Cement Trader Gets Goods Released via Bank Guarantee After GST Detention

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Case Name

Faisludeen P.M. v. Assistant State Tax Officer, Intelligence Squad No-II & Others

Court Name: High Court of Kerala at Ernakulam

Case No.: W.P.(C) No.16357 OF 2020

Decided on: Tuesday, 11th August 2020

Before: The Honourable Mr. Justice A.K. Jayasankaran Nambiar

Key Takeaways

1. Detention under Section 129 of the GST Act is valid when goods are transported without original invoices and when there is a physical discrepancy in the quantity of goods.

2. Bank Guarantee as a remedy: The Court allowed the petitioner to get his goods and vehicle released by furnishing a bank guarantee for the tax and penalty amount demanded — this is a practical and commonly used relief mechanism in GST detention cases.

3. Adjudication must follow detention: After releasing the goods, the matter must be forwarded to the adjudicating authority for a proper hearing and decision under Section 130 of the GST Act.

4. Right to be heard: The Court specifically directed that the adjudication shall be completed only after hearing the petitioner — reinforcing the principle of natural justice.

5. Time-bound adjudication: The adjudicating authority was directed to complete the process within one month from the date the files are forwarded.

Issue

The central legal question here is:

Was the detention of the goods and vehicle under Section 129 of the GST Act justified, and can the petitioner get his goods released while the dispute is being adjudicated?

More specifically:

• Was it valid to detain the goods because the original invoice was not accompanying the consignment?
• Was the discrepancy of 200 cement bags a sufficient ground for detention?
• Can the goods be released on furnishing a bank guarantee?

Facts

The Players:

• Petitioner: Faisludeen P.M., aged 52 years, Proprietor of P.S. Cements, Haripad, Alappuzha
• Respondents: Assistant State Tax Officer & State Tax Officer, Intelligence Squad No-II, State GST Department, along with the State of Kerala and the Commissioner of GST, Government of India

The Chain of Events on 6th August 2020:

Time ---- Event

07:05: AME-Way Bill No. 5311 9361 7516 generated by consignor (Cochin Cements Ltd.) for transport of 500 bags of cement from Mevelloor, Kottayam to Arattupuzha, Haripad using Vehicle No. KL29K 9027

07:38: AM Petitioner generates E-Way Bill No. 5911 9361 8319 for 100 bags to be delivered to A.M. Traders, Punnapra, Ambalapuzha

07:43: AM Petitioner generates E-Way Bill No. 5611 9361 8604 for 200 bags to be delivered to Metal Plaza, Vallamkulam, Thiruvalla

10:45: AM GST Intelligence Squad issues detention notices MOV-01 & MOV-027th August 2020Further notices MOV-04, MOV-06 & MOV-07 issued demanding tax and penalty under Section 129 of the CGST and KSGST Acts, 2017

Why were the goods detained?

The Intelligence Squad alleged:

1. No original invoices were accompanying the consignment

2. Physical verification revealed a variation of 200 bags of cement compared to what was described in the invoice

Arguments

Petitioner’s Arguments (Faisludeen P.M.):

• The petitioner challenged the detention notice (Ext.P5) issued under Section 129 of the GST Act

• He presented documentary evidence including:
• Ext.P1: Tax Invoice No. CC2255 dated 06-08-20 from Cochin Cements Ltd. for 500 bags of cement
• Ext.P2: E-Way Bill for transport from Mevelloor to Arattupuzha
• Ext.P3 & P3(A): Supply Tax Invoices raised by the petitioner for onward delivery to Metal Plaza and A.M. Traders
• Ext.P4 & P4(A): E-Way Bills generated by the petitioner for the onward deliveries

• The petitioner’s counsel sought permission to clear the goods by furnishing a bank guarantee to cover the amounts demanded in the detention notice

Respondents’ Arguments (GST Department):

• The consignment was not supported by original invoices
• There was a variation/discrepancy detected in the quantity of goods transported compared to what was described in the invoice
• These grounds justified the detention under Section 129 of the GST Act

Key Legal Precedents

The judgment in this case is quite brief and does not cite any prior case law or judicial precedents. However, it does reference the following statutory provisions:

1. Section 129 of the GST Act (CGST & KSGST Acts, 2017)

• This is the provision under which the goods and vehicle were detained
• Section 129 deals with detention, seizure, and release of goods and conveyances in transit
• It allows GST officers to detain goods if they are being transported in contravention of the GST law
• Tax and penalty can be demanded for release of the detained goods

2. Section 130 of the GST Act

• This provision deals with confiscation of goods or conveyances and levy of penalty
• The Court directed that after releasing the goods on bank guarantee, the matter should be forwarded to the adjudicating authority for adjudication under Section 130
• This means the formal dispute about whether the goods should be confiscated and what penalty applies will be decided under this section

Note: No prior case laws were cited by the Court in this judgment. The decision was based purely on the statutory provisions and the facts presented.

