Indefinite detention of goods without Section 130 confiscation notice serves no purpose, deposit ordered for release

Gujarat HC held that indefinite detention of goods and vehicle due to document defects serves no purpose without Section 130 confiscation notice. Court directed petitioner to deposit Rs. 14,36,528 with authorities for immediate release of conveyance and goods, while clarifying no opinion was expressed on case merits and leaving final confiscation decision to the Department.

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Issues:
Detention of goods in transit without lawful reason, liability towards tax and penalty under Sections 129 and 130 of the Central Goods & Services Tax Act, 2017.

Detention of Goods in Transit:
The writ applicant, a private limited company engaged in the supply of goods falling under Chapter-74 of the Customs Tariff Act, filed a writ application seeking the release of goods-in-transit detained by respondent No.4 without a valid reason. Despite no discrepancies found during physical verification, the respondent issued a detention order. The applicant argued that no penalty notice had been issued under Section 129(3) of the Act. The Court noted the absence of a confiscation notice under Section 130 and directed the applicant to deposit the tax and penalty amount of Rs. 14,36,528 with respondent No.4 for the release of goods, emphasizing that the final decision on confiscation lies with the Department.

Liability Towards Tax and Penalty:
During the proceedings, the learned counsel for the respondent highlighted potential tax evasion concerns regarding the transaction between the applicant and the supplier, M/s. Nexus Enterprises. The respondent contended that the transaction might involve cash dealings and the creation of bogus vouchers to wrongfully claim input tax credit. The Court acknowledged these concerns but emphasized that the liability of the applicant was limited to the tax and penalty under Section 129 of the Act. The respondent calculated the total liability at Rs. 14,36,528, comprising tax and penalty at 18% each. The Court directed the applicant to pay this amount for the provisional release of goods and the vehicle.

Conclusion:
The Court disposed of the writ application, instructing the applicant to deposit the specified amount with respondent No.4 for the release of goods-in-transit. It clarified that the decision on confiscation under Section 130 rests with the Department, and the applicant may seek legal recourse if necessary. The judgment highlighted the importance of complying with tax and penalty obligations under the Act while allowing the Department to proceed with its inquiry into potential tax evasion without interference from the Court.

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