PURCHASING DEALER NOT RESPONSIBLE FOR SUPPLIER’S BUSINESS ACTIVITIES OR REGISTRATION AUTHENTICITY

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PURCHASING DEALER NOT RESPONSIBLE FOR SUPPLIER’S BUSINESS ACTIVITIES OR REGISTRATION AUTHENTICITY

28/05/2024

PURCHASING DEALER NOT RESPONSIBLE FOR SUPPLIER’S BUSINESS ACTIVITIES OR REGISTRATION AUTHENTICITY

ANDHRA PRADESH HIGH COURT

ARHAAN FERROUS AND NON-FERROUS SOLUTIONS PVT LTD V/S DEPUTY ASSISTANT COMMISSIONER

HON`BLE JUSTICE U. DURGA PRASAD RAO AND VENKATA JYOTHIRMAI PRATAPA, JJ.

WRIT PETITION NOS.15481, 15482, 15486 AND 15487 OF 2023

03.08.2023

FACTS OF THE CASE:

1st petitioner is a trader in iron scrap under a valid registered GST No. 37AATCA9148B1ZD. He purchased the iron scrap from the 4th respondent under invoice, dated 12.06.2023 and in turn sold the same in favour of M/s Radha Smelters Private Limited, Sankarampet, Medak District, Telangana State under valid invoice number.

The 1st petitioner engaged the vehicles of the 2nd petitioner for transporting goods from Vijayawada to Sankarampet and consignment was sent along with valid documents such as invoice, way bill, weighment slip etc., While goods were in transit the 1st respondent detained the vehicles along with the goods on 12.06.2023 on the alleged ground that the vendor of the 1st petitioner i.e., the 4th respondent has no place of business at Vijayawada and accordingly issued impugned proceedings in the name of 4th respondent by deliberately ignoring the documents produced by the drivers at the time of check.

It is further case of the petitioners that the 4th respondent having sold the scrap has no interest and in case of default on his part, the 1st respondent may initiate action against the 4th respondent.

However, under the guise of initiating proceedings against the 4th respondent, the 1st respondent cannot put the petitioners in trouble as long as the transaction is covered by all relevant and applicable documents.

It is further case of the petitioners that the 1st respondent did not follow the procedure contemplated under APGST/ CGST Act, 2017 and in straight away issued proceedings proposing to confiscate the goods under transit without issuing notices in GST MOV -02, 03, 04, 05, 06 07, 08 or GST MOV -09 before issuing notice of confiscation in Form GST MOV -10.

It is also contended that the documents served on the 2nd petitioner do not contain DIN Number. The 1st respondent has no right or jurisdiction to detain the goods and vehicle of the petitioners.

ANALYSIS:

Thus, it is clear that the proceedings for detention of goods can be initiated while the goods are in transit in contravention of provisions of the CGST/APGST Act.

In the instant case also the 1st respondent has detained the goods of the 1st petitioner while they were in transit from Vijayawada to Sankarampet, Medak, Telangana State.

That being the factual scenario, the question is whether 1st respondent can confiscate the goods of the 1st petitioner without initiating any proceedings against him U/s 129 but initiating proceedings U/s 130 of CGST/APGST Act against the 4th respondent on the ground of dubious credentials of the 4th respondent.

In our considered view though the 1st respondent may initiate proceedings against the 4th respondent U/s 130 of the Act in view of his absence in the given address and not holding any business premises at Vijayawada, however, he cannot confiscate the goods of the 1st petitioner merely on the ground that the 1st petitioner happen to purchase goods from the 4th respondent.

Even assuming that the petitioners, particularly the 1st petitioner partakes in the enquiry proceedings against the 4th respondent, his responsibility will be limited to the extent of establishing that he bonafidely purchased goods from the 4th respondent for valuable consideration by verifying the GST registration of the 4th respondent available on the official web portal and he was not aware of the credentials of the 4th respondent.

Further, he has to establish the mode of payment of consideration and the mode of receiving of goods from the 4th respondent through authenticated documents. Except that he cannot be expected to speak about the business activities of the 4th respondent and also whether he obtained GST registration by producing fake documents.

In essence, the petitioners have to establish their own credentials but not the 4th respondent. In that view, the 1st respondent is not correct in roping the petitioners in the proceedings initiated against the 4th respondent without initiating independent proceedings U/s 129 of CGST/APGST Act against the petitioners.

As the 1st petitioner claims to have purchased goods from the 4th respondent whose physical existence in the given address is highly doubtful as per the enquiry conducted by the Joint Commissioner (ST), Kurnool, the 1st petitioner as observed supra, owes a responsibility to prove the genuineness of the transactions between him and the 4th respondent.

Therefore, the 1st respondent can initiate proceedings U/s 129 of CGST/APGST Act against the petitioners and conduct enquiry by giving opportunity to the petitioners to establish their case.

DECISION:

These writ petitions are accordingly disposed of giving liberty to the 1st respondent to initiate proceedings against the petitioners U/s 129 of CGST/APGST Act, 2017 within two weeks from the date of receipt of a copy of this order and conduct enquiry by giving an opportunity of hearing to the petitioners and pass appropriate orders in accordance with governing law and rules.

In the meanwhile, the 1st respondent shall release the detained goods in favour of 1st petitioner on his deposit of 25% of their value and executing personal bond for the balance and he shall also release the vehicles in favour of the 2nd petitioner in the respective writ petitions on their executing personal security bonds for the value of the vehicles as determined by concerned Road Transport Authority.

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