Judgment

This was a partial win for the petitioner. The Court did not quash the detention (it found the detention was prima facie not unjustified), but it gave the petitioner a practical relief — the ability to get his goods and vehicle released.

What Did the Court Decide?

The Court disposed of the writ petition with the following directions:

1. The 1st Respondent (Assistant State Tax Officer) shall permit the petitioner to clear the goods and the vehicle upon the petitioner furnishing a bank guarantee for the amount demanded in Ext.P5 (the detention notice)

2. After releasing the goods, the 1st Respondent shall forward the files to the adjudicating authority for adjudication of the dispute under Section 130 of the GST Act

3. The adjudication shall be done only after hearing the petitioner (natural justice must be followed)

4. The adjudication must be completed within one month from the date the files are forwarded to the 2nd Respondent

5. The petitioner must produce a copy of this judgment along with a copy of the writ petition before the 1st Respondent for further action

The Court took a balanced approach:

• It acknowledged that the detention was prima facie justified (missing original invoice + quantity discrepancy are valid grounds)
• But it also recognized that keeping the goods detained while the dispute is being adjudicated would cause hardship to the petitioner
• The bank guarantee solution protects the government’s revenue interest while allowing the petitioner’s business to continue

FAQs

Q1: What is Section 129 of the GST Act, and why was it invoked here?

Section 129 allows GST officers to detain goods and vehicles being transported in violation of GST rules. Here, it was invoked because the consignment lacked original invoices and there was a quantity discrepancy of 200 cement bags.

Q2: What is a bank guarantee in this context?

A bank guarantee is a commitment from the petitioner’s bank that if the petitioner fails to pay the tax and penalty ultimately determined, the bank will pay it. It’s essentially a security deposit that allows the goods to be released without the petitioner paying cash upfront.

Q3: Did the Court say the detention was wrong?

No! The Court specifically said that on a prima facie view, the detention “cannot be said to be unjustified.” It simply provided a mechanism for the goods to be released while the formal dispute is resolved.

Q4: What happens next after the goods are released?

The GST officer must forward the case files to the adjudicating authority, who will conduct a formal hearing under Section 130 of the GST Act and decide the matter within one month. The petitioner will get a chance to present his case.

Q5: What was the discrepancy about?

The original invoice from Cochin Cements Ltd. was for 500 bags of cement. The petitioner had generated e-way bills for 200 bags (to Metal Plaza) and 100 bags (to A.M. Traders) for onward delivery. The physical verification apparently showed a variation of 200 bags from what was described in the invoice.

Q6: Why didn’t the Court cite any previous case laws?

This was a relatively straightforward interim disposal. The Court didn’t need to establish any new legal principle — it simply applied the existing statutory framework (Sections 129 and 130 of the GST Act) to the facts and granted practical relief.

Q7: What is the significance of the “original invoice” requirement?

Under GST rules, goods in transit must be accompanied by proper documentation, including the original tax invoice and a valid e-way bill. Carrying only copies (without originals) can be treated as a violation, giving officers grounds for detention under Section 129.

1. The petitioner has approached this Court challenging the detention

notice issued to him (Ext.P5) under Section 129 of the GST Act. On a perusal

of the detention notice, I find that the objection of the respondents was

essentially that the consignment was not supported by the original invoice

and there was variation detected in the goods transported from the

description in the invoice. On a consideration of the reasons shown in

Ext.P5, I am of the prima facie view that the detention cannot be said to be

unjustified.

2. I have heard the learned counsel for the petitioner as also the

learned Government Pleader for the respondents.

The learned counsel for the petitioner seeks permission to clear the

goods on furnishing of a bank guarantee to cover the amounts demanded in

Ext.P5. Taking note of the said submission, I dispose the writ petition by

directing the 1st respondent to permit the petitioner to clear the goods and

the vehicle on furnishing a bank guarantee for the amount demanded in

Ext.P5. Thereafter, the 1st respondent shall forward the files to the

adjudicating authority for an adjudication of the dispute under Section 130

of the GST Act, which adjudication shall be completed only after hearing the

petitioner, within a period of one month from the date of the files being

forwarded to the 2nd respondent. The petitioner shall produce a copy of this

judgment together with a copy of the writ petition before the 1st

respondent for further action.

Sd/-

A.K.JAYASANKARAN NAMBIAR

JUDGE