Sahil Traders v. State of Gujarat
[Citation -2020-LL-0129-147]

Citation 2020-LL-0129-147
Appellant Name Sahil Traders
Respondent Name State of Gujarat
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act CGST
Date of Order 29/01/2020
Judgment View Judgment
Keyword Tags goods and services tax • order of confiscation • application of mind • service of notice • show-cause notice • redemption fine • satisfaction • release of vehicle • release of goods


C/SCA/11018/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 11018 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India or any order made thereunder ? SHAHIL TRADERS Versus STATE OF GUJARAT Appearance: UCHIT N SHETH(7336) for Petitioner(s) No. 1 MR CHINTAN DAVE, CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 29/01/2020 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Rule, returnable forthwith. Learned Assistant Government Pleader Mr.Chintan Dave waives service of Page 1 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT notice of rule for and on behalf of respondents. 2. By this Writ Application under Article 226 of Constitution of India, writ applicant-a proprietorship concerned, through its proprietor, has prayed for following relief: A. This Hon ble Court may be pleased to issue writ of certiorari or writ in nature of certiorari or any other appropriate writ, order or direction quashing and setting aside detention order dated 20.4.2019 in Form GST MOV-6 (annexed at Annexure A) and confiscation order dated 30.4.2019 in Form GST MOV-11 (annexed at Annexure B); B. This Court may be pleased to issue writ of mandamus or writ in nature of mandamus or any other appropriate writ or order directing learned Respondent authorities to forthwith release truck no.HR KA-30A-0062 along with goods contained therein; C. Pending notice, admission and final hearing of this petition, this Hon ble Court may be pleased to stay operation of impugned detention / confiscation orders (annexed at Annexure A/B) and this Hon ble Court may be pleased to further direct learned Respondent authorities to forthwith release truck no.KA-30A-0062 along with goods contained therein; D. Ex parte ad interm relief in terms of prayer C may kindly be granted; E. Such further relief(s) as deemed fit in facts and circumstances of case may kindly be granted in Page 2 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT interest of justice for which act of kindness your petitioner shall forever pray. 3. On 26th June, 2019, Co-ordinate Bench of this Court has passed following order: Let notice be issued to respondents, returnable on 24th July 2019. Ms.Mehta, learned AGP waives service of notice for and on behalf of respondents State. Having heard learned counsel appearing for parties and having gone through materials on record, we propose to pass interim order with regard to release of goods seized by officers of Goods and Services Tax department. It appears from materials on record that writapplicant herein is engaged in business of betel nuts. He is registered dealer under Goods and Services Tax Act (for short, GST Act ). writ-applicant is operating from State of Tamil Nadu. It appears that consignment of betel nuts was being transported from Vellor, State of Tamil Nadu, to Delhi. While goods were in transit and passing through State of Gujarat, vehicle was intercepted by officers of GST and same came to be detained on ground that E-Way Bill was not produced when demanded. In such circumstances, vehicle along with goods came to be seized. It appears that immediately writ-applicant preferred representation dated 22nd April 2019 addressed to State Tax Officer (2), Mobile Squad, Division-1, Page 3 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT Ahmedabad, stating that writ- applicant is ready and willing to deposit requisite amount without prejudice to his rights and contentions, and on deposit of such amount, vehicle along with goods may be released. It appears that one another representation dated 30th April 2019 addressed to State Tax Officer (2), Mobile Squad, Division-1, Ahmedabad, along with copy of challan. To cut-short controversy for time being, writapplicant deposited amount of Rs.1,85,500=00. However, according to authorities, amount due and payable is Rs.3,93,750=00. There are many larger issues involved in this petition, more particularly, with regard to interpretation of Sections 129 and 130 of GST Act. Many petitions have been admitted and are pending for consideration in this regard. We propose to pass order directing respondent authorities to release goods on writ-applicant depositing balance amount, I.e. Rs.2,08,250=00. In passing aforesaid order, we take support of one order passed by co-ordinate Bench of this Court dated 8th March 2019 in Special Civil Application No.4730 of 2019. order reads thus: 1. On 06.03.2019 this Court had passed order in following terms: 1. Mr.Uchit Sheth, learned Page 4 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT advocate for petitioners invited attention of court to provisions of sections 129 and 130 of Central Goods and Services Tax Act, 2017, to point out procedure which is required to be followed by respondent authorities in case where any goods are