Court allows assessee another chance to prove innocence after vehicle seized for carrying goods in violation of GST Act.

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Case Name :

Shri Vajid Vs. State Of U.P. (High Court of Allahabad)

Misc Bench No. 34650 of 2019

Date: 23rd January 2020

Key Takeaways:

- The burden lies on the vehicle owner to prove their innocence when their vehicle is found carrying goods in violation of the GST Act.

- Failure to discharge this burden before the authorities can lead to the non-release of the seized vehicle.

- However, the Court can grant liberty to the assessee to approach the authorities again with a defense to prove their innocence.

- Furnishing a bank guarantee under Section 129(1)(c) of the GST Act leads to the conclusion of proceedings initiated under Section 129 for the detention and seizure of goods and conveyances in transit.

Issue:

Whether the Court should grant relief to the petitioner and direct the release of his vehicle seized for allegedly carrying goods in violation of the Uttar Pradesh Goods and Services Tax Act, 2017, despite the petitioner’s failure to prove his innocence before the concerned authorities.

Facts:

The petitioner’s vehicle, bearing registration number UP-32 CN-5694, was found carrying goods in violation of the Uttar Pradesh Goods and Services Tax Act, 2017. The vehicle, along with the goods, was seized by the respondents (GST authorities). The petitioner appeared before the competent authority with a request to release the vehicle. However, the petitioner failed to prove that he had no knowledge about the goods carried in the vehicle, as required to discharge his burden under the Act. Consequently, the authorities did not accept the petitioner’s prayer for the release of the vehicle.

Arguments:

Petitioner’s argument:

The petitioner relied on a previous judgment by a Coordinate Bench of the same Court and sought relief through a writ petition, requesting the Court to direct the authorities not to take any coercive action against the petitioner before holding him guilty in the inquiry proceedings, particularly since the petitioner had deposited Rs.2 crores before the quantification of tax liability.

Revenue authorities’ argument:

The authorities argued that the petitioner’s non-cooperation and failure to appear before them did not warrant the Court’s discretionary relief under Article 226 of the Constitution.

Key Legal Precedents:

State of Uttar Pradesh and others vs. M/s Kay Pan Fragrance Pvt. Ltd. (2019) 71 NTNDX 409 (SC):

The Supreme Court held that authorities must process claims strictly as per the statutory provisions, disregarding any contrary High Court orders.

Poolpandi vs. Superintendent, Central Excise: The Supreme Court observed that the purpose of an inquiry under the Customs Act and similar statutes would be frustrated if the whims of persons possessing useful information for the departments are allowed to prevail. The authorities can dissociate such persons from an atmosphere that encourages non-cooperative attitudes towards the law.

Judgment:

The High Court ruled in favor of the Revenue authorities and dismissed the writ petition. The Court held that the petitioner’s failure to prove that he had no knowledge about the goods carried in the vehicle did not warrant the Court’s discretionary relief under Article 226 of the Constitution. However, the Court granted liberty to the petitioner to approach the authorities again with a defense to prove his innocence. The Court directed the Revenue Authorities to adjudicate the case on merits expeditiously, preferably within three months. The bank guarantee furnished by the petitioner was to remain with the State Revenue Authorities, and its invocation would be subject to the result of the adjudication.

FAQs:

Q1What is the significance of furnishing a bank guarantee under Section 129(1)(c) of the GST Act?

A1: Furnishing a bank guarantee under Section 129(1)(c) leads to the conclusion of proceedings initiated under Section 129 for the detention and seizure of goods and conveyances in transit. No further proceedings can be initiated under Section 129(3) once the bank guarantee is furnished and accepted.

Q2: Can the tax authorities demand an additional bank guarantee after accepting the initial one?

A2: No, the Court held that once the initial bank guarantee was furnished and accepted under Section 129(1)(c), the proceedings under Section 129 were concluded as per Section 129(5). The authorities cannot initiate further proceedings under Section 129(3) or demand an additional bank guarantee.

Q3: What is the purpose of the summary procedure under Section 129 of the GST Act?

A3: The summary procedure under Section 129 aims to secure revenue interests while ensuring the expeditious release of seized goods and conveyances. It prevents prolonged detention of goods, which could hinder trade and commerce, while allowing the adjudicatory process for determining tax liability to run its course independently.

Q4: What were the directions given by the High Court in this case?

A4: The High Court directed the Revenue Authorities to adjudicate the case on merits expeditiously, preferably within three months. The bank guarantee furnished by the petitioner was to remain with the State Revenue Authorities, and its invocation would be subject to the result of the adjudication.

1. By this writ petition, a prayer is made for release of vehicle bearing U.P.-32 CN-5694 ceased by the respondents. It is when the vehicle carrying goods were found to be carried in violation of the U.P. Goods and Services Tax Act, 2017( for short 'Act of 2017'). The petitioner is the vehicle owner and appeared before the competent authority with a request to release the vehicle.

2. The prayer made by the petitioner was not accepted by the respondents and accordingly and in absence of the payment, the vehicle could not be released. The amount demanded by the respondents is huge. It cannot be satisfied by the petitioner thus, he is unnecessarily suffering on that count.

3. The prayer is to cause interference in the impugned order with a direction to release the vehicle.

4. The written instructions given to the Standing Counsel are being placed before this court and are taken on record.

5. It is submitted that the petitioner was required to prove that whatever goods were carried in the vehicle, were without his knowledge.

6. Burden lies on the owner of the vehicle to prove his innocence however while a counsel appeared on behalf of the petitioner, no proof was produced to show that the goods carried in the vehicle was without his knowledge. Thus, an order for release of the vehicle could not be passed.

7. We have considered the submissions made by learned counsel for the parties and perused the record so as the provisions of the Act of 2017.

8. It is a case where a vehicle along with goods

were seized when it was found carrying goods in

violation of the Act of 2017. The petitioner

alongwith owner of the goods was served with the

notice before seizure of the goods. The petitioner

is the owner of the vehicle but he failed to prove

that he had no knowledge about the goods carried

in the vehicle so as to discharge his burden as

otherwise envisaged under the Act of 2017. In

absence of discharge of burden by the owner of

the vehicle, an order for release of vehicle could

not be passed and we do not find any illegality in

the order.

9. However, while disposing of the writ petition,

liberty is given to the petitioner to again approach

the authority with defence, as available to prove

his innocence. In that case, the matter would be

heard afresh and dismissal of the writ petition

would not come in the way of the petitioner for the

aforesaid.

10. The writ petition is disposed of with the

aforesaid.

Order Date :- 23.1.2020

Shukla