Department cannot detain the goods on the ground of non-filing of statutory returns.

Case Title: Relcon Foundations (P.) Ltd. v. Assistant State Tax Officer

Court: High Court of Kerala

Petition Number: W.P. (C) No. 30102 of 2019 (K)

Relevant Section: Section 129 and 130 of the Kerala GST Act (KGST Act)

Category of Dispute: Detention of Goods

Date of Judgment: 8th November 2019

Relevant Provisions: Section 129 and 130 of CGST Act (mirrored under KGST Act)

Facts of the Case

1. The petitioner challenged an order of detention (Ext. P1) and a confiscation notice (Ext. P4) relating to goods in transit belonging to them [¶1].
2. The vehicle was detained because the petitioner had not filed GSTR-3B returns since June 2018 and GSTR-1 returns since March 2019 [¶1].
3. The petitioner argued that such grounds are extraneous to the scope of detention under Section 129 of the KGST Act [¶1].

Question(s) in Consideration

1. Whether non-filing of GSTR-3B and GSTR-1 returns can be a valid ground for detention of goods under Section 129 of the KGST Act? [¶1]
2. Whether such non-compliance justifies issuance of a confiscation notice under Section 130 of the KGST Act? [¶1]

Observations of the Court

1. The Court held that the reasons stated in the detention order (non-filing of returns) do not constitute sufficient grounds for invoking Section 129 of the KGST Act [¶2].
2. Similarly, the proposed confiscation under Section 130 lacked the foundational ingredients required to invoke the said provision, and hence could not be sustained [¶2].

Judgment of the Court

1. The High Court quashed both Ext. P1 (detention order) and Ext. P4 (confiscation notice) [¶2].
2. The Court directed the immediate release of the goods and vehicle upon submission of a copy of the judgment [¶2].
3. It was clarified that this judgment does not preclude the department from pursuing penal action through proper procedure, if warranted, under the GST Act [¶2].

Between Fine Lines

• Detention under Section 129 must relate to transportation or tax-related discrepancies, not to non-filing of returns.
• Confiscation under Section 130 requires satisfaction of specific offence criteria, which were not met here.
• Procedural fairness and adherence to statutory limits are key in enforcement actions.
• GST enforcement powers cannot be used to penalize past compliance defaults during goods transit.
• The department can still take appropriate action, but only in accordance with due legal process.

Summary of Referred Cases

No specific judicial precedents were cited or discussed in the judgment.