2022 (7) TMI 1364 - HC - GST

Confiscation Order Under GST Act Section 130 Quashed Due to Natural Justice Violations and Inadequate Response Opportunity

The HC quashed a confiscation order under GST Act section 130, finding authorities violated natural justice principles by not allowing the petitioner ... Breach of principles of natural justice - interim release of confiscated goods and conveyance on security/deposit - condition of deposit and furnishing of bond for interim relief - direct service of process - invocation of powers under section 129 vis-a -vis section 130 of the GST ActBreach of principles of natural justice - interim release of confiscated goods and conveyance on security/deposit - condition of deposit and furnishing of bond for interim relief - direct service of process - Whether the impugned order of confiscation suffered from breach of natural justice and whether interim relief by release of goods and conveyance should be granted on conditions - HELD THAT: - The court found that the impugned order was passed in quick succession immediately after search operations and without permitting the petitioner to file a reply to the show cause notice, resulting in an evident breach of the principles of natural justice to the petitioner's prejudice. On a prima facie basis the petition therefore merited interim relief. Balancing interests, the court directed release of the petitioner's goods and conveyance subject to conditions: deposit of a specified sum within ten days as security for interim release, and, when the final order includes determination of fine in lieu of confiscation, further compliance by furnishing a specified bond within ten days in addition to the deposit. Non compliance with these conditions would render the interim relief liable to be vacated. The court also permitted and directed steps for service of process, including direct service on respondents where appropriate. [Paras 5, 6, 7]Impugned confiscation order prima facie breached natural justice; interim release of goods and conveyance granted on conditions of deposit and future furnishing of bond, and direct service directedInvocation of powers under section 129 vis-a -vis section 130 of the GST Act - Question whether the authorities lawfully exercised powers under section 130 when powers under section 129 (relating to goods in transit) were claimed to be independent and operative - HELD THAT: - The petitioner contended that the goods were in transit and that the authorities' exercise of powers arose under the regime applicable to goods in transit; thus section 129 (beginning with a non obstante clause) would operate independently of section 130. The court recorded that this contention requires detailed examination and did not adjudicate the legal dispute on the merits in the present order. The matter was left open for fuller consideration on the return of the rule. [Paras 4, 5]Contention left for detailed examination; not finally decided in the interim orderFinal Conclusion: The court found a prima facie breach of natural justice in the confiscation order and granted interim release of the petitioner's goods and conveyance on specified deposit and bond conditions, while reserving for detailed inquiry the legal question whether powers under section 129 could be invoked independently of section 130. Issues:Challenge to order confiscating goods under the Goods and Services Tax Act, 2017 without proper opportunity to respond.Analysis:The High Court of Gujarat heard a case challenging an order passed under section 130 of the Goods and Services Tax Act, 2017, confiscating goods carried by the petitioner. The petitioner contended that the authorities acted without jurisdiction, as the goods were purchased from a specific enterprise and were in transit when confiscated. The petitioner argued that the authorities misused their powers under section 129 of the GST Act, which led to a breach of principles of natural justice by not allowing the petitioner to file a reply before passing the impugned order.The Court noted the quick succession of events leading to the order, highlighting the authorities' haste in passing the order without giving the petitioner a chance to respond adequately. This rush compromised the petitioner's right to natural justice. The Court acknowledged the need for a detailed examination of the petitioner's contentions but found a prima facie case for granting interim relief due to the evident breach of principles of natural justice.As a result, the Court directed the release of the goods and conveyance of the petitioner, subject to the petitioner depositing Rs. 40 lakhs with the competent authority within ten days. Additionally, the petitioner was required to furnish a bond of Rs. 1,17,74,440 along with the deposit. Non-compliance with these conditions would render the grant of interim relief void.The Court set the next hearing on 21.07.2022 and allowed direct service for the second respondent. The petitioner was instructed to serve notice of the Rule on both respondents. The Court also permitted the filing of an affidavit-in-reply before the next hearing date.