Court upholds seizure order in inter-state GST case, clarifies applicability of IGST Act

Case Name:

M/s. R.R. Agro Industries Through Its Prop Vs. State of U.P. Through Its Secy. And 3 Others

Writ Tax No. 105 of 2018

Key Takeaways:

- The IGST Act applies to inter-state transactions, but incorporates provisions from the Central GST Act for matters like seizure.

- An order issued under the wrong Act (U.P. GST Act in this case) can still be valid if the power of seizure is traceable under the relevant Act (IGST Act).

- The court emphasized the importance of substance over form in interpreting tax laws.

Issue:

Was the seizure of goods during inter-state transport valid when the order was issued under the U.P. GST Act instead of the IGST Act?

Facts:

- The petitioner, M/S. R.R. AGRO INDUSTRIES, manufactures and sells 'Taslas', categorized as agricultural implements.

- On January 13, 2018, while transporting 'Taslas' from one state to another, the goods were intercepted, detained, and seized at Ghaziabad.

- The seizure order was passed under Section 129(1) of the Uttar Pradesh Goods and Services Tax Act, 2017.

Arguments:

Petitioner's arguments:

The transaction was inter-state, covered by the IGST Act, not the U.P. GST Act.

The goods were 'Taslas', exempt from GST, not 'Ghamellas' which are taxable.

Respondent's arguments:

The IGST Act incorporates provisions of the Central GST Act for matters like seizure.

The order's validity shouldn't depend on mentioning the wrong Act if the power of seizure exists under the relevant Act.

Key Legal Precedents:

The judgment doesn't mention specific case laws but refers to:

Section 20 of the IGST Act

Section 129 of the U.P. GST Act and Central GST Act

Judgement:

- The court held that while the U.P. GST Act doesn't apply to inter-state transactions, the IGST Act incorporates relevant provisions from the Central GST Act.

- The seizure order was deemed valid, as the power of seizure under the IGST Act (read with Central GST Act) is analogous to Section 129 of the U.P. GST Act.

- The court directed the release of seized goods and vehicle upon furnishing an indemnity bond and security.

FAQs:

Q1: Why was the seizure order upheld despite being issued under the wrong Act?

A1: The court emphasized substance over form, noting that the power of seizure exists under the relevant Act (IGST Act), even if wrongly mentioned.

Q2: What's the significance of Section 20 of the IGST Act?

A2: It provides that provisions of the Central GST Act apply to matters of inspection, search, seizure, and arrest under the IGST Act.

Q3: Did the court make a final decision on whether the goods were 'Taslas' or 'Ghamellas'?

A3: No, the court noted this as a question for consideration and directed the respondent to file a counter-affidavit on this matter.

Q4: What immediate relief did the court provide to the petitioner?

A4: The court ordered the release of the seized goods and vehicle upon furnishing an indemnity bond and security.

Heard Sri Aditya Pandey, learned counsel for the petitioner, Sri C.B. Tripathi, special counsel for the respondents no. 1, 3 and 4 and Sri Anant Tiwari, learned counsel for the respondent no. 2.

The petitioner is aggrieved by the order of seizure dated 13.01.2018 alleged to have been passed under Section 129(1) of the Uttar Pradesh Goods and Services Tax Act, 2017.

The petitioner is in the business of manufacturing and sale of 'Tasla' which is categorised as an agricultural implement. The petitioner was transporting a consignment of 'Taslas' from one State to another when the same were intercepted, detained and seized at Ghaziabad. The seizure order is impugned by means of this petition.

The first submission of Sri Pandey, learned counsel for the petitioner is that the goods were being transported from one State to another and as such the transaction was inter-state covered by the Integrated Goods and Services Tax Act, 2017. It is not liable to be seized under the U.P.G.S.T. Act.

Sri Tripathi, in response to the above argument submits that in the matters covered by Integrated Goods and Services Tax Act, 2017 (IGST) the provisions of Central G.S.T. Act apply mutatis mutandis. Since analogous provisions like Section 129(1) of the U.P.G.S.T. Act exist in the Central G.S.T. Act as well, the order of seizure is not illegal or without jurisdiction.

The U.P.G.S.T. Act makes provision for levy and collection of tax on intrastate supply of goods or services or both i.e. relating to transactions within the State, whereas IGST Act covers interstate transactions. In this view of the matter, the transaction in question is treated to be covered

by the IGST Act and the provisions of U.P. G.S.T. Act would not apply. However, a similar provision as Section 129 of the U.P. G.S.T. Act exists in the Central G.S.T. Act as well. Section 20 of the IGST Act provides that the

provisions of Central G.S.T. Act would apply in respect of matters of inspection, search, seizure and arrest to the matters covered by the IGST Act.

In other words, in the matter of seizure under the provisions of IGST Act the provisions of Central G.S.T. Act such as Section 129 would apply mutatis mutandis.

In this way the power of seizure under the IGST Act read with Central G.S.T. Act is analogues to that under Section 129 of the U.P. G.S.T. Act.

In view of above, the impugned order of seizure cannot be held to be bad in law only for the reason that the wrong provision of Act has been mentioned while passing the same as the power of seizure is clearly traceable under the relevant Act as well.

Accordingly, we are of the view that the impugned order is to be treated to have been passed under IGST Act read with Section 129 of the Central G.S.T. Act rather than the one passed under U.P.G.S.T. Act.

The next submission of Sri Pandey, is that the consignment of goods has been seized by treating them to be 'Ghamella' rather than 'Tasla'. 'Tasla' was exempted from G.S.T. vide notification dated 29.06.2017 and 'Ghamella' has been included in the taxable goods vide notification dated 25.01.2018. Thus, on the relevant date 'Ghamella' was also an exempted item and the order of

seizure is patently illegal.

In view of above, the question for consideration is whether the consignment of goods seized is that of 'Tasla' or 'Ghamella' and whether on the relevant date 'Ghamella' was exempted from taxation.

Sri Tripathi is directed to seek instructions and file counter affidavit within a month. Two weeks, thereafter, are allowed to the petitioner for filing rejoinder affidavit. List for admission / final disposal immediately after expiry of the above period.

In the meantime, the goods and the vehicle seized are directed to be released on furnishing indemnity bond as well as security other than cash and bank guarantee of the taxable amount of the seized goods.

Order Date :- 31.1.2018