2024 (1) TMI 572 - HC - GST

Vehicle Seizure Under GST Act Overturned: Procedural Fairness Mandates Hearing and Reasoned Review of Penalty Order

HC ruled that vehicle seizure under GST Act was procedurally improper. Court directed authorities to provide petitioner an opportunity to be heard, ... Seizure of goods/vehicle under statutory power - right to be heard before deprivation of valuable civil right - proviso to Section 129(6) - deposit for release of vehicle - ex-parte order and entitlement to opportunity of hearing - reasoned order and appellate remedy on rejectionRight to be heard before deprivation of valuable civil right - ex-parte order and entitlement to opportunity of hearing - Whether the petitioner was entitled to an opportunity of hearing before the truck (a transporter's capital asset) was subjected to a penalty/seizure order passed ex-parte. - HELD THAT: - The Court found that the penalty order dated 5.12.2023 was passed ex-parte against the petitioner and that no separate show cause notice was issued to the petitioner prior to seizure of the truck. The truck was held to be a valuable property and a capital asset of the transporter used to generate income, thereby engaging a civil right which was adversely affected without affording the petitioner an opportunity to explain or to establish absence of connivance or active participation in the alleged illegality. In these circumstances natural justice required that the petitioner be given one opportunity of hearing to furnish explanation before any final decision for release or continued detention of the vehicle is taken.Petitioner entitled to an opportunity of hearing; ex-parte seizure/penalty as against the petitioner cannot stand without affording him a chance to be heard.Proviso to Section 129(6) - deposit for release of vehicle - seizure of goods/vehicle under statutory power - reasoned order and appellate remedy on rejection - The procedure to be followed for consideration of the petitioner's claim for release of the truck and the legal consequences of such consideration. - HELD THAT: - The Court recorded that, as a matter of statutory law, release of the vehicle is subject to the proviso to Section 129(6) requiring deposit (mentioned as Rs. One lakh in the order) and that this statutory requirement remains applicable. The Court directed that the petitioner may treat the penalty order as a show cause notice for the limited purpose of seeking release, file a reply/application to Respondent No.2, and that the authority shall afford a due opportunity of hearing and pass an appropriate reasoned order on that application. If the application for release is rejected, the authority must record reasons for rejection and the petitioner will have a right of appeal. The Court further directed that this exercise be completed within one week of the petitioner's compliance. The Court clarified that any order for release of the truck shall have no bearing on the separate proceedings concerning seizure of the goods or penalty proceedings against the dealer.Respondent to treat penalty order as show cause for release-application, afford hearing, decide by reasoned order within one week; statutory deposit requirement remains; rejection must record reasons and will give rise to appellate remedy; release of truck will not affect goods-related penalty proceedings.Final Conclusion: Writ petition disposed by directing limited remand to the competent authority to afford the petitioner a hearing on his application for release of the seized truck (treating the penalty order as a show cause notice for this purpose), to decide the application by a reasoned order within one week subject to the statutory deposit requirement, and to record reasons if release is refused, without affecting the separate penalty proceedings against the dealer. Issues involved: Seizure of vehicle under Section 129 of the U.P. Goods and Services Tax Act, 2017 without issuing a show cause notice to the petitioner.The petitioner challenged the seizure of his vehicle, a TATA LPT 407 truck, under Section 129 of the U.P. Goods and Services Tax Act, 2017. The petitioner argued that no show cause notice was issued to him regarding the seizure of the truck, which was based on an ex-parte penalty order passed on MOV-09. The petitioner contended that he should have been given an opportunity to present his case before the truck was seized. The court noted that the penalty order did not establish any collusion between the petitioner and the dealer involved in transporting the goods on the truck.The court recognized that the truck was a valuable asset used by the petitioner to generate income. Considering the lack of opportunity for the petitioner to be heard before the seizure and the requirement of depositing Rs. One lakh for the release of the vehicle as per Section 129(6) of the Act, the court issued the following directions: (i) The petitioner could treat the penalty order as a show cause notice and reply to the Respondent No. 2 to secure the release of the truck. (ii) After receiving the reply/application from the petitioner, the respondent was directed to pass a reasoned order after providing a hearing to the petitioner. (iii) If the claim for release was rejected, the reasons for the decision were to be provided, allowing the petitioner to appeal. (iv) The entire process was to be completed within one week from the petitioner's compliance. (v) Importantly, the release of the truck would not impact the seizure of the goods or the penalty proceedings against the dealer, M/s Royal India Enterprises.