C/SCA/17805/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 17805 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 ? GLOBAL KNITFAB THROUGH AUTHORISED PERSON, ACCOUNT MANAGER, BHAGWAN POOSH RAJ AGARWAL Versus STATE TAX OFFICER (1) Appearance: MR VINAY SHRAFF WITH MR VISHAL DAVE (8375) for Petitioner(s) No. 1 MR MITESH AMIN, GOVERNMENT PLEADER(1) for Respondent(s) No. 1,2 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 13/02/2020 ORAL JUDGMENT Page 1 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. By this Writ Application under Article 226 of Constitution of India, writ applicant has prayed for following reliefs: a. To issue writ of or in nature of mandamus or any other appropriate writ, order or direction to direct respondent to release goods and vehicle on payment of applicable tax and penalty in terms of clause (a) of Sub section (1) of Section 129 of GGST/ CGST Act after being provided opportunity of hearing under sub section (4) of Section 129 of g GGST / CGST Act; b. To issue order(s), direction(s), writ(s) or any other relief(s), as this Hon ble Court deems fit and proper in facts and circumstances of case and in interest of justice; c. To issue Rule Nisi in terms of prayers (a) to (b) above; d. To Grant ad interim reliefs in terms of prayers above; e. To award costs of and incidental to this application be paid by Respondents. 2. We take note of order passed by co ordinate Bench of this court dated 22.10.2019, which reads thus: 1. Heard Mr. Vinay Shraff, learned advocate with Ms. Hiral U. Mehta and Mr. Naved Page 2 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT Mohammed, learned advocates for petitioner and Ms. Maithili Mehta, learned Assistant Government Pleader for respondents. 2. Issue Rule, returnable on 27.11.2019. By way of interim relief, respondent No.1 is directed to forthwith release conveyance bearing No.GJ19X7826 together with goods contained therein subject to petitioner depositing amount of Rs.76,468/ with respondent No.1. Direct service is permitted today. 3. While issuing notice, this Court had directed that vehicle as well as goods be released upon payment of tax in terms of impugned notice. 4. writ applicant availed benefit of interm order passed by this court and got vehicle along with goods released on payment of tax amount. proceedings, as on date, are at stage of show cause notice, under Section 130 of Central Goods and Services Act, 2017. proceedings shall go ahead in accordance with law. 5. It shall be open for writ applicant to point out recent pronouncement of this Court in case of Synergy Fertichem Pvt.Ltd V/s. State of Gujarat [Special Civil Application No.4730 of 2019]. It shall be open for writ Page 3 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT applicant to rely on observations made by this Court in paragraph Nos.99 to 104 of said judgment, which 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 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 Page 4 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT 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 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 Page 5 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT 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 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 Page 6 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT 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 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 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 Page 7 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT 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. 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 Page 8 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 C/SCA/17805/2019 JUDGMENT 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 be mere pretence. 6. It is now for applicant to make good his case that show cause notice, issued in GSTMOV 10, deserves to be discharged. 7. In view of above, this writ application stands disposed of. Rule is made absolute to aforesaid extent. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) PRAVIN KARUNAN Page 9 of 9 Downloaded on : Fri Jun 18 12:03:24 IST 2021 Global Knitfab v. State Tax Officer (1)