Court quashes confiscation, allows release of goods under GST Act

The court found that the detention of goods and vehicle under Section 129 of the GST Act was justified due to irregularities in transit documents but ruled that the confiscation under Section 130 was not warranted as there was no evidence of an intention to evade tax. The court quashed the confiscation orders under Section 130 and directed the respondents to proceed under Section 129(3), allowing the petitioners to release the goods and vehicle upon payment of tax and providing a bank guarantee for the penalty. The writ petitions were allowed, and the respondents were instructed to act accordingly.

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Issues Involved:
1. Legality of the detention of goods and vehicle under Section 129 of the GST Act.
2. Legality of the confiscation orders passed under Section 130 of the GST Act.

Detailed Analysis:

1. Legality of the Detention of Goods and Vehicle under Section 129 of the GST Act:

The petitioners, owners of goods consigned from Tamil Nadu to Maharashtra and the vehicle transporting them, faced detention by the respondents in Kerala. The consignment, covered by an invoice and e-way bill showing IGST payment, was intercepted because the vehicle was off the normal route. The respondents issued an order for physical verification (FORM GST MOV-2). The respondents collected information suggesting the consignment originated from Kerala, not Tamil Nadu, and invoked Section 130 of the GST Act, issuing a notice in FORM GST MOV-10. Despite the petitioners' reply, the respondents confiscated the goods and vehicle under FORM GST MOV-11, confirming tax and penalty, and allowing redemption on payment of a fine.

The court found that the respondents had misunderstood the scope of Sections 129 and 130. Sections 129 and 130 are independent provisions. While Section 129 deals with detention for irregularities in transit documents, Section 130 requires material evidence suggesting an intention to evade tax. The court noted that the respondents' material justified detention under Section 129 due to the invalid documents but did not establish an intention to evade tax necessary for Section 130. The court emphasized that the invoice raised by the petitioners indicated tax compliance, and the respondents failed to rebut this presumption. Hence, the detention under Section 129 was justified, but the further invocation of Section 130 was not.

2. Legality of the Confiscation Orders Passed under Section 130 of the GST Act:

The respondents argued that the interception revealed a sham transaction intended to evade tax, citing irregularities in the transportation documents and the petitioners' lack of knowledge about the transaction. They contended that the petitioners' details were used fraudulently to secure GST registration in Tamil Nadu, and the goods were actually loaded in Kerala. The court, however, found no material evidence suggesting an intention to evade tax, a necessary precondition for invoking Section 130. The court highlighted that the petitioners' invoice declared IGST liability, and the respondents did not provide evidence to counter this declaration. The court concluded that the invocation of Section 130 was not justified without establishing mens rea.

The court quashed the confiscation orders under Section 130 (FORM GST MOV-11) and directed the respondents to pass orders under Section 129(3), allowing the petitioners to release the goods and vehicle upon payment of the tax amount and furnishing a bank guarantee for the penalty. The court emphasized that while the irregularity in documents justified detention under Section 129, the respondents failed to establish the necessary intent for Section 130.

Conclusion:

The court allowed the writ petitions, quashing the orders under Section 130 and directing the respondents to proceed under Section 129(3). The petitioners were permitted to release the goods and vehicle upon fulfilling the specified conditions, and the respondents were instructed to communicate the judgment for immediate action.

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