2022 (8) TMI 147 - HC - GST

Confiscation of goods alongwith the vehicle - allegation is that the goods were transported without valid documents - Section 130 of CGST Act - HELD THAT - The learned Special Government Pleader is right in contending that the validity or legality of Ext.P9, which is only a show cause notice need not be considered by this Court in proceedings under Article 226 of the Constitution of India, at this stage. While holding so, some High Courts have taken the view that in the initial stage, proceedings of this nature can be levied only under Section 129 and not under Section 130 of the CGST Act. However, that question need not be gone into in this Writ Petition, as in the facts of the present case, the notice under Section 130 was issued only after physical verification - the prayer to quash Ext.P9 is only to be rejected. Whether the petitioner is entitled to the interim release of the goods pending adjudication of the notice under section 130 of the CGST Act? - HELD THAT - Though the learned special Government Pleader has referred to the judgment of the Supreme Court in UNION OF INDIA VERSUS LEXUS EXPORTS PVT. LTD. 1994 (1) TMI 153 - SUPREME COURT , where it was held that, The proceedings of seizure and confiscation are proceedings in rem. Until the culmination of the adjudication it is difficult to envisage any right on the part of the respondents from whom they are seized to export them on the basis of a future title they expect to acquire by payment of fine , the said precedent has no application in deciding a matter arising under section 130 of the CGST Act. That case dealt with the provisions of the Customs Act, 1962. Under the provisions of the Customs Act, 1962, confiscation may be absolute if the goods in question are prohibited goods within the meaning of Customs Law. In the case of a domestic transaction like that in the present case, the question of ordering an absolute confiscation does not arise as even the provisions do not contemplate such course. The objection raised by the department is that there is an attempt to evade the payment of tax. There is no provision in Section 130 which prohibits the interim release of goods which are detained pending finalization of proceedings under Section 130. The State can insist on conditions being imposed to ensure that its revenue is protected. Thus, 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/- and furnishing a simple bond for the balance amount - petition disposed off.

Summary

Issues:
1. Validity of show cause notice issued under Section 130 of the CGST Act.
2. Entitlement to interim release of goods pending adjudication of the notice under Section 130 of the CGST Act.

Issue 1: Validity of show cause notice under Section 130 of the CGST Act:

The petitioner, a registered dealer under Goods & Services Tax enactments, was transporting areca nuts when intercepted by the respondent for alleged lack of valid documents. The respondent issued notice in form GST-MOV-10 under Section 130 of the CGST Act, calling for a show cause on confiscation of goods and conveyance. The petitioner challenged the notice as illegal and arbitrary, while the respondent argued that such notices are non-interferable under Article 226 of the Constitution. The court held that the notice, being a show cause notice, need not be considered for quashing under Article 226. The court noted differing views on proceedings under Section 129 and 130 but decided not to delve into it, as the notice was issued post-physical verification. The court rejected the plea to quash the notice, citing that statutory remedies' existence made further consideration unnecessary.

Issue 2: Entitlement to interim release of goods pending adjudication under Section 130 of the CGST Act:

The court analyzed whether the petitioner could seek interim release of goods pending adjudication under Section 130 of the CGST Act. While the respondent cited precedents like Lexus Exports case, the court found it inapplicable to the present matter. The court emphasized that Section 130 does not prohibit interim release of detained goods during proceedings. Referring to a previous judgment, the court highlighted that Section 130(2) allows release on payment of fine before confiscation orders. The court differentiated a Karnataka High Court case, emphasizing the distinct nature of release under Section 130(2). The court upheld the petitioner's entitlement to goods' release pending adjudication, subject to a deposit and bond requirement. The court disposed of the writ petition, directing the release of goods upon specified conditions.

This detailed analysis of the judgment addresses the validity of the show cause notice under Section 130 of the CGST Act and the entitlement to interim release of goods pending adjudication, providing a comprehensive overview of the legal arguments and court's reasoning in each issue.