2025 (1) TMI 586 - HC - GST

Provisional release of the goods under Section 67 (6) of the GST Act pending adjudication of the notice under Section 130 - legality of the seizure order and the subsequent show cause notice issued u/s 130 of the GST Act - HELD THAT - The question as to whether interim release of goods can be ordered pending adjudication of notice under Section 130 of the GST Act came up for consideration before this Court in Golden Traders 2022 (8) TMI 147 - KERALA HIGH COURT . Distinguishing the judgment of the Hon'ble Supreme Court in Lexus Exports 1994 (1) TMI 153 - SUPREME COURT and referring to the decision in Balakrishnan 2021 (12) TMI 123 - KERALA HIGH COURT , this Court held 'the petitioner is entitled to an order directing the release of goods pending adjudication of Ext.P9 notice. As a result, it is directed that pending adjudication of Ext.P9 notice, the goods and conveyance detained in terms of Expt.P9 order shall be released to the petitioner on the petitioner depositing a sum of Rs. 1,00,000/- (Rupees One Lakh Only) and furnishing a simple bond for the balance amount.' This Court, in Golden Traders 2022 (8) TMI 147 - KERALA HIGH COURT , has categorically held that there is no provision in Section 130 of the GST Act which prohibits the interim release of goods seized pending adjudication of show cause notice under Section 130. Section 130(7), therefore, provides an option to pay fine in lieu of confiscation even after the adjudication. The intention of the legislature is that the interest of the revenue is protected. The adjudication can be proceeded even if the goods are released pending adjudication. Even if confiscation is ordered, there is an option to the owner of the goods to pay fine in lieu of confiscation. Further, after the owner of the goods avails the option but refuse to make payment in lieu of confiscation, Section 130(6) permits the proper officer to withdraw the order of release and hold possession of the goods confiscated. The provisional release does not in fact result in loss of absolute custody by the Department over the goods seized, as the Department will still have constructive custody. The object of the provision is only to secure the value of the goods that are liable for confiscation and not to confiscate the goods as such. Therefore, even if goods are ordered to be released pending adjudication, no prejudice is caused to the Department, as the revenue is protected by the owner making payment in lieu of confiscation. The reason stated in Ext.P8 that there is no provision under Section 130 of the GST Act to order provisional release of goods pending adjudication of notice under Section 130 cannot be sustained. Conclusion - The provisional release of goods is permissible under Section 67(6) even after the initiation of Section 130 proceedings. The adjudication can be proceeded even if the goods are released pending adjudication. Petition disposed off.

Summary

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1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following legal issues:

• Whether the petitioner is entitled to provisional release of goods under Section 67(6) of the GST Act pending adjudication of a show cause notice issued under Section 130 of the GST Act.
• The legality of the seizure order and the subsequent show cause notice issued under Section 130 of the GST Act.
• Whether the writ petition against a show cause notice under Section 130 is maintainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Provisional Release of Goods Pending Adjudication

Relevant Legal Framework and Precedents:

Section 67(6) of the GST Act allows for the provisional release of seized goods upon execution of a bond and furnishing of security. Section 130 deals with confiscation of goods and levy of penalty.

The court referenced the judgment in Golden Traders v. Assistant State Tax Officer and Dhanlaxmi Metals v. State of Gujarat, which support the provisional release of goods even after the initiation of Section 130 proceedings.

Court's Interpretation and Reasoning:

The court held that there is no provision in Section 130 that prohibits the interim release of goods pending adjudication. The intention of the legislature is to protect the revenue, not to confiscate goods absolutely.

Key Evidence and Findings:

The petitioner provided delivery challans and argued that the goods were stock-in-trade, accompanied by valid documents, and accounted for in the books.

Application of Law to Facts:

The court found that the petitioner is entitled to provisional release of goods under Section 67(6) pending adjudication of the show cause notice under Section 130.

Treatment of Competing Arguments:

The court distinguished the case from precedents cited by the respondents, noting that the provisions of the Customs Act do not apply to domestic transactions under the GST Act.

Conclusions:

The court directed the provisional release of the goods upon the petitioner depositing a specified amount and executing a bond for the value of the goods.

Issue 2: Legality of Seizure Order and Show Cause Notice

Relevant Legal Framework and Precedents:

Section 67 of the GST Act provides for the power to inspect, search, and seize goods. Section 130 authorizes confiscation and penalty.

Court's Interpretation and Reasoning:

The court did not interfere with the show cause notice at this stage, leaving the contentions regarding the legality of the seizure order open for adjudication.

Key Evidence and Findings:

The petitioner argued that the goods were seized without valid grounds and that there was no contravention of the GST Act.

Application of Law to Facts:

The court allowed the adjudication process to continue, noting that the petitioner had participated in the proceedings.

Treatment of Competing Arguments:

The court acknowledged the petitioner's cooperation with the proceedings and the lack of immediate grounds to quash the show cause notice.

Conclusions:

The court left the legality of the seizure order and show cause notice open for further adjudication.

Issue 3: Maintainability of Writ Petition

Relevant Legal Framework and Precedents:

The respondents argued that a writ petition against a show cause notice under Section 130 is premature and not maintainable.

Court's Interpretation and Reasoning:

The court did not quash the show cause notice, indicating that the writ petition at this stage was not maintainable.

Key Evidence and Findings:

The petitioner had requested provisional release after the commencement of confiscation proceedings.

Application of Law to Facts:

The court allowed the adjudication process to proceed, leaving the petitioner's contentions open.

Treatment of Competing Arguments:

The court noted the ongoing adjudication process and the petitioner's participation in it.

Conclusions:

The court disposed of the writ petition without quashing the show cause notice.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"There is no provision in Section 130 which prohibits the interim release of goods which are detained pending finalization of proceedings under Section 130."

Core Principles Established:

• The provisional release of goods is permissible under Section 67(6) even after the initiation of Section 130 proceedings.
• The intention of the legislature is to protect revenue, not to keep goods unused until final adjudication.

Final Determinations on Each Issue:

• The petitioner is entitled to provisional release of goods upon depositing a specified amount and executing a bond.
• The legality of the seizure order and show cause notice remains open for further adjudication.
• The writ petition against the show cause notice was not quashed, allowing the adjudication process to continue.