8 Jan 2022

Goods In Transit Can't Be Confiscated Under CSGT Act On Grounds Of Under-Valuation Or Wrong Route: Gujarat High Court.

The Gujarat High Court has held that mere undervaluation of the goods or change of route of the consignment can't be sufficient grounds to detain the
goods and vehicle under the Central Goods and Services Tax Act, 2017. Holding thus, the Bench of Justice Nisha M. Thakore quashed the entire confiscation proceedings including the notice issued u/s 130 of CGST Act against the Petitioner, Karnataka Traders. who is a seller of the goods (Arecanut) and a registered dealer under the GST.
The case in brief Essentially, the goods (Arecanut) were being sent by the petitioner (Karnataka traders/seller) to a buyer in Ahmedabad by using the services of petitioner No.2, who is the owner of a Truck on which the instant goods were to be transported.

The said consignment was intercepted by the CGST officials on 20th November 2021 and the officials were shown necessary documents i.e. E-way bill and Tax Invoice and further, a physical verification/ inspection of the conveyance, goods, and documents were conducted by the said officials.
Upon examination of the same, a report in Form GST MOV – 04 was prepared, however, no discrepancy was noted by the Officials with regard to the description of goods as per invoice and conveyance nor anY anomaly was found with regard to quantity as per invoice and physical verification.
Thereafter, the officials noticed two discrepancies in the impugned notice Form GST MOV – 10 and sought to confiscate the goods and vehicle and they were as follows:
The vehicle was intercepted while it was traveling in a different direction than the direction of destination or way to the destination. So it is So it is clear that the goods were not moving to the place destined for. Hence it appears that the goods is being transported with the intention to evade tax.
The value of goods being transported is shown as Rs.286/- which is too low compared to its Real Market Value i.e. 330/-.
Court's observations
 Finding force in the contention of the advocate appearing for the petitioners, the Court noted that there cannot be any mechanical detention of a consignment in transit solely on the basis of the two reasons as stated in the impugned notice.
"We find that merely the direction preferred by the petitioners for delivery of the consignment to the place destined for, an inference cannot be drawn with regard to the intention of the petitioners to evade tax. So far as the second ground with regard to the goods being transported to be undervalued is concerned, no material has been placed on record. Even otherwise, as held by this Court as well as other High Courts, it is a settled legal position that undervaluation cannot be a ground for seizure of goods in transit by the inspecting authority. In the instant case, there is no such indication,"
the Court held as it allowed the application.