Court rules IGST Act applies to interstate goods seizure, not UP GST Act

Case Name:

M/S. Seth Prasad Agro (P.) Ltd. vs. State of U.P.

Writ Tax No. 95 of 2018

Key Takeaways:

- IGST Act applies to interstate transactions, not state GST acts.

- Section 129 of the Central GST Act applies to seizures under IGST Act.

- Courts can treat seizure orders under wrong acts as valid if power exists under the correct act.

- The nature of goods (Tasla vs. Ghamella) and their tax exemption status are crucial in determining the legality of seizure.

Issue:

Can goods being transported interstate be seized under the UP GST Act, or should the IGST Act apply?

Facts:

- The petitioner, M/S. Seth Prasad Agro (P.) Ltd., manufactures and sells 'Tasla', an agricultural implement.

- Their consignment of Taslas was intercepted, detained, and seized at Varanasi while being transported from one state to another.

- The seizure order was passed on 11.01.2018 under Section 129(1) of the UP GST Act, 2017.

- The petitioner challenged this seizure order.

Arguments:

Petitioner's argument:

- The transaction was interstate, covered by the IGST Act, 2017.

- The goods are not liable to be seized under the UP GST Act.

Respondent's argument:

- In matters covered by IGST Act, provisions of Central GST Act apply mutatis mutandis.

- Analogous provisions to Section 129(1) of UP GST Act exist in the Central GST Act.

- The order of seizure is not illegal or without jurisdiction.

Key Legal Precedents:

The judgment doesn't mention specific case laws, but it refers to the following legal provisions:

- Section 129(1) of the Uttar Pradesh Goods and Services Tax Act, 2017

- Section 129 of the Central Goods and Services Tax Act, 2017

- Section 20 of the Integrated Goods and Services Tax Act, 2017

Judgement:

- The court ruled that the transaction is covered by the IGST Act, not the UP GST Act.

- The impugned order should be treated as passed under the IGST Act read with Section 129 of the Central GST Act.

- The court ordered the release of the seized goods and vehicle upon furnishing an indemnity bond and security (other than cash and bank guarantee) of the taxable amount.

- The court directed Sri Tripathi to file a counter affidavit within a month and allowed the petitioner two weeks to file a rejoinder affidavit.

- The case was listed for admission/final disposal after the expiry of this period.

FAQs:

Q1: Why did the court rule that the IGST Act applies instead of the UP GST Act?

A1: The court determined that since the transaction was interstate (goods moving from one state to another), it falls under the jurisdiction of the IGST Act, which covers interstate transactions.

Q2: Does this mean the seizure was illegal?

A2: Not necessarily. The court ruled that the seizure order should be treated as passed under the correct act (IGST Act), even though it was originally issued under the UP GST Act.

Q3: What's the significance of 'Tasla' vs 'Ghamella'?

A3: The classification of the goods as either 'Tasla' or 'Ghamella' is important because it affects their tax exemption status. The court noted this as a question for consideration.

Q4: What happens next in this case?

A4: The court has ordered the release of the seized goods, asked for additional affidavits from both parties, and scheduled the case for further hearing.

Q5: How does this ruling impact other interstate goods transportation cases?A5: This ruling clarifies that interstate transactions fall under the IGST Act, not state GST acts, which could impact how similar cases are handled in the future.

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 Kumar Tiwari, learned counsel for the respondent no. 2.

The petitioner is aggrieved by the order of seizure dated 11.01.2018 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 Varanasi. 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 of seizure '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 : 29.1.2018/NS