2025 (4) TMI 1463 - HC - GST

Challenge to SCN - jurisdiction of appellate authority to entertain the appeal - prayer for provisional release of the goods and conveyance - HELD THAT - On perusal of the impugned show-cause notice passed in GST MOV-10 and order passed in FORM GST MOV-11 prima facie it appears that the supplier of the petitioner-M/s. Sunrise Enterprise is a non-existent entity. However neither the supplier of the goods to the petitioner nor the transporter who is owner of the truck in question have made an attempt for release of the goods or conveyance. On perusal of the impugned order passed in FORM GST MOV-11 it appears that the petitioner has purchased the goods from some other person and obtained the bill in name of M/s. Sunrise Enterprise who is a non-existent entity. On perusal of the details provided in FORM GST MOV-11 it also appears that the said M/s. Sunrise Enterprise was found to be a non-existent on physical verification carried out by respondent No. 4 at Surat and therefore the goods purchased by the petitioners are liable to be confiscated under the provision of section 130 of the GST Act. No interference is made in the impugned order to challenge the impugned show-cause notice dated 11.11.2024 in FORM GST MOV-10 as well as order in FORM GST MOV-11 passed by respondent No. 4 - Petition dismissed.

Summary

Issues Presented and Considered:

The core legal questions considered by the Court in this matter include:

• Whether the petitioner was entitled to challenge the show-cause notice issued in FORM GST MOV-10 and the order passed in FORM GST MOV-11 before the High Court under Articles 226 and 227 of the Constitution of India, despite having preferred an appeal under the GST Act.
• Whether the petitioner's appeal filed before the Commissioner (Appeals) at Hyderabad was maintainable and whether the appellate authority had jurisdiction to entertain the appeal.
• The legality and validity of the detention and proposed confiscation of goods and conveyance under sections 129 and 130 of the GST Act, particularly in light of the supplier being a non-existent entity and the use of fake/bogus invoices.
• Whether the petitioner was entitled to provisional release of the goods and conveyance during the pendency of the appeal, including the withdrawal of the auction notice issued by the respondent authority.

Issue-wise Detailed Analysis:

1. Maintainability of Petition under Articles 226 and 227 challenging show-cause notice and order under GST Act

Relevant legal framework and precedents: The GST Act provides a statutory remedy of appeal under section 107 and related rules (Rule 109A) against orders passed under sections 129 and 130. The principle of exhaustion of alternative statutory remedies before invoking constitutional writ jurisdiction is well-established in administrative law jurisprudence.

Court's interpretation and reasoning: The Court observed that the petitioner had already availed the statutory remedy by filing an appeal before the Commissioner (Appeals) at Hyderabad. The impugned show-cause notice and order are subject matters of the appeal pending adjudication. The Court held that the petitioner could not bypass the statutory appellate mechanism and directly seek relief under Articles 226 and 227.

Key evidence and findings: The petitioner's appeal was filed within the statutory period after the order was uploaded on the portal. The petitioner's repeated requests to upload the order and subsequent filing of appeal were noted. The Court found no procedural irregularity in the filing of the appeal.

Application of law to facts: Since the petitioner had an efficacious alternative remedy, the High Court declined to interfere with the orders under GST Act through writ jurisdiction, emphasizing the principle of exhaustion of statutory remedies.

Treatment of competing arguments: The petitioner argued that the delay in uploading the order prevented timely filing of appeal and justified writ jurisdiction. The respondents contended that the appeal was properly filed and the petitioner had availed the remedy. The Court sided with respondents, noting the petitioner's own efforts to ensure the order was uploaded and appeal filed timely.

Conclusion: The petition challenging the show-cause notice and order under Articles 226 and 227 was not maintainable and was dismissed on this ground.

2. Jurisdiction and propriety of appeal before Commissioner (Appeals) Hyderabad

Relevant legal framework and precedents: Section 107 of the GST Act and Rule 109A of the GST Rules govern the appellate mechanism. The appellate authority is generally the Commissioner (Appeals) of the jurisdiction where the order was passed.

Court's interpretation and reasoning: The Court noted that the respondent No. 4, who passed the impugned order, had become functus officio and the appeal was properly preferred before the Commissioner (Appeals) at Hyderabad, the jurisdictional appellate authority chosen by the petitioner on the portal.

Key evidence and findings: The petitioner's appeal was filed online and physically before the Commissioner (Appeals) Hyderabad within the statutory period, following the order's upload on the portal.

