Detention u/ss 67, 129 and confiscation u/s 130 GST Act held distinct; illegal conversion quashed

HC held that detention under Section 129 and confiscation under Section 130 of the GST Act are distinct, independent powers and cannot be interchanged. Once the Proper Officer invokes powers to inspect, detain or seize goods/vehicle under Sections 67 or 129, he cannot convert such proceedings into confiscation under Section 130, which is an ultimate penal measure to be exercised only where tax and penalty remain unpaid post a Section 129 order. The impugned confiscation and the Appellate Authority's affirming order were found illegal and quashed. As the goods had been auctioned, respondents were directed to remit sale proceeds minus penalty under Section 129(1)(a) and release the conveyance.

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Issues Involved:
1. Detention of goods under Section 129 of the CGST Act.
2. Confiscation of goods under Section 130 of the CGST Act.
3. The legality of converting detention proceedings into confiscation proceedings.
4. Compliance with statutory provisions and procedural requirements.
5. The application of penalties for non-compliance with CGST Act provisions.

Issue-Wise Detailed Analysis:

1. Detention of Goods under Section 129 of the CGST Act:
On September 13, 2021, the Proper Officer intercepted seven trucks transporting Areca nuts and detained them due to the absence of requisite documents, including the E-Way bill. The officer issued Form GST MOV-02 for physical verification. Upon verification, discrepancies were found between the invoice quantity and the actual quantity of goods. Consequently, an order of detention under Section 129 of the CGST Act was issued on September 28, 2021, in Form GST MOV-06.

2. Confiscation of Goods under Section 130 of the CGST Act:
On September 29, 2021, the Deputy Director issued a notice for confiscation of goods and conveyances under Section 130 of the CGST Act, citing the intent to evade tax. Despite the petitioner's reply, the Deputy Director proceeded with the confiscation order on November 24, 2021, in Form GST MOV-11. The petitioner appealed to the Joint Commissioner, who dismissed the appeal, leading to the present writ petition.

3. Legality of Converting Detention Proceedings into Confiscation Proceedings:
The petitioner argued that once goods were detained under Section 129, the proper officer lacked the power to initiate confiscation proceedings under Section 130 without first allowing the opportunity to pay the tax and penalty. The court examined the statutory framework and concluded that the power to confiscate under Section 130 is distinct and cannot be invoked after initiating detention under Section 129 unless the tax and penalty are not paid within 14 days as stipulated in Section 129(6).

4. Compliance with Statutory Provisions and Procedural Requirements:
The court emphasized the statutory intent to recover tax and penalty rather than confiscate goods. The statutory scheme under Sections 73 and 74 provides mechanisms for determining tax liability and penalties, encouraging compliance by allowing the wrongdoer to rectify errors. The court found that the proper officer's action of converting detention into confiscation proceedings was contrary to the statutory scheme and nullified the owner's right to release the goods upon payment of the applicable tax and penalty.

5. Application of Penalties for Non-Compliance with CGST Act Provisions:
The court noted that for transporting goods without an E-Way bill, the proper officer could impose a penalty under Section 122(1)(xiv) of the CGST Act. Additionally, for undervaluation or mis-declaration, penalties under Sections 73 and 74 could be applied. However, the court found that the proper officer's decision to initiate confiscation proceedings based on undervaluation and mis-declaration was inappropriate, as these issues should be addressed through the prescribed determination process under Sections 73 and 74.

Conclusion:
The court concluded that the proper officer's actions in converting detention proceedings into confiscation proceedings were illegal and contrary to the statutory scheme. The court quashed the impugned orders and directed the respondents to pay the petitioner the sale proceeds of the auctioned goods after deducting the penalty under Section 129(1)(a) within four weeks. The conveyance was also ordered to be released if not already done. The proper officer was granted liberty to initiate proceedings for tax determination under Sections 73 or 74, without this order affecting the merits of the allegations. The writ petition was allowed.

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