C/SCA/16702/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 16702 of 2019 M/S VALIMOHAMMED JUSAB AND CO. Versus STATE OF GUJARAT Appearance: MR VARIS V ISANI(3858) for Petitioner(s) No. 1 MR SOAHAM JOSHI, AGP GOVERNMENT PLEADER(1) for Respondent(s) No. 1,2 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 04/03/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Rule, returnable forthwith. Mr. Soaham 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: 17(A) 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 confiscation notice dated 21.8.2019 in FORM GST MOV 10 (annexed at Annexure A); (B) 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.GJ 04 V 4335 along with goods contained therein; (C) Pending notice, admission and final hearing of this petition, be Page 1 of 7 Downloaded on : Thu Jul 01 11:55:29 IST 2021 C/SCA/16702/2019 ORDER pleased to stay operation of impugned detention/confiscation orders (annexed at Annexure A) and be pleased to further direct learned Respondent authorities to forthwith release truck No.GJ 04 V 4335 along with goods contained therein; (D) Ex parte ad interim relief in terms of prayer may kindly be granted; (E) Such further relief(s) as deemed fit in facts and circumstances of case may kindly be granted in interest of justice for which act of kindness your petitioner shall forever pray. 3. We take note of order, passed by Co ordinate Bench of this Court, dated 27th September, 2019, which reads thus: 1. Mr. Varis V. Isani, learned advocate for petitioner has submitted that petitioner had work order in respect of some job work for which Winch Machine was transported to Nirma Ltd., Kala Talav. However, on account of some defect in machinery, same was taken back to premises of petitioner directly to Yadav Trading Co., namely, dealer from whom machinery has been purchased for purpose of repairs on 20.8.2019. 2. It was submitted that gate pass had been issued by Nirma Ltd. with regard to removal of Winch Machine from its premises. However, when machine in question was being transported back to premises of Nirma Ltd., vehicle in question being GJ 04 V 4335 was intercepted and same has been seized under section 130 of Gujarat Goods and Service Tax Act, 2017 (hereinafter referred to as 'GGST Act, 2017') read with relevant provisions of other statutes, mainly on ground that e way bill was not tendered for goods in movement. 3. learned advocate for petitioner submitted that vehicle came to be intercepted at 18:15 hours on 20.8.2019 and immediately thereafter, at 7.49 p.m., e way bill came to be generated. attention of court was invited to provisions of section 2(108) of GGST Act, 2017 to submit that taxable supply means supply of goods or services or both which is leviable to tax under Act. It was submitted that in present case, goods were merely being transported back to premises of Nirma Ltd. for job work and that no goods or services were leviable to tax in respect thereof. 4. Reference was made to provisions of section 122 of GGST Act, 2017 and more particularly, clause (xiv) thereof to submit Page 2 of 7 Downloaded on : Thu Jul 01 11:55:29 IST 2021 C/SCA/16702/2019 ORDER that same provides that where taxable person who transports any taxable goods without cover of documents as may be specified in this behalf, he shall be liable to pay penalty of Rs.10,000/ or amount equivalent to tax evaded or tax not deducted under section 51 etc. It was submitted that in this case, petitioner is not liable to pay any tax and hence, at most, petitioner could be made liable to pay penalty of Rs.10,000/ . 5. Having regard to submissions advanced by learned advocate for petitioner in context of documents produced on record, which prima facie indicate that old and used Winch Machine was being transported from premises of Yadav Trading Co. where it had been sent for repairs and was being transported back to Nirma Ltd., there is substance in submissions made by learned advocate for petitioner that at best, petitioner would be liable to pay fine of Rs.10,000/ as contemplated under clause (xiv) of section 122 of GGST Act, 2017. 6. Under circumstances, issue notice, returnable on 17.10.2019. By way ad interim relief, respondents are directed to forthwith release Truck No.GJ 04 V 4335 along with goods contained therein subject to petitioner depositing sum of Rs.10,000/ with respondent authorities. 7. 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 Page 3 of 7 Downloaded on : Thu Jul 01 11:55:29 IST 2021 C/SCA/16702/2019 ORDER Vs. 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 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 14 days of detention or seizure, then further proceedings would be initiated in accordance with Page 4 of 7 Downloaded on : Thu Jul 01 11:55:29 IST 2021 C/SCA/16702/2019 ORDER 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 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 Page 5 of 7 Downloaded on : Thu Jul 01 11:55:29 IST 2021 C/SCA/16702/2019 ORDER 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 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, Page 6 of 7 Downloaded on : Thu Jul 01 11:55:29 IST 2021 C/SCA/16702/2019 ORDER 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. 7. It is now for applicant to make good his case that show cause notice, issued in Form 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) aruna Page 7 of 7 Downloaded on : Thu Jul 01 11:55:29 IST 2021 Valimohammed Jasab and Co. v. State of Gujarat