with the issuance of the impugned notice.

The petitioner argues that no supply occurred under the provisions of the Central Goods and Services Tax Act, 2017 or the Integrated Goods and Services Tax Act, 2017 in this context. Furthermore, it contends that any penalty for discrepancies in the E-way bill should be minimal, citing a maximum penalty of Rs. 1000 as per circulars issued by the Central Board of Indirect Taxes and Customs, specifically referring to circulars dated July 7, 2022, November 22, 2022, and September 14, 2018.

Legal precedent is also invoked by the petitioner’s counsel, highlighting the Kerala High Court’s decision in Greenlights Power Solutions vs. State Tax Officer, SGST Department, Ernakulam [2022 (61) G.S.T.L. 561 (Ker.)], along with other relevant cases such as G. Murugan vs. Government of India [2019 (29) G.S.T.L. 385 (Mad.)], W.P (MD) No. 1287 of 2019 dated January 24, 2019, and W.P (MD) No. 5720 of 2022 dated March 30, 2022.

In response, the respondents argue that the petitioner has acknowledged the notice under Section 129(3) by providing a reply on September 26, 2022, and subsequently participating in the process by attending a scheduled personal hearing. They contend that rather than contesting the notice, the petitioner should engage constructively in the proceedings.

The matter thus hinges on the interpretation of statutory provisions, the applicability of penalties, and adherence to procedural norms under the Central Goods and Services Tax Act, 2017, highlighting divergent perspectives on the petitioner’s compliance and the justification for penalties imposed under Section 129(3).

The petitioner has contested a notice issued under Section 129(3) of the Central Goods and Services Tax Act, 2017, dated September 24, 2022. This notice requires the petitioner to explain why a penalty should not be imposed under Clause A of Sub Section 1 of Section 129, which pertains to the detention, seizure, and release of goods and conveyances in transit. According to this clause:

Under Section 129, despite provisions in other parts of the Act, if any person transports or stores goods in transit in violation of the Act or its rules, the goods and conveyances used for transportation may be detained or seized. These goods and conveyances can be released upon payment of a penalty. For goods subject to tax, the penalty amounts to two hundred percent of the tax payable on the goods. In cases involving exempted goods, the penalty is either two percent of the goods’ value or twenty-five thousand rupees, whichever is less, provided the owner of the goods opts to pay this penalty.

The petitioner’s challenge to the notice centers on disputing the grounds for the penalty under these statutory provisions. The petitioner had entered into a contract with M/s. Vishwa Samudra Engineering Private Limited, Kerala, for a road widening project. As part of this contract, the petitioner transferred an excavator from their head office in Maharashtra to the project site in Kerala, with an E-way bill generated on April 11, 2022, valid until June 4, 2022.

Subsequently, due to a new contract in Odisha, the petitioner arranged to move the excavator from Kerala to Odisha, generating a fresh E-way bill on September 21, 2022, valid until October 1, 2022. During transit, the excavator was seized by the State Tax Officer, Roving Squad Special RS Vellore, Tamil Nadu, on September 26, 2022, and the impugned notice was issued on the same date.

The petitioner argues that there was no supply as defined under the Central Goods and Services Tax Act, 2017, or the Integrated Goods and Services Tax Act, 2017. They also contend that any penalty for discrepancies in the E-way bill is capped at a maximum of Rs. 1000, as per circulars from the Central Board of Indirect Taxes and Customs, referencing Circulars F.No.354/119/2017-TRU(Pt) dated July 7, 2022, F.No.354/320/2017-TRU(Pt) dated November 22, 2022, and Circular 64/38/2018-GST dated September 14, 2018.

The petitioner’s counsel cites precedents such as the Kerala High Court case of Greenlights Power Solutions vs. State Tax Officer, SGST Department, Ernakulam [2022 (61) G.S.T.L.561 (Ker.)], and other relevant decisions to support their argument.

On the other hand, the respondents argue that the petitioner responded to the notice on September 26, 2022, and a date for a personal hearing was fixed for September 30, 2022. They contend that the petitioner prematurely filed this writ petition on October 6, 2022, before exhausting alternative remedies, such as participating in the show cause proceedings.

After considering arguments from both sides, the court finds prima facie that invoking Section 129(3) for imposing penalties under Section 129(1)(a) appears misplaced, as there is no supply under the relevant tax laws. The court directs the petitioner to participate in further proceedings, acknowledging the need for detailed examination given the issuance of the show cause notice by the respondent.

This summary encapsulates the key legal and factual points in the ongoing legal dispute involving the petitioner and the authorities under the Central Goods and Services Tax Act, 2017.

The petitioner has contested a notice issued under Section 129(3) of the Central Goods and Services Tax Act, 2017, dated September 24, 2022. This notice seeks to impose a penalty under Clause A of Sub Section 1 of Section 129, related to the detention, seizure, and release of goods and conveyances in transit.

The petitioner, M/s.Vishwa Samudra Engineering Private Limited, entered into a contract with M/s. Vishwa Samudra Engineering Private Limited, Kerala, for a road widening project. To fulfill this contract, the petitioner transported an excavator from their head office in Maharashtra to the project site in Kerala, accompanied by a valid E-way bill generated on April 11, 2022, valid until June 4, 2022.

Subsequently, due to being awarded a new contract in Odisha, the petitioner needed to transport the excavator from Kerala to Odisha. Accordingly, a fresh E-way bill was generated on September 21, 2022, valid until October 1, 2022. However, during transit, the excavator was seized by the State Tax Officer, Roving Squad Special RS Vellore, Tamil Nadu, on September 26, 2022, and the impugned notice was issued on the same date.

The petitioner argues that there was no supply within the meaning of the Central Goods and Services Tax Act, 2017, or the Integrated Goods and Services Tax Act, 2017, involved in this transit. They also contend that any penalty for discrepancies in the E-way bill should be limited to a maximum of Rs. 1000, citing relevant circulars from the Central Board of Indirect Taxes and Customs.

In support of their case, the petitioner’s counsel refers to legal precedents such as the Kerala High Court’s decision in Greenlights Power Solutions vs. State Tax Officer, SGST Department, Ernakulam [2022 (61) G.S.T.L.561 (Ker.)], and other relevant judgments.

On the other hand, the respondents argue that the petitioner participated in the initial proceedings by responding to the notice and being issued a hearing date. They assert that the writ petition filed by the petitioner is premature and should be dismissed on grounds of alternative remedies being available.

After hearing arguments from both sides, the court finds prima facie that the invocation of Section 129(3) for imposing a penalty under Section 129(1)(a) appears misplaced, as there was no supply under the relevant tax acts. The court directs the petitioner to participate in the ongoing proceedings but allows for the release of the seized excavator upon payment of a security amount and a bond. The petitioner is directed to pay Rs. 2,50,000 to the respondents, with the balance to be secured to the satisfaction of the respondents.

In conclusion, the court allows the writ petition with the specified directions, emphasizing that compliance with these conditions will lead to the immediate release of the excavator and lorry involved in the transportation.

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