Application of law to facts: The Court held that the appeal was maintainable and the appellate authority had jurisdiction to hear the matter, thereby negating the petitioner's contention that the appeal should have been filed before the Commissioner (Appeals) Gujarat.

Treatment of competing arguments: The respondents submitted that the appeal was properly filed and the petitioner had availed the remedy. The petitioner's contention about jurisdiction was rejected.

Conclusion: The appeal before the Commissioner (Appeals) Hyderabad was valid and maintainable.

3. Validity of detention, confiscation, and proposed auction of goods and conveyance under GST Act

Relevant legal framework and precedents: Sections 129 and 130 of the GST Act empower authorities to detain and confiscate goods and conveyances involved in tax evasion or transportation of goods without proper documents. The law mandates physical verification and issuance of show-cause notices before confiscation.

Court's interpretation and reasoning: The Court perused the show-cause notice and order and found that the supplier of goods, M/s Sunrise Enterprise, was a non-existent entity. The goods were transported under invoices found to be bogus. Physical verification by respondent No. 4 confirmed the non-existence of the supplier.

Key evidence and findings: The show-cause notice and order detailed the non-existence of supplier and fake invoices. The petitioner admitted purchase from another person but obtained bills in the name of the non-existent supplier. The truck was intercepted and detained as per procedure.

Application of law to facts: The Court held that the goods were liable to confiscation under section 130 of the GST Act as the statutory conditions for confiscation were fulfilled.

Treatment of competing arguments: The petitioner sought release of goods and conveyance on payment of penalty under protest, but the Court noted that neither the supplier nor the transporter sought release. The respondents maintained the confiscation was justified.

Conclusion: The detention and proposed confiscation of goods and conveyance were lawful and justified on the facts.

4. Provisional release of goods and conveyance and withdrawal of auction notice during pendency of appeal

Relevant legal framework and precedents: Section 129(1)(a) of the GST Act allows for provisional release of goods and conveyance on payment of penalty pending adjudication. The appellate authority has jurisdiction to consider applications for such release during appeal proceedings.

Court's interpretation and reasoning: The petitioner had made multiple applications to the respondent authorities and appellate authority for provisional release and withdrawal of auction notice, offering to pay penalty under protest. However, no order was passed releasing the goods or withdrawing the auction notice.

Key evidence and findings: Petitioner's emails and applications for release and withdrawal of auction notice were on record. The appellate authority was seized of the appeal and application for provisional release.

Application of law to facts: The Court noted that since the petitioner had applied to the appellate authority for provisional release, no further adjudication by the High Court was warranted at this stage. The appellate authority was competent to decide on provisional release.

Treatment of competing arguments: The petitioner urged the Court to order provisional release and withdrawal of auction notice. The respondents submitted that the appellate authority was dealing with the matter and no interference was required.

Conclusion: The Court declined to interfere with the provisional release and auction notice matters, leaving it to the appellate authority to decide.

Significant Holdings:

"The petitioner could not have preferred this petition under Article 226 of the Constitution of India praying for the same relief for quashing and setting aside the show-cause notice in FORM GST MOV 10 as well as the order in FORM GST MOV 11 which is a subject-matter of adjudication before the appellate authority."

"The petitioner had already preferred appeal before respondent No. 5 which is pending for adjudication. The petitioner has therefore, availed the remedy as per the provisions of the GST Act."

"It appears that the supplier of the petitioner-M/s. Sunrise Enterprise is a non-existent entity...the goods purchased by the petitioners are liable to be confiscated under the provision of section 130 of the GST Act."

"No interference is made in the impugned order...The observations made by us in this order are prima facie subject to the adjudication to be done by the appellate authority in accordance with law."

Core principles established include the primacy of statutory appellate remedies under the GST Act over writ jurisdiction, the lawfulness of confiscation of goods transported under fake invoices from a non-existent supplier, and the procedural propriety of filing appeals and applications for provisional release before the designated appellate authority.

Final determinations:

• The High Court dismissed the petition challenging the show-cause notice and order passed under the GST Act.
• The appeal filed by the petitioner before the Commissioner (Appeals) Hyderabad was held maintainable.
• The detention and proposed confiscation of goods and conveyance were upheld as lawful.
• The matter of provisional release of goods and withdrawal of auction notice was left to the appellate authority's adjudication.