Kerala High Court Upholds Order Against Detention Of Hindustan Coca-Cola's Goods In GST Dispute

The Kerala High Court has dismissed a writ appeal filed by the state tax authorities against Hindustan Coca Cola Private Limited over the detention of its goods during transit under the GST Act.

The court held that the detention was not justified because the consignment was accompanied by all required documents.

A Division Bench of Justice V.G. Arun and Justice Harisankar V. Menon said proceedings under Section 129 of the Central and State GST Acts were not called for in the facts of the case.

Section 129 allows tax officers to detain goods and vehicles during transit in specified situations, including when goods are moved without proper documents.

The court said this power cannot be used when the documents accompanying the goods carry the same description as the goods in transit, even if the officer suspects a difference in classification.

The bench observed, “Therefore, especially when the detaining officer specifically states that there is difference with reference to HSN No., it is for the officer who detained the goods to inform the assessing authority of the respondents herein, about the description difference, and it is for the assessing authority to consider the same while considering the acceptability or otherwise of the returns to be filed by the assessee.”

The case arose after goods belonging to Hindustan Coca-Cola Private Limited were intercepted and detained during transit by a State GST mobile squad in Palakkad. The detention was ordered under Section 129(3) of the GST law, which deals with the issuance of a detention notice and the proposal of tax and penalty.

The officer alleged that there was a misdescription of the commodity. This was despite the goods being accompanied by valid e-way bills and other prescribed documents.

The tax department argued before the High Court that the detention was justified because there was a difference in the description of the goods including its HSN.

According to the department, this difference was sufficient to detain the goods during transit.

The High Court rejected this argument. It noted that the detention notice itself recorded that the statutory documents carried the same description as the goods in transit.

The Bench agreed with the single judge that disputes relating to description or classification must be examined during assessment, when the company's returns are scrutinized, and not at the stage of transit detention.

Upholding the reasoning of the single bench, the Bench noted that the issue was already covered by earlier decisions of the High Court, including N.V.K. Mohammed Sulthan Rawther and Sons v. Union of India, and found no reason to interfere.

While dismissing the appeals, the High Court of Kerala left it open to the tax authorities to raise the issue of classification or description during assessment, if so advised.