in transit in contravention of provision of Act or rules made thereunder. It was pointed out that firstly, under section 129 of Act, officer is required to issue notice as contemplated under sub- section (3) thereof and thereafter, after affording opportunity of hearing to person concerned, pass order thereunder. It was submitted that it is only if there is no compliance of order passed under section 129 of Act, that provisions of section 130 of IGST Act can be resorted to. attention of court was invited to impugned show-cause notice dated 1.3.2019, to submit that same seeks to impose penalty, redemption fine and confiscation under section 130 of Act without initiating any proceedings under section 129 of Act, which is not permissible in law. It was further submitted that integrated goods and services tax has already been paid on goods in question at time of import thereof and that goods in question are perishable goods with limited shelf-life. 2. Having regard to submissions advanced by learned counsel for petitioners, Issue Notice returnable on 8th March, 2019. Direct Service is permitted Page 5 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT today. 2. In response to notice, Mr. Soham Joshi, learned Assistant Government Pleader, has appeared on behalf of respondents. 3. learned Assistant Government Pleader has invited attention of Court to detention order dated 14.02.2019 issued by proper officer under sub-section (1) of section 129 of Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act ) and other relevant statutes. It was submitted that goods in question were not accompanied by E-way bill during course of transit and therefore, respondents are fully justified in passing detention order under section 129(1) of CGST Act. 4. Subsection (3) of section 129 of CGST Act provides that proper officer detaining or seizing goods or conveyances shall issue notice specifying tax and penalty payable and thereafter, pass order for payment of tax and penalty under clause (a) or clause (b) or clause (c). Sub- section (4) provides that no tax, interest or penalty shall be determined under sub-section (3) without giving person concerned opportunity of being heard. 5. In present case, show-cause notice dated 01.03.2019 has been issued under section 130 of CGST Act calling upon petitioner to show cause as to why goods in question as well as vehicle should not be Page 6 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT confiscated for non-payment of amount of Rs.60,72,639/-, as detailed therein. On query by Court, learned Assistant Government Pleader is not in position to point out that procedure, as contemplated under subsections (3) and (4) of section 129 of CGST Act, has been followed. Thus, prima facie, it appears that show- cause notice under section 130 of CGST Act has been issued without complying with requirements of section 129 of CGST Act. It is also admitted position that goods in question are perishable in nature. 6. In aforesaid premises, in opinion of this Court, petitioner has made out strong prima facie case for grant of interim relief. By way of interim relief, respondents are hereby directed to forthwith release goods in question and Truck bearing registration no. GJ-07- UU-7250 detained/seized under purported exercise of powers under sections 129 and 130 of CGST Act. However, petitioner shall file undertaking before this Court within week from today to effect that in case petitioner, ultimately, does not succeed in petition, he shall duly cooperate in further proceedings. 7. Stand over to 27.03.2019, so as to enable respondents to file affidavit-in-reply, if any, in matter. Direct service is permitted today. vehicle bearing registration no.GJ-03-AT-1362 as well as goods, I.e. betel nuts, Page 7 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT detained/seized under purported exercise of powers under Sections 129 and 130 of GST Act shall be released immediately upon writ- applicant depositing amount of Rs.2,08,250=00 with concerned department. writ-applicant shall file undertaking before this Court within week from today to effect that in case writ- applicant ultimately does not succeed in petition, he shall duly cooperate in further proceedings. Post this matter for further hearing on 24th July 2019. Direct service is permitted. 4. By ad-interim order, this Court directed that goods to be released upon writ applicant on depositing amount of Rs.2,08,250/-. With this direction, writ applicant availed benefit of interim-order and got goods released, on payment of requisite amount. We are now called upon to adjudicate legality and validity of order passed by authority in GST MOV-11. 5. learned advocate, appearing for writ applicant, vehemently submitted that impugned order of confiscation is without any application of mind and not tanable in law. Mr. Sheth, learned advocate, has pointed out something very unusual that notice for confiscation was issued on 22nd April, 2019, whereas, order of confiscation came to be passed on 11th April, 2019. He pointed out that thus, final order of Page 8 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT confiscation came to be passed on very same date on which notice was issued. 