2021 (8) TMI 659 - HC - GST

Confiscation of goods u/s 130 of the GST Act - petitioner sought 233.540 gms of gold ornaments for the purpose of displaying and not for sale - no opportunity of hearing was given to petitioner and proceedings u/s 130 of GST was initiated straightaway - HELD THAT - The petitioner is only required to show cause within seven days of the notice as to why action under Section 130 of the CGST Act should not be taken against the petitioner. Section 130 of the CGST Act, 2017 contemplates opportunity of hearing in order to decide whether the goods are required to be confiscated or not. No doubt, while taking action under Section 130 of the said Act, the proper officer is enjoined with the duty to come to the conclusion that the act on the part of the petitioner is only with an intent to avoid payment of tax, but that has to be decided by the proper officer on consideration of the entire materials before him and that too, after hearing the petitioner. The petitioner has to approach the proper officer for making his stand clear and to seek audience before him - petition as such is premature and the same is accordingly dismissed.

Issues:
1. Whether action under Section 130 of the Central Goods and Service Tax Act, 2017 can be initiated without mens rea?
2. Whether the quantity of gold carried by the petitioner for display purposes constitutes a valid defense against confiscation and penalty?
3. Whether the notice issued to the petitioner complies with the requirements of Section 130 of the CGST Act, 2017?
4. Whether the petitioner can seek relief directly from the High Court without approaching the proper officer first?

Analysis:
1. The petitioner, a goldsmith, carried gold ornaments for display to solicit orders from jewellers. The respondent issued a notice for confiscation and penalty under Section 130 of the CGST Act, 2017. The petitioner argued that mens rea is necessary for such action, citing precedents. The High Court emphasized that the proper officer must determine intent after providing an opportunity for a hearing. The court dismissed the petition as premature, instructing the petitioner to approach the proper officer first.

2. The petitioner contended that the gold carried was for display, not sale, and constituted a small quantity. The respondent argued that the petitioner lacked valid documentation for the transported material. The court noted that the notice required the petitioner to show cause within seven days as to why action under Section 130 should not be taken. It clarified that the proper officer must decide on confiscation after considering all materials and hearing the petitioner. The court held that the petitioner must present his case before the proper officer before seeking relief from the High Court.

3. The Senior Government Pleader highlighted Section 130 of the CGST Act and Rule 138A of the CGST Rules, emphasizing that the matter was at the show cause notice stage. The court examined the notice in Form GST MOV-10, which directed the petitioner to show cause within seven days. The court reiterated that the proper officer must decide on confiscation after a hearing, based on the materials before him. The court dismissed the petition as premature, stating that the petitioner must engage with the proper officer before seeking judicial intervention.

4. The court's analysis focused on the procedural aspect, emphasizing the necessity for the petitioner to engage with the proper officer first before seeking relief from the High Court. The court clarified that the show cause notice provided the petitioner with an opportunity to present his case and that the proper officer must decide on confiscation after a hearing. The court underscored the importance of the proper officer's decision-making process in determining the intent behind the petitioner's actions, as required by Section 130 of the CGST Act, 2017.

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