Hindustan Steel and Cement vs. Assistant State Tax Officer [2022 SCC Online TS 1527] – Kerala High Court

Hindustan Steel and Cement vs. Assistant State Tax Officer [2022 SCC Online TS 1527] – Kerala High Court

Voluntary Payment for Release of Goods/Conveyance Does Not Take Away Right to Appeal

Background

The case of Hindustan Steel and Cement vs. Assistant State Tax Officer before the Kerala High Court dealt with a critical issue concerning the right to appeal under Section 107 of the CGST Act, 2017, when goods and vehicles are detained under Section 129.

• The assessee’s goods and vehicles were detained/seized under Section 129 of the CGST Act.
• To secure release of the detained goods and conveyance, the assessee opted to make payment of tax and penalty in terms of the pre-amended provisions of Section 129(1)(a).
• Upon payment, the goods and vehicles were released as per procedure, and Form GST MOV-05 was issued.
• The detaining authority also issued an order in Form GST MOV-09 (u/s 129(3)), but failed to issue a summary of demand in Form GST MOV-07.
• Without a summary in Form MOV-07 uploaded on the GST portal, the assessee could not file an appeal under Section 107, as the portal permitted filing of appeal only against orders reflected through a MOV-07 summary.

The assessee approached the High Court, contending that its right to appeal could not be taken away merely because of payment under Section 129(1)(a) and the absence of MOV-07 summary.

Point of Dispute

• Whether a person who makes payment under Section 129(1)(a) to secure release of detained goods/vehicle loses the right to file an appeal against the detention proceedings under Section 107?

Submissions by the Assessee

• Procedural Lapse by Revenue: The order in Form MOV-09 issued under Section 129(3) should have been accompanied by a summary order in Form MOV-07. Without this, the system did not permit filing an appeal.
• Denial of Right to Appeal: Absence of MOV-07 meant the assessee was wrongfully deprived of its statutory right under Section 107.
• Voluntary Payment ≠ Admission of Liability: Payment made to release goods was not an admission of the discrepancies alleged but a commercial necessity to avoid loss.

Submissions by the Revenue

• Finality of Payment: Payments under Section 129(1)(a) are voluntary and made through Form GST DRC-03, meant for self-assessed or voluntary payment. Once paid, the proceedings are deemed concluded.
• No Further Adjudication: After payment, no further demand could be raised through DRC-07, as the assessee had effectively accepted the discrepancies noted.
• End of Proceedings: By making payment under Section 129(1)(a), the assessee accepted the liability, and therefore, no appeal could lie.

Legal Principles and Scope of Decision

The Kerala High Court analyzed the statutory provisions and clarified the scope of rights available to taxpayers:

1. Right to Appeal under Section 107

• Section 107 is widely worded and allows any person aggrieved by any order or decision under the Act to appeal within three months.
• It does not create any distinction between those who pay under Section 129(1)(a) and those who furnish security under Section 129(1)(c).

2. Role of Section 129(3)

• Section 129(3) requires issuance of a notice specifying tax and penalty irrespective of whether payment is made under Section 129(1)(a) or security is given under Section 129(1)(c).
• Thus, even after payment, an order under Section 129(3) forms the basis for appeal.

3. Requirement of MOV-07 (Rule 142(5))

• Rule 142(5) mandates uploading of a summary of order in Form GST DRC-07 on the GST portal.
• CBIC Circular No. 41/15/2018-GST dated 13.04.2018 also clarifies that every order in MOV-09 and MOV-11 must be uploaded in DRC-07.
• This ensures the assessee’s ability to challenge orders through appeal.

4. Legislative Intent

• Section 129(5) provides for conclusion of detention proceedings but does not restrict the taxpayer’s right to appeal.
• To hold otherwise would render Section 107 ineffective and deprive taxpayers of statutory remedies.

Conclusion of the Court

• The Kerala High Court held that payment under Section 129(1)(a) does not deprive an assessee of the right to appeal under Section 107.
• Authorities must issue both MOV-09 and the corresponding MOV-07 summary, failing which the taxpayer’s right to appeal is obstructed.
• The Court rejected the Revenue’s argument that such payment amounted to admission of liability and finality of proceedings.
• It was clarified that the assessee is entitled to file an appeal even after voluntary payment to release detained goods or vehicles.

Practical Impact and Key Takeaways

1. Right to Appeal is Absolute
   • Taxpayers can still appeal under Section 107 even after making payments under Section 129(1)(a).
2. No Waiver of Rights by Payment
   • Payment to secure release of goods is a practical necessity and does not mean acceptance of liability.
3. Authorities Must Upload MOV-07
   • Issuing only MOV-09 is insufficient. Non-upload of MOV-07 infringes the right to appeal.
4. Protection Against Coercion
   • Businesses should not be coerced into payments under threat of detention without retaining their right to challenge.
5. Balanced Approach Required
   • While revenue protection is vital, taxpayer rights under natural justice and statutory law cannot be curtailed.

SEO Meta Description

Kerala High Court in Hindustan Steel and Cement vs. ASTO (2022) held that voluntary payment under Section 129(1)(a) for release of goods does not bar the right to appeal under Section 107. Absence of Form MOV-07 cannot deprive taxpayers of appellate remedy.

✅ This ruling is a major relief for businesses facing detention proceedings under GST, ensuring that payment for release of goods does not extinguish the statutory right to appeal.