DELUDING – AUDI ALTERAM PARTEM AND ITS IMPACT ON GST ACT, 2017

DELUDING – AUDI ALTERAM PARTEM AND ITS IMPACT ON GST ACT, 2017 “Natural justice is a sense of what is wrong and what is right.”

– CA BHAVYA SHAH
[B.COM, LL.B]
AUDI ALTERAM PARTEM

Audi alteram partem (or audiatur et altera pars) is a latin phrase meaning “listen to the other side”, or “let the other side be heard as well”. It is the principle that no person should be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against them. “Audi alteram partem” is considered to be a principle of fundamental justice or equity or the principle of natural justice in most legal systems.

The rule of natural justice has evolved with the growth of civilization. Natural justice is the concept of common law which implies fairness, reasonableness, equality and equity. In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution. Article 14 enshrines that every person should be treated equally. Article 21 in its judgment of Maneka Gandhi vs. The Union of India, it has been held that the law and procedure must be of a fair, just and reasonable kind. The principle of natural justice comes into force when no prejudice is caused to anyone in any administrative action.

There are three main principle of natural justice:

1. Nemo in propria causa judex, esse debet- No man shall be a judge in his own cause and

2. Audi Alteram Partem- No man shall be condemned unheard

3. Reasoned Decision

The judicial climate on this point is thickly clothed with many decisions. The result is that the danger of confusion has become real and natural justice is on the misleading road of sentimental poten¬tialities.

Decoding, one of the most recent instant in relation to section 129 under the GST statue, where the rights conferred under the doctrine mentioned supra has been carried away by the governed Authorities while enforcing the provisions of the section. Unlike, justice should not only be done but seen to be done. Moreover, opportunity is not a rigid doctrine it must be applied even where not expressly provided. Silence of the statue shall not to be construed as exclusion of the opportunity.

BRINGING A LOOK TO – IMPACT OF BEWILDERING AUDI AULTERAM PARTEM IN GST ACT, 2017

K of Karnataka has purchased goods from G of Gujarat and while goods were moving towards Karnataka through the corridor of Maharashtra, the truck loaded with the goods is detained for

-non-generation of e-way bill due to technical glitches or
-any clerical errors in the e-way bill

The question, which arises is that whether section 129 will be applicable and if yes, then whether tax and penalty can be levied on the basis of the aforesaid facts?

Section 68 of the Central Goods & Service Tax Act, 2017 read with rules specifies that tax invoice/ challan/ bill of supply/ delivery challan as per law should be accompanied with the consignment of goods and that e-way bill as per rule 128 should also be generated. Section 122 (1) of the Central Goods & Service Tax Act, 2017, inter-alia contains that a taxable person who transports any taxable goods without the cover of specified documents shall be liable to a penalty of Rs. 20,000/- IGST (10000 CGST + 10000 SGST) or tax sought to be evaded, whichever is higher.

Section 129(1) of the Central Goods & Service Tax Act, 2017 (CGST Act for short) as well as the same section in the various State Goods & Service Tax Act, 2017 (SGST Acts for short) / Union Territory Goods & Service Tax Act, 2017 (UTGST Acts for short) mandates the proper officers functioning under the said Acts to detain the goods under transport in case they are transported in contravention of the provisions of the said Acts. In fact, similar provisions can be found in the erstwhile State Level Value Added Tax Acts prevailed in the various Indian States from 2005-06 FY to June 2017 as well as in their forerunners, the General Sales Tax Laws in force up to 2004-05 FY.

Section 129 of CGST Act, which begins with a non obstante clause empowers the officers to detain and seize the goods, documents and the conveyance, if the goods are transported or stored during the transit in contravention of the provisions of this Act or the rules made thereunder.

For ease of reference, the provision of section 129(1) is reproduced below;

“129 (1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released: on payment of the applicable tax and penalty equal to one hundred percent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two percent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty; on payment of the applicable tax and penalty equal to the fifty percent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five percent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty; upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed: Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods”

With the plain reading of the provision it can be concluded that the assessee has either to remit the tax and penalty as calculated on the detention or to furnish a bank guarantee for the release of the goods/conveyance. This means in all alike cases as mentioned aforesaid, the assessee will lose substantial money for inadvertent clerical errors or procedural lapses but not for having any kind of evasion of tax or suppression of relevant facts.

It is an inexplicable and strange situation where assessee has to remit huge amounts of tax and penalty where no tax has been evaded. Though there exists the contravention of the provisions of the Act in the strict technical sense, but on the other hand it is apparent that there is neither any attempt to evade the tax nor there is any element of Mensrea.

For the sake of brevity, analysing the judicial precedents, in the matter of M/s Indus Towers Limited vs. The Assistant State Tax Officer 018 (1) TMI 1313- Kerala High Court and Age Industries (P.) Ltd. Versus Assistant State tax Officer 2018 (1) TMI 1116 – Kerala High Court the nutty question arises whether two different penalties under section 122 and 129 can be levied for the same offence, i.e. transporting of taxable goods in contravention of GST Laws. It will also be interesting to discuss that whether section 129 is a procedural section to give effect the aforesaid provision of section 122(1).

In the meanwhile, it has already been judicially pronounced that section 129 cannot be read ignoring the provisions of section 130, the Honourable Court held that a combined reading of Sections 129 and 130, especially the provision contained in sub-section (6) of Section 129 indicates that the detention of the goods is contemplated under the statute only when it is suspected that the goods are liable to confiscation. Further, it entitles the officers to levy tax and penalty even on a transaction which is not otherwise taxable and there is no need for any the existence of Mensrea or the intention to evade tax before levying penalty. However, in that case, since there was no challenge to the constitutional validity of Section 129(1), the division bench did not look into the reasonableness of the provisions in the light of the constitutional provisions. Now, writ petitions challenging the constitutional validity of Section 129(1) of the CGST/SGST Acts are pending before various High Courts in the country.

