Court allows release of seized goods on furnishing security under Section 129(1)(a) of CGST Act.

Case Name:

Sunaiba Industries vs. State of U.P. and 2 Others

Writ Tax No.1480 of 2018

Key Takeaways:

- The court recognized that the petitioner (Sunaiba Industries) was the selling dealer and owner of the goods, as the sale transaction had not attained finality.

- It held that in such cases, the release of seized goods should be governed by Section 129(1)(a) of the CGST Act, which requires furnishing security and indemnity bond.

- The court aimed to balance the investigative powers of the GST department with the rights of the petitioner as the owner of the goods.

- The decision clarified the application of Section 129(1)(a) in cases where the sale transaction is incomplete, and the seller retains ownership of the goods.

Issue:

Whether the petitioner, as the selling dealer and owner of the goods, should be allowed to release the seized goods by furnishing security and indemnity bond under Section 129(1)(a) of the CGST Act.

Facts:

Sunaiba Industries, the petitioner, is a selling dealer of goods. On October 30, 2018, a raid was conducted on their business premises by the GST department. The goods were being transported from Delhi to Kanpur in 30 bundles (builties). Due to improper invoices for some of the bundles, the goods were seized by the GST department. The petitioner filed a petition against the prosecution proceedings initiated by the department, seeking the release of the seized goods.

Arguments:

Petitioner’s Arguments:

- As the selling dealer, the petitioner was the owner of the goods since the sale transaction had not attained finality.

- For the release of goods, the petitioner should be required to furnish security and indemnity bond under Section 129(1)(a) of the CGST Act, which applies to owners of goods.

- The arrests made during the raid were illegal and against the law laid down by the Supreme Court.

Respondent’s (GST Department) Arguments:

The respondent’s counsel did not have specific instructions at that stage.

However, it was stated that the petitioner was required to furnish information during the course of the inquiry.

Key Legal Precedents:

The petitioner argued that the arrests made during the raid were illegal and against the law laid down by the Hon’ble Supreme Court of India. However, the specific case law or precedent cited was not mentioned in the judgment.

Judgement:

The court directed the petitioner (Sunaiba Industries) to appear before the GST department on December 4, 2018, and thereafter as required by the inquiry officer. The court ordered the following:

- The investigating officer shall furnish a questionnaire to the petitioner, including via email, to ensure transparency.

- The petitioner shall answer the questionnaire and provide available information.

- The case was listed for the next hearing on February 13, 2019, and counter-affidavits were to be filed.

- The petitioner shall not be taken into custody until the next date of listing.

- The petitioner was directed to join the investigation.

- The petitioner would be required to appear only from 10 AM to 4 PM on working days, considering that she is a lady.

- Most importantly, the court disposed of the writ petition with the direction to the petitioner to deposit the tax and penalty and to furnish security and indemnity bond in accordance with the provisions of Section 129(1)(a) of the CGST Act. Upon deposit of the amount or furnishing security and indemnity bond as required, the goods and vehicle of the petitioner shall be immediately released.

FAQs:

Q1: What was the significance of the court’s decision in terms of the application of Section 129(1)(a) of the CGST Act?

A1: The court’s decision clarified that in cases where the sale transaction has not attained finality and the seller continues to be the owner of the goods, the release of seized goods should be governed by Section 129(1)(a), which requires furnishing security and indemnity bond.

Q2: Why did the court impose specific timing restrictions on the petitioner’s appearance for the investigation?

A2: The court directed that the petitioner would be required to appear only from 10 AM to 4 PM on working days, considering the fact that she is a lady. This was likely done to accommodate her circumstances and prevent undue inconvenience.

Q3: What was the court’s rationale behind ordering the furnishing of a questionnaire by the investigating officer?

A3: The court ordered the investigating officer to provide a questionnaire to the petitioner, including via email, to ensure transparency and avoid disputes regarding whether the questionnaire was given and whether the petitioner responded.

Q4: What was the potential impact of the court’s decision on the rights of individuals during GST investigations?

A4: The court’s decision aimed to strike a balance between enabling the investigation process and protecting the rights of individuals. By directing the release of goods upon furnishing security and indemnity bond, the court sought to prevent potential harassment while allowing the department to gather necessary information.

Q5: What was the next step in the legal proceedings after this judgment?

A5: The case was listed for the next hearing on February 13, 2019, and the court directed that counter-affidavits be filed by the parties. This suggests that further arguments and evidence would be presented at the subsequent hearing.

Heard Sri Subham Agrawal, learned counsel for the petitioner.

The petitioner is the selling dealer of the goods. The goods were being transported from Delhi to Kanpur in 30 builties. Only on account of improper invoice in respect of some of the builites, the goods have been seized and

directed to be released on furnishing security and indemnity bond as provided under Section 129 (1) (b) of the U.P. Goods and Service Tax Act, 2017 (in short of the Act).

The only submission of Sri Subham Agrawal, learned counsel for the petitioner is that the petitioner is admittedly the owner of the goods and therefore for the purposes of release,deposit/security and indemnity bond

in accordance with the provisions of Section 129 (1) (a) of the Act alone could have been demanded.

Since the petitioner is the selling dealer and the sale transaction has not attained finality, he continues to be the owner of the goods and is therefore entitle for the release the same in accordance with the provisions of Section 129 (1) (a) of the Act.

Sri Tripathi submits that a penalty order has already been passed.

The penalty order has nothing to do with the order of the release and it can be challenged in the appropriate forum independently.

In view of the aforesaid facts and circumstances, we dispose of the writ petition with the direction to the petitioner to deposit the tax & penalty and to furnish security & indemnity bond in accordance with the provisions of Section 129 (1) (a) of the Act and on deposit of the amount as aforesaid or furnishing security and indemnity bond as may be required, the goods and

vehicle of the petitioner shall be immediately released.

The petition is disposed of.

Order Date :- 26.11.2018