6. Two grounds have been raised by department for purpose of confiscation of goods. First is that e-way bill was not generated and second ground was under valuation. In what state of circumstances authority would be justified to invoke Section 130 of Act, for purpose of confiscation, is now explained in detail by this Court in case of Synergy Fertichem Pvt.Ltd V/s. State of Gujarat [Special Civil Application No.4730 of 2019]. Paragraph Nos.99 to 104 of said judgment, read thus: 99.It is practically impossible to envisage various types of contravention of provisions of Act or Rules for purpose of detention and seizure of goods and conveyances in transit. contravention could be trivial or it may be quite serious sufficient enough to justify detention and seizure. This litigation is nothing but outburst on part of dealers that practically in all cases of detention and seizure of goods and conveyance, authorities would straightway invoke Section 130 of Act and thereby would straightway issue notice calling upon owner of goods or owner of conveyance to show-cause as to why goods or conveyance, as case may be, should not be confiscated. Once such notice under Section 130 of Act is issued right at inception, I.e, right at time of detention and seizure, then Page 9 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT provisions of Section 129 of Act pale into insignificance. reason why we are saying so is that for purpose of release of goods and conveyance detained while in transit for contravention of provisions of Act or rules, section provides for release of such goods and conveyance on payment of applicable tax and penalty or upon furnishing security equivalent to amount payable under clause (a) or clause (b) to Clause (1) of Section 129. Section 129(2) also provides that provisions of sub-section (6) of Section 67 shall mutatis mutandis apply for detention and seizure of goods and conveyances. We quote Section 67(6) as under; 67(6) goods so seized under sub-section(2) shall be released, on provisional basis, upon execution of bond and furnishing of security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as case may be. 100. Section 129 further provides that proper officer, detaining or seizing goods or conveyances, is obliged to issue notice, specifying tax and penalty payable and, thereafter, pass order for payment of such tax and penalty. Clause (4) provides that no tax, interest or penalty shall be determined under sub-section (3) without giving person concerned opportunity of being heard. Clause (5) provides that on payment of amount, referred to in sub-section (1) of proceedings in respect of notice, specified in sub-section (3) are deemed to be concluded, and in last, clause (6) provides that if tax and penalty is not paid within 14 days of detention or seizure, then further proceedings would be initiated in accordance with Page 10 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT provisions of Section 130. 101. We are of view that at time of detention and seizure of goods or conveyance, first thing authorities need to look into closely is nature of contravention of provisions of Act or Rules. second step in process for authorities to examine closely is whether such contravention of provisions of Act or Rules was with intent to evade payment of tax. Section 135 of Act provides for presumption of culpable mental state but such presumption is available to department only in cases of prosecution and not for purpose of Section 130 of Act. What we are trying to convey is that in given case, contravention may be quite trivial or may not be of such magnitude which by itself would be sufficient to take view that contravention was with necessary intent to evade payment of tax. 102. In such circumstances, referred to above, we propose to take view that in all cases, without any application of mind and without any justifiable grounds or reasons to believe, authorities may not be justified to straightway issue notice of confiscation under Section 130 of Act. For purpose of issuing notice of confiscation under Section 130 of Act at threshold, I.e,. at stage of Section 129 of Act itself, case has to be of such nature that on face of entire transaction, authority concerned is convinced that contravention was with definite intent to evade payment of tax. We may give one simple example. driver of vehicle is in position to produce all Page 11 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT relevant documents to satisfaction of authority concerned as regards payment of tax etc., but unfortunately, he is not able to produce e-way bill , which is also one of important documents so far as Act, 2017 is concerned. authenticity of delivery challan is also not doubted. In such situation, it would be too much for authorities to straightway jump to conclusion that case is one of confiscation, I.e, case is of intent to evade payment of tax. 103. We take notice of fact that practically in all cases, after detention and seizure of goods and conveyance, straightway notice is issued under Section 130, and in said notice, one would find parrot like chantation as goods were being transported without any valid documents, it is presumed that goods were being transported for purposes