The Hon’ble Supreme Court, in the case of Deputy Assistant Commissioner-1 (ST) v. Arhaan Ferrous and Non Ferrous Solutions (P.) Ltd. [Petitions for Special Leave to Appeal (C) No (S). 24711-2474 of 2023 dated November 6, 2023], decided not to interfere with the matter. The decision upholds the stance taken by the Hon’ble Andhra Pradesh High Court, which stated that the assessee’s responsibility extends only to establishing the bonafide purchase of goods from the supplier for valuable consideration after verifying the GST registration of the said supplier on the GST portal.

Facts:

Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. (“the Respondent”) is engaged in the trading of iron scrap. Mr. T. Srinivasulu (“the Transporter”) is the owner of the vehicle in which the Respondent transports iron scrap. The Respondent purchased the iron scrap (“the Goods”) from M/s. K.S. Enterprises (“the Supplier”) located in Vijayawada and further sold the same to M/s. Radha Smelters Private Limited (“the Buyer”) located in Sankarampet under a valid invoice number. The Respondent engaged the transporter for transporting the Goods from Vijayawada to Sankarampet accompanied by valid documents such as invoice, E-way bill, weighment slip, etc.

The Revenue Department (“the Petitioner”) detained the Goods in transit on the allegation that the Supplier had no place of business at Vijayawada and initiated proceedings against the Supplier under Section 130 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

The Respondent contended that the Petitioner had deliberately ignored the documents produced at the time of check which showed that the Respondent was the owner of the Goods. As per Section 129 of the CGST Act, an action can be initiated against the person who is transporting goods, which in the present case is the Respondent. Instead of issuing proceedings in the name of the Respondent, the Petitioner issued notice against the Supplier who had no interest in the matter after selling the consignment for valuable consideration to the Respondent.

The Hon’ble Andhra Pradesh High Court held that, the proceedings for detention of the Goods can be initiated while the Goods are in transit in contravention of the provisions of the CGST Act. In the instant case, the Petitioner may initiate proceedings against the Supplier under Section 130 of the CGST Act in view of his absence at the given address and not holding any business premises at the provided address. However, the Petitioner cannot confiscate the Goods of the Respondent merely on the grounds that the Respondent happened to purchase goods from the said Supplier. Further, the claim made by the Respondent regarding the purchase of goods is highly doubtful as the physical existence of the said Supplier is questioned. Thus, the Petitioner can initiate proceedings under Section 129 of the CGST Act against the Respondent and conduct an inquiry by giving an opportunity to the Respondent to establish their case.

Further held that, the Petitioner will release the detained goods in favor of the Respondent on deposit of 25% of the value of goods and execute a bond for the balance and shall also release the vehicles in favor of the transporter. Lastly, the Respondent’s responsibility will be limited to the extent of establishing that he bonafidely purchased goods from the Supplier for valuable consideration after verifying the GST registration of the said Supplier on the GST portal.

Hence, aggrieved by the Order passed by the Hon’ble High Court, Special Leave Petition was filed by the Petitioner.

Held:

The Supreme Court of Indiain the case of **Special Leave to Appeal (C) No (S). 24711-2474 of 2023 dated November 6, 2023, held that, the Apex Courtwas not inclined to interfere in the matter resulting in the dismissal of SLP. Hence, the matter was disposed of.