C/SCA/6126/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 6126 of 2019 M/S MOON TRADERS THROUGH HARSHADKUMAR BHOGILAL RAVAL Versus STATE OF GUJARAT Appearance: MR.D K.PUJ(3836) for Petitioner(s) No. 1 DELETED(20) for Respondent(s) No. 3 MR. SOHAM JOSHI, LD .ASST. GOVERNMENT PLEADER(1) for Respondent(s) No. 1,2 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 19/02/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Rule, returnable forthwith. Mr. Soham Joshi, learned Assistant Government Pleader waives service of notice of rule for and on behalf of respondents. 2. By this Writ Application under Article 226 of Constitution of India, writ applicant has prayed for following reliefs: (A) This Hon'ble Court may kindly be pleased to issue Writ of Mandamus, or any other appropriate writ, order and/or directions in nature of mandamus quashing and setting aside order of detention passed by respondent no.2 under Section 129(1) of GST Act of goods and conveyance bearing Truck No.GJ-12-AT- 6507 at Rajoda at about 4:30 clock on 7.3.2019 as well as notice dated 22.3.2019 issued by respondent no.2 for confiscation of goods or conveyances and levy of penalty under Section 130 of GST Act as said Page 1 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 C/SCA/6126/2019 ORDER actions of respondent no.2 are absolutely illegal, unlawful contrary to facts and evidence on record, violative of principles of natural justice and against provisions of Act and Rules framed thereunder; (B) During admission, hearing and final disposal of present Petition, this Hon'ble Court may be pleased to grant interim relief directing respondent no.2 to release goods and conveyance in question forthwith on any term or condition as may be fixed by this Hon'ble Court. 3. We take note of order, passed by co-ordinate Bench of this Court, dated 27th March, 2019, which reads thus: 1. Leave to delete respondent No.3 from array of respondents. 2. Mr. D. K. Puj, learned advocate for petitioner has invited attention of court to notice for confiscation of goods or conveyance and levy of penalty under section 130 of Central Goods and Services Act, 2017 read with relevant provisions of State/Union Territory Goods and Services Act, 2017/The Integrated Goods and Service Tax Act, 2017 and Goods and Services Tax (Compensation to States) Act, 2017 issued in FORM GST MOV-10, to submit that despite fact that under section 129 of Central Goods and Services Tax Act, 2017, concerned 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. Referring to impugned notice, it was pointed out 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. 3. perusal of impugned notice reveals that in paragraph 4 thereof, there is blank which has not been filled in which makes it manifest that procedure as Page 2 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 C/SCA/6126/2019 ORDER required under provisions of Act as referred to in paragraph 4 have not been followed by competent authority prior to issuance of said notice. 4. Issue Notice to respondents returnable on 3rd April, 2019. respondents shall also show cause as to why costs should not be imposed upon respondents for noncompliance of relevant statutory provisions. 5. It is clarified that in meanwhile, it would be open for respondents to release vehicle together with goods upon payment of tax amount in terms of impugned notice. Direct service is permitted. 4. While issuing notice, this Court directed that vehicle as well as goods be released, upon payment of tax, in terms of impugned notice. 5. writ applicant availed benefit of interim-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. 6. 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 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 Page 3 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 C/SCA/6126/2019 ORDER 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 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 Page 4 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 C/SCA/6126/2019 ORDER 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 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 Page 5 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 C/SCA/6126/2019 ORDER 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 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 Page 6 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 C/SCA/6126/2019 ORDER 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. 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 Page 7 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 C/SCA/6126/2019 ORDER 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. 7. It is now for applicant to make good his case that show cause notice, issued in GST-MOV-10, deserves to be discharged. 8. 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) Vahid Page 8 of 8 Downloaded on : Fri Jun 18 11:07:58 IST 2021 Moon Traders v. State of Gujarat