of evading tax . We have also come across notices of confiscation, wherein it has been stated that the driver of conveyance is presumed to have contravened provisions of Act or Rules with intent to evade payment of tax. This, in our opinion, is not justified. resultant effect of such issue of confiscation notice at very threshold, without any application of mind or without there being any foundation for same, renders Section 129 of Act practically otiose. We take cognizance of fact that once notice under Section 130 of Act is issued, then vehicle is not released even if owner of goods is ready and willing to pay tax and penalty that may be determined under Section 129 of Act. Such approach leads to unnecessary detention of goods and conveyance for Page 12 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT indefinite period of time. Therefore, what we are trying to convey is that all cases of contravention of provisions of Act or Rules, by itself, may not attract consequences of such goods or conveyance confiscated under Section 130 of Act. Section 130 of Act is altogether independent provision which provides for confiscation in cases where it is found that intention was to evade payment of tax. Confiscation of goods or vehicle is almost penal in character. In other words, it is aggravated form of action, and object of such aggravated form of action is to deter dealers from evading tax. 104. In aforesaid context, we would like to clarify that we do not propose to lay down, as proposition of law, or we should not be understood to have taken view that, in any circumstances, authorities concerned cannot invoke Section 130 of Act at threshold, I.e., at stage of detention and seizure. What we are trying to convey is that for purpose of invoking Section 130 of Act at very threshold, authorities need to make out very strong case. Merely on suspicion, authorities may not be justified in invoking Section 130 of Act straightway. If authorities are of view that case is one of invoking Section 130 of Act at very threshold, then they need to record their reasons for such belief in writing, and such reasons recorded in writing should, thereafter, be looked into by superior authority so that superior authority can take appropriate decision whether case is one of straightway invoking Section 130 of Act. Any opinion of authority to be formed is not subject to objective test. Page 13 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT language of Section 130 of Act leaves no room for relevance of official examination as to sufficiency of ground on which authority may act or proceed for purpose of confiscation at very threshold. But, at same time, there must be material based on which alone authority could form its opinion in good faith that it has become necessary to call upon owner of goods as well as owner of conveyance to show-cause as to why goods and conveyance should not be confiscated under Section 130 of Act. notice for purpose of confiscation must disclose materials, upon which, belief is formed. It could be argued that it is not necessary for authority under Act to state reasons for its belief. For time being, we proceed on basis of such argument. But, if it is challenged that notice is bereft of necessary details or satisfaction of authority is imaginary or based on mere suspicion, then authority must disclose materials, upon which, his belief was formed as it has been held by Supreme Court in Sheonath Singh s case [AIR 1971 SC 2451]. In Sheonath Singh (supra), Supreme Court held that Court can examine materials to find out whether honest and reasonable person can base his reasonable belief upon such materials although sufficiency of reasons for belief cannot be investigated by Court. formation of opinion by authority that goods and conveyance are liable to be confiscated should reflect intense application of mind. We are saying so because it is not any or every contravention of provisions of Act or Rules which may be sufficient to arrive at conclusion that case is one of intention to evade payment of tax. In short, action must be held in good faith and should not Page 14 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 C/SCA/11018/2019 JUDGMENT be mere pretence. 7. We are convinced with submissions of Mr.Sheth, as regards legality and validity of impugned order of confiscation in Form GST MOV-11. 8. In view of aforesaid, this Writ Application is allowed, in part. impugned order of confiscation, in Form GST MOV-11, is hereby quashed and set aside. matter is remitted to respondent No.2 for fresh consideration, so far as issue of confiscation is concerned. 9. While considering issue fresh, respondent No.2 shall bare in mind principles, explained by this Court in Synergy Fertichem Pvt.Ltd V/s. State of Gujarat [Special Civil Application No.4730 of 2019], decided on 23.12.2019, and more particularly, observations made in paragraph Nos.99 to 104 of said judgment. 10. In view of above, Writ Application stands disposed of. Direct service is permitted. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) PALAK Page 15 of 15 Downloaded on : Wed Jun 09 11:46:21 IST 2021 Sahil Traders v. State of Gujarat
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