2020 (2) TMI 1108 - HC - GST

Court Invalidates Detention Order and Confiscation Notice, Emphasizes Procedural Compliance and Fairness

The court found the detention order under Section 129(1) of the GST Act to be illegal due to non-compliance with prescribed procedures. It deemed the ... Confiscation of goods alongwith vehicle - levy of penalty u/s 130 of CGST Act - principles of natural justice - HELD THAT:- The writ applicant availed the benefit of the interim-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [2019 (12) TMI 1213 - GUJARAT HIGH COURT]. It is now for the applicant to make good his case that the show cause notice, issued in GST-MOV-10, deserves to be discharge - application disposed off. Issues Involved:1. Legality of the detention order under Section 129(1) of the GST Act.2. Validity of the notice for confiscation of goods and levy of penalty under Section 130 of the GST Act.3. Compliance with the principles of natural justice and statutory provisions.4. Application of recent judicial pronouncements.Detailed Analysis:1. Legality of the Detention Order under Section 129(1) of the GST Act:The writ applicant challenged the detention of goods and conveyance under Section 129(1) of the GST Act, arguing that the order was 'absolutely illegal, unlawful contrary to the facts and evidence on record, violative of principles of natural justice and against the provisions of the Act and Rules framed thereunder.' The court noted that the detention order was issued without following the prescribed procedure, including issuing a notice under sub-section (3) and affording an opportunity of hearing as required by Section 129.2. Validity of the Notice for Confiscation of Goods and Levy of Penalty under Section 130 of the GST Act:The court observed that the impugned notice for confiscation and penalty under Section 130 was issued without initiating proceedings under Section 129, which is not permissible in law. The notice contained various blanks, indicating non-compliance with the statutory provisions. The court highlighted that Section 130 should only be invoked if there is non-compliance with an order passed under Section 129, and not at the inception of detention and seizure.3. Compliance with the Principles of Natural Justice and Statutory Provisions:The court emphasized the importance of following the statutory procedure and principles of natural justice. It referred to a previous order where it was directed that the vehicle and goods be released upon payment of the tax amount. The court reiterated that the authorities must first determine the nature of the contravention and whether it was with an intent to evade tax before issuing a notice under Section 130. The authorities must record their reasons in writing and have them reviewed by a superior authority.4. Application of Recent Judicial Pronouncements:The court allowed the writ applicant to rely on a recent judgment in the case of Synergy Fertichem Pvt. Ltd. v. State of Gujarat, which provided detailed guidelines on the invocation of Sections 129 and 130. The judgment clarified that Section 130 should not be invoked at the threshold without a strong case and that mere suspicion is insufficient. The court stressed that any notice for confiscation must disclose the materials on which the belief is formed and must reflect intense application of mind.Conclusion:The writ application was disposed of with the court making the rule absolute to the extent that the proceedings should continue in accordance with the law, and the applicant has the opportunity to make a case for discharging the show cause notice issued in GST-MOV-10. The court's analysis underscored the necessity of adhering to statutory procedures and principles of natural justice while dealing with detention and confiscation under the GST Act.