Detention in GST: Important issues and case laws

Detention in GST: Provisions in GST 

Detention is one obvious thing in indirect tax. Right from the VAT and excise to GST. The detention in GST is covered by section 129 of the CGST Act. There are many loopholes in the drafting of provisions. Then the GSTN portal has its own issues. Taxpayers are in detrimental condition. When a vehicle is detained, the prime focus of the taxpayer if to get it released as soon as possible. In some cases demand, more than the value of goods itself. In the case of synergy fertichem Vs State of Gujrat, the demand was more than the value of goods itself. There are many case laws related to detention in GST.

Section 129 and 130 for the detention of Goods in GST

Both of these sections start with “notwithstanding”. Its literal meaning is irrespective of something adverse is given. The provisions of this section will prevail. Now both of these sections say “notwithstanding anything contained in this Act”. Wow, both of them superseded the entire CGST Act. Some important questions arise:

• Whether sections 129 and 130 both can be invoked in a case simultaneously.
• Section 130 can be invoked directly, bypassing section 129.
• Whether 129 is mandatory before we move to section 130.

Then there are some other open issues. 

• Whether the Order of detention u/s 129 is an appealable order. Section 107 for appeal provides that the order of an adjudicating authority can be challenged in an appeal. Whether the authority u/s 129 is an adjudicating authority. Let us have a look at the definition of adjudication authority. It means an authority appointed or authorized to pass an order or decision. But then section 121 provides for the non-appealable orders. (See the discussion of RK Overseas in the next para)
• When a vehicle is detained in another state, what should be the course of action? Here another state means the state other than the state where the supplies have the GST registration.
• Now section 129 provides for payment or Bank guarantee. But at ground level, a person is forced to pay. Although it is their right to furnish the bank guarantee and get the goods released.

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Important case laws related to detention in GST:

Detention is one of the most litigated areas in GST. Many cases for detention are there. Let us have a look at some of the important decisions. We also have a brief analysis of what is observed in these decisions.

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RK overseas Vs. Union of India

In this particular case, it is decided that the order u/s 129(1) is not appealable.

“On the conjoint reading of Sections 107 and 121 of the Act, it is thus apparent that though all orders passed under the Act by the adjudicating authority are appealable but not the one’s which have been specifically excluded from the purview of appeal under Section 121 of the Act such as orders pertaining to seizure. In view of the aforesaid facts and circumstances, we hold that the order of seizure of the goods in transit or storage passed under Section 129(1) of the Act is not appealable and therefore, a writ petition is maintainable against it subject to the limitations of judicial review.”

Jindal Pipes Vs. State of UP

Service of order to the aggrieved person. In this case, an order was served on the driver of the vehicle. The court held that the order shall be served on the aggrieved person. Here the driver is not the aggrieved person. 

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Synergy Fertichem Pvt. Ltd. Versus State of Gujarat

It is one of the landmark judgment. The concept of interpretation of the non-obstante clause is discussed at length. Then Interplay of sections 129 & 130 is also discussed. In this case demand of Rs. 60,72,639 was raised for the release of goods worth Rs. 39,43272. Section 130 was invoked. The court clarified that section 130 can be invoked only when there is an “Intention to evade tax”. This part is very important. Unless there is a clear intention for evasion of tax. Section 130 cant be applicable. 

Detention in GST, Consultease, section 129, section 130