The Kerala High Court has allowed the provisional release of goods pending adjudication under section 130 of the GST Act in lieu of fine.
The bench of Justice Murali Purushothaman has observed that the intention of the legislature cannot be to keep the goods and conveyance unused till the final adjudication exhausting the hierarchy of remedies.
The bench noted that as per Section 130(2) of the GST Act, whenever confiscation of any goods or conveyance is authorised by the Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit.
The bench stated that the object of the provision is only to secure the value of the goods that are liable for confiscation and not to confiscate the goods as such. Therefore, even if goods are ordered to be released pending adjudication, no prejudice is caused to the Department, as the revenue is protected by the owner making payment in lieu of confiscation.
The petitioner/assessee is in the business of wholesale trade of gold, precious metals and ornaments made therefrom to various jewellery shops in different States and is a registered dealer under the provisions of the Goods and Services Tax Act (GST Act). The principal place of business of the petitioner is at Gujarat.
According to the petitioner, as part of business, the petitioner deputes Marketing Executives as carriers to exhibit its goods to dealers in different States. Only if the dealers approve the exhibited goods, the petitioner supplies the required ornaments, along with tax invoice. In the case of diamond gold jewellery unlike gold jewellery, the petitioner has also to obtain a certificate from the laboratory certifying the purity of the precious stones. Only upon receipt of the laboratory certificate, the petitioner proceeds to sell the approved diamond gold jewellery along with the certificate and tax invoice.
In order to transport the sample ornaments for approval of dealers, the petitioner issues delivery challans in the name of its Marketing Executives in accordance with Rule 55(1) (c) of the Central/State Goods and Services Tax Rules, 2017.
While so, the petitioner issued delivery challans for 1044.074 and 3287.716 grams of net weight diamond gold jewellery. The petitioner states that, pursuant to the authorization to exhibit the diamond gold jewellery mentioned in the delivery challans.
However, at that time, the Intelligence Officer, State Goods and Services Tax Department, Ernakulam along with other officials of the Department entered the premises and conducted search and upon finding certain discrepancies in the stock, proceeded to seize the entire ornaments including that of the petitioner under Section 67 of GST Act.
The petitioner stated that the jewellery seized from the petitioner’s Marketing Executive amounts to 607.39 grams and 3188.27 grams, of 22KT Diamond gold jewellery. The respondent issued combined seizure order in respect of the goods of the 2nd respondent and the petitioner.
The petitioner contended that the department and his officials have no right to seize the ornaments of the petitioner which were accompanied by valid delivery challans as prescribed under GST Rules, 2017 from the premises.
The department contended that no writ petition under Article 226 of the Constitution would lie against a show cause notice issued under Section 130 of the GST Act. The request for provisional release of the goods was made by the petitioner only on 05.07.2023 i.e., after the commencement of confiscation proceedings on 20.06.2023 by issuing show cause notice.
The department contended that Section 130 does not contemplate provisional release of goods which are proposed to be confiscated and the respondent has no authority to release the goods pending adjudication and until the culmination of adjudication, the party from whom the goods were seized cannot claim release of such goods and that legal proceedings cannot be whittled down on grounds of expediency.
The court rejected the contention of the department that there is no provision under Section 130 of the GST Act to order provisional release of goods pending adjudication of notice under Section 130 cannot be sustained.
The court held that there will be a direction to the department to release the goods seized to the petitioner pending adjudication of show cause notice on the petitioner depositing a sum of Rs.2,93,71,666, being the penalty and fine quantified in lieu of confiscation of goods and on execution of bond for the value of goods.
The court directed that the goods shall be released within two weeks from the date of deposit.
Case Details
Case Title: Shish Jewels Private Limited Versus The Intelligence Officer
Case No.: WP(C) NO. 40450 OF 2023
Date: 06/01/2025
Counsel For Petitioner: K. Sreekumar
Counsel For Respondent: Spl.GP Mohammed Rafiq
