2019 (10) TMI 665 - HC - GST

Confiscation of goods or conveyance - imposition of penalty - non-production of invoice or the e-way bill - contravention to the provisions of sub-section (4) of section 130 of the CGST Act - Principles of natural justice - HELD THAT - In terms of clauses (i) and (iv) of sub-section (1) section 130 of the CGST Act, the goods can be confiscated provided that the person supplies or receives goods in contravention of the provisions of the Act or the rules made thereunder with the intent to evade payment of tax; or contravenes any provisions of the Act and the rules made thereunder with the intent to evade payment of tax respectively. Insofar as clauses (ii) and (iii) are concerned, the very fact that the person does not account for the goods on which he is liable to pay tax under the Act; or supplies any goods which are liable to tax under the Act without having applied for registration, would be sufficient for ordering confiscation of the goods. Therefore, while making an order of confiscation under section 130 of the CGST Act, the officer adjudging it will have to state as to which clause of sub-section (1) of section 130 of the CGST Act is attracted in the facts of the said case. In the present case, the impugned order is totally silent as regards which provision of the Act or the rules has been contravened; which clause of sub-section (1) of section 130 of the CGST Act is attracted in the present case; and as to why the officer adjudging it has come to the conclusion that there is contravention of the provisions of the Act and the rules made thereunder with the intent to evade payment of tax. Sub-section (2) of section 130 of the CGST Act provides that the fine leviable shall not exceed the market value of the goods, less the tax chargeable thereon. It is, therefore, clear that the fine provided under the first proviso to sub-section (2) of section 130 of the CGST Act is the maximum fine leviable. Consequently, the proper officer adjudging the case is required to examine the seriousness of the contravention and impose fine accordingly. It is not as if in every case the proper officer should levy the maximum fine. The order of confiscation should, therefore, reflect due application of mind on the part of the proper officer to the quantum of fine imposed by him. In ASSISTANT COMMISSIONER, COMMERCIAL TAX DEPARTMENT, WORKS CONTRACT LEASING, KOTA VERSUS M/S SHUKLA BROTHERS 2010 (4) TMI 139 - SUPREME COURT the Supreme Court has held that giving reasons in support of the conclusions arrived at is an ingredient of the principles of natural justice. Thus, the impugned order is in breach of the principles of natural justice on two counts firstly, that though the matter was kept for hearing on 28.08.2019, the second respondent passed the impugned order on 24.08.2019 without affording any opportunity of hearing to the petitioner; and secondly, because the impugned order is a totally non-speaking order which does not reflect the reason as to why the proper officer has come to the conclusion that the goods and the conveyance are liable to be confiscated, which renders the order unsustainable - petition allowed by way of remand.

Summary

Issues Involved:
1. Validity of the order of confiscation of goods and conveyance under section 130 of the CGST Act.
2. Compliance with the principles of natural justice.
3. Requirement of a reasoned order.

Issue-wise Detailed Analysis:

1. Validity of the order of confiscation of goods and conveyance under section 130 of the CGST Act:
The petitioner challenged the order dated 24.8.2019 passed by the second respondent in Form GST MOV-11, which ordered the confiscation of the conveyance and goods. The conveyance was intercepted on 6.8.2019 due to the absence of mandatory documents like the invoice and e-way bill. A notice for confiscation was issued on 21.8.2019, directing the petitioner to appear on 28.8.2019. However, the order was passed on 24.8.2019, before the scheduled date. The court noted that section 130 of the CGST Act mandates that no order of confiscation or penalty shall be issued without giving the person an opportunity of being heard.

2. Compliance with the principles of natural justice:
The court observed that the impugned order was passed without affording any opportunity of hearing to the petitioner, which is a violation of sub-section (4) of section 130 of the CGST Act. The court emphasized that the petitioner was not given a fair chance to present his case, as the order was issued before the date mentioned in the notice. This undue haste in passing the order without a hearing contravened the principles of natural justice.

3. Requirement of a reasoned order:
The court scrutinized the impugned order and found it to be a non-speaking order, lacking any reasons for the confiscation decision. The statutory format in Form GST MOV-11 requires the officer to provide reasons for the confiscation in paragraph 5, which was left blank. The court highlighted that the order did not specify which clause of sub-section (1) of section 130 was applicable or why the contravention was considered to be with the intent to evade tax. The court referred to the legislative scheme under section 130, which necessitates a detailed explanation of the grounds for confiscation, including the specific contravention and the intent to evade tax.

The court also pointed out that the fine imposed was equal to the market value of the goods without deducting the tax chargeable, exceeding the maximum fine permissible under sub-section (2) of section 130. The order lacked any indication of the officer's application of mind regarding the quantum of fine, further rendering it unsustainable.

Conclusion:
The court concluded that the impugned order violated the principles of natural justice and was devoid of any reasoning, making it unsustainable. The court quashed the order and remitted the matter to the proper officer for a fresh decision after affording a reasonable opportunity of hearing to the petitioner. The court directed the release of the conveyance and goods, subject to the final outcome of the proceedings under section 130 of the CGST Act. The petition was allowed, and the rule was made absolute to the specified extent.