A T Trading Company v. State of Gujarat
[Citation -2020-LL-0304-127]

Citation 2020-LL-0304-127
Appellant Name A T Trading Company
Respondent Name State of Gujarat
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act CGST
Date of Order 04/03/2020
Judgment View Judgment
Keyword Tags goods and services tax • application of mind • relevant documents • reasonable belief • irreparable loss • payment of tax • notice issued • satisfaction • penalty • detention of goods


C/SCA/9676/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 9676 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 NO see judgment ? 2 To be referred to Reporter or not ? NO 3 Whether their Lordships wish to see fair copy of NO judgment ? 4 Whether this case involves substantial question of law NO as to interpretation of Constitution of India or any order made thereunder ? M/S T TRADING COMPANY Versus STATE OF GUJARAT Appearance: MR PAWANSHREE AGRAWAL, ADVOCATE WITH MR RAHUL L GAJERA(9399) for Petitioner(s) No. 1 MR SOAHAM JOSHI, AGP GOVERNMENT PLEADER(1) for Respondent(s) No. 1,2,3 JAIMIN GANDHI(8065) for Respondent(s) No. 4 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 04/03/2020 Page 1 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 C/SCA/9676/2019 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. By this writ application under Article 226 of Constitution of India, writ applicant Proprietory concern, engaged in business of Arecanut, has prayed for following reliefs: 34(a) Be pleased to issue appropriate writ, direction or order under Article 226 of Constitution quashing and setting aside detention order dated 25/26.04.2019 passed by respondent no.2 and notice dated 26.04.2019 read with revised notice dated 06.05.2019 issued by respondent no.2; (b) Pending hearing and final disposal of this petition, be pleased to stay operation and effect of impugned detention order dated 25/26.04.2019 and notice dated 26.04.2019 read with revised notice dated 06.05.2019 issued by respondent no.2 u/s.130 of Central GST Act, 2017 and to further direct respondent no.2 to release goods and vehicle No.KA 14 B 3156 which has been seized by Respondent no.2 during pendency of writ petition otherwise petitioner shall suffer irreparable loss and injury. (c) That any other and further relief which is just and proper may kindle be granted by this Hon'ble Court. 2. We need not to go into facts in details, as on date, controversy is in very narrow compass.. 3. On 21st May, 2019, learned Single Judge of this Court passed following order: 1. Learned Advocate Mr. Pawanshree Agrawal appearing for petitioner invited attention of this Court to order dated 16.05.2019 passed in Special Civil Application No. 9619 of 2019. 2. Having regard to submissions advanced by learned advocates for respective parties, by way of ad interim measure, respondents are directed to release detained goods together with conveyance, subject to petitioner paying tax and penalty as computed by respondent authorities and also subject to filing solemn undertaking before this court to effect that petitioner Page 2 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 C/SCA/9676/2019 JUDGMENT shall make good deficit liability, if any, as may be determined finally by authorities for goods as well as for vehicle/s subject to petitioner's right to challenge same in accordance with law. For release of goods and vehicle/s, petitioner shall also submit before concerned authority proof of payment of above referred amounts and also copy of solemn undertaking filed in this court as well as documents, namely, PAN card and Aadhar card / Election card for identification of petitioner and address of petitioner. 3. Issue Notice returnable on 19.06.2019. Direct Service is permitted. 4. order passed by this Court referred to above was availed and goods and conveyance ultimately came to be released upon payment of requisite amount towards tax and penalty. 5. We are called upon to look into legality and validity of notice dated 26th April 2019, issued by State Tax Department in Form GST MOV 10. notice issued by State Tax Department to writ applicant in Form GST MOV 10 calls upon writ applicant to show cause as to why goods and conveyance should not be confiscated under Section 130 of Central Goods and Services Tax Act, 2017. show cause notice in Form GST MOV 10 is substantially on following grounds: (i) Vehicle was intercepted from route where it is not supposed to go as per route of E way Bill and destination. (ii) Upon site visit, it is revealed that no actual business is being carried out from place of M/s. Natraj Enterprise, 2, Sundaram Complex, New Railway Colony, Ground Floor, Sabarmati, Ahmedabad 380005. (iii) value of goods being transported is shown too low compared to its real market value i.e. Rs.210 against rs.225 real value of Arecanut. 6. While making good, principal argument canvassed by Page 3 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 C/SCA/9676/2019 JUDGMENT learned counsel appearing for writ applicant that impugned show cause notice in Form GST MOV 10 deserves to be quashed. It is pointed out that there is no any whisper in entire notice that alleged contravention was with intent to evade payment of tax. 7. Mr. Agrawal, learned counsel appearing for writ applicant vehemently submitted that most important ingredient for purpose of confiscation of goods or conveyance is intention on part of dealer to evade payment of tax. According to Mr. Agrawal, said decision on part of authority concerned is missing in Form GST MOV 10. It is submitted that show cause notice, in such circumstances, could be termed as without jurisdiction. 8. In support of aforesaid submissions, strictly reliance has been placed by learned counsel on recent pronouncement of this Court in case of Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat; Special Civil Application No.4730 of 2019 and allied matters; decided on 23rd December, 2019, more particularly, observations made by Bench in Paragraphs 101 to 104. 9. On other hand, this writ application has been vehemently opposed by Mr. Soaham Joshi, learned AGP appearing for State. learned AGP would submit that since matter is at stage of show cause notice, writ applicant should be asked to file appropriate reply and make his case good before authority for purpose of getting show cause notice discharged. learned AGP would submit that mere omission in show cause notice with regard to intent to evade payment of duty by itself would not make show cause notice susceptible. complaint that itself is without jurisdiction or without any application of mind. Page 4 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 C/SCA/9676/2019 JUDGMENT 10. Mr. Agrawal, learned counsel appearing for writ applicant in rejoinder submitted that even if, all three grounds stated in show cause notice are accepted as true, such grounds are not sufficient to attract provisions of Section 130 of Act i.e. for purpose of confiscation of goods and conveyance. 11. Having heard learned counsel appearing for parties and having gone through materials on record, only question that falls for our consideration is whether we should quash impugned show cause notice? 12. In Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat [Supra], this Court had occasion to explain provisions of Sections 129 and 130 of Act in details. We may quote relevant paragraphs, upon which reliance has been placed by learned counsel appearing for writ applicant. 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 Page 5 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 C/SCA/9676/2019 JUDGMENT 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 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 view that, in any circumstances, authorities concerned cannot invoke Section 130 of Act at Page 6 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 C/SCA/9676/2019 JUDGMENT 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 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. 13. We are of view that writ applicant makes his case good before authority concerned and point out principle explained by this Court in aforesaid decision. It shall also open for writ applicant to file detail reply and take all legal grounds available to him Page 7 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 C/SCA/9676/2019 JUDGMENT for purpose of getting notice discharged. 14. We dispose of this writ application with direction to authority concerned to hear writ applicant or any of his representative and take into consideration submissions, which have been canvassed before us. submissions, which have been canvassed before us, shall be looked into by authority keeping in mind observations made by this Court in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat [Supra] referred to above. authority concerned shall undertake this exercise at earliest and pass appropriate order in accordance with law within period of four weeks from date of receipt of writ of this order. 15. With above, this writ application stands disposed of. Direct service is permitted. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) aruna Page 8 of 8 Downloaded on : Thu Jul 01 11:40:47 IST 2021 T Trading Company v. State of Gujarat
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