However, a distinguishing factor differentiating the present GST provisions from their forerunners is that in the erstwhile laws the situation which warrants demand of security deposit or tax on the detention of goods under transport and the consequential imposition of penalty is a case of attempted evasion of tax or omission of the subject transaction from the regular books of accounts. Section 129 of the CGST/SGST Acts which empowers the officers to levy penalty and tax upon detention does not require any such attempted evasion of tax or omission to account the subject transaction. On the other hand, only procedural lapses or clerical errors can lead to levy of tax and penalty, to any dimension.

Moreover, the contravention can be minor or major; however, section 129 does not make a distinction between various types of contraventions as far as the penal consequences are concerned. Section 129 provides that, in the case of contravention, the goods can be detained and the officer concerned can release the goods only on the payment of tax and a penalty which is equivalent to 100% of the tax applicable on the goods.

THE PLETHORA OF MATTER DECODING THE DOCTRINE

01. In the matter of Bansal Earthmovers Pvt. Ltd. the Honourable Calcutta High Court held that- Levy of penalty – Principles of natural justice – service of notice – notice was not served on the person on whom penalty was levied, but on the driver of vehicle – as a result opportunity of hearing could not be availed off – Imposition of penalty u/s 129(3) of the West Bengal Goods and Services Tax Act, 2017 – HELD THAT:- The notice for imposition of penalty requires to be served upon the person on whom the penalty is to be imposed. Furthermore, an opportunity of hearing has to be granted. In the event, such hearing is not granted, the same would definitely amount to violation of principles of natural justice.
02. Extract from one of the judgement In Re: Synergy Fertichem Pvt. Ltd Vs State of Gujarat (Gujarat High Court)
From the plain reading of Sections 129 and 130 of the Act, it is clear that the suppliers or receivers of the goods transport any goods in contravention of provisions of the Act or the Rules made thereunder are liable for the detention or seizure of the goods under Section 129 of the Act and under Section 130 (i)(v) of the Act for confiscation of the goods and conveyance. Thus, for the same breach and/or contravention of the provisions of the Act, there are two types of penalties provided under Section 129 and Section 130(i)(v) of the Act.

I am of the view that the Legislature should, once again, look into both the provisions, i.e, Sections 129 and 130 of the Act and amend the sections accordingly so as to remove certain inconsistencies in the two provisions. Let this aspect be looked into by the State Government in accordance with law.

03. Mistake in vehicle no. mentioned in E-Way Bill the goods were detained by commercial tax officer Under Section 129(1) Accordingly, the appellant got present before the detaining authority and stated that inadvertently a clerical mistake got happened while generation of E-Way Bill. The Ld. ACST&E did not heed to prayer and submission of the Appellant and imposed a penalty under section 129(1) held by appellate authority that the penalty imposed in the instant case under section 129 was unwarranted. GST Council vide circular No 64/38/2018 dated 14th September, 2018. in para 5 provides that in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated in case of minor mistakes like error in one or two digits/characters of the vehicle number. Orders of ACST&E, Chamba are set-aside on the ground that the standard operating procedure mentioned in Circular was not taken into consideration while imposing penalty in the instant case.

04. In the matter of UOI and ors Vs. L C Infra Projects Pvt. Ltd.[2020-TIOL-827-HC-KAR-GST] the Honourable Karnataka High Court held that before recovery interest payable in accordance with section 50 of the GST Act, a Show Cause Notice is required to be issued to the assessee following the principles of natural justice.

05. In the matter of Pittappillil Agencies Vs. Superintendent of Central Tax and Central Excise Goods And Service Tax Department the Honourable Kerala High Court held that when assessee was served with notice of recovery for interest on delayed filing of returns and its bank account was attached without considering the objections raised by the assessee the said recovery, the High Court directed the revenue authorities to consider the objections raised by the assessee after affording to the assessee a reasonable opportunity of being heard.

06. In the matter of Mahadeo Construction Co. Vs. UOI through the Commissioner, Central Goods & Services Tax, Central Revenue Building, Ranchi, the Honourable Jharkhand High Court held that it shall be open for the respondent Authorities to initiate appropriate adjudication proceeding either under Section 73 or 74 of the CGST Act (as the case may be) against the petitioner-assessee and determine the liability of interest, if any, in accordance with law after giving due opportunity of hearing to the petitioner.

Having regard to the context in which a provision appears and the object of statute in which the said provision is enacted, it should be construed in a harmonious way to make it meaningful. An attempt must always be made so as to reconcile the relevant provisions as to advance the remedy intended by the statute. There is a need to take an insight from as held by the Supreme Court that it would be important to notice certain well settled canons of interpretation of statutes. The primary and foremost task of a Court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the Court must then strive to so interpret the statute as to promote and advance the object and purpose of the enactments.

Therefore, at all the stages of the procedure if any authority is given off the judicial function are not purely accepted but the main motive of the principle is to prevent the miscarriage of justice. It is supreme to note that any decision or order which violates the natural justice will be declared as null and void in nature, hence one must carry in mind that the principles of natural justice are essential for any administrative settlement to be held valid. The principle of natural justice is not confined to restricted walls the applicability of the principle but depends upon the characteristics of jurisdiction, grant to the administrative authority and upon the nature of rights affected of the individual. Thus, there’s need to look into both the provisions, i.e, Sections 129 and 130 of the Act and other sections of the Act also accordingly so as to remove certain inconsistencies.

“Principle of Natural Justice donot supplant law but supplement it.”

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