Confiscation orders under Section 130 CGST Act set aside for violating natural justice principles

The AP HC set aside confiscation orders under Section 130 of the CGST Act due to violations of natural justice principles. The court held that Section 130 proceedings can be initiated without prior Section 129 action, as Section 129 applies only to goods in transit while Section 130 has broader application. However, the confiscation orders were invalid because they contained details not included in the show cause notices, and the respondent failed to provide requested supporting material to the petitioners. The matter was remanded for proper adjudication following natural justice principles.

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Issues Involved:
1. Whether action can be taken under Section 130 of the CGST Act only after action had been initiated under Section 129 of the CGST ActRs.
2. Whether action taken under Section 130 of the CGST Act, without a prior invocation of Section 129 of the Act, would render the proceedings under Section 130 of the CGST Act invalidRs.
3. Whether non-affixture of a Document Identification Number (DIN) on the order of confiscation would render the said order invalidRs.

Issue-wise Detailed Analysis:

1. Invocation of Section 130 of the CGST Act after Section 129:
The court examined the interplay between Sections 129 and 130 of the CGST Act. Section 129 pertains to the detention, seizure, and release of goods and conveyances in transit when there is a contravention of the provisions of the Act. Section 130 deals with the confiscation of goods or conveyances and the levy of penalties when there is an intent to evade tax. The court noted that the provisions of Section 129 apply only when goods are in transit, whereas Section 130 can be invoked directly if there is a prima facie intention to evade tax. The court referenced the judgment of the High Court of Gujarat in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat, which clarified that the authorities must first determine the nature of the contravention and whether there was an intent to evade tax before invoking Section 130.

2. Validity of Proceedings under Section 130 without Prior Invocation of Section 129:
The court acknowledged that while the authorities can directly invoke Section 130 without prior proceedings under Section 129, such action must be based on specific reasons recorded in writing, establishing a prima facie intention to evade tax. In the present case, the authorities issued a notice under Section 130 after detaining the goods and conveyances, citing discrepancies that suggested an intent to evade tax. However, the court found that the show-cause notice did not provide sufficient details or reasons for invoking Section 130 directly. The court emphasized that a show-cause notice must set out the entire case against the noticee, allowing them an opportunity to rebut the same. The failure to provide the necessary details and respond to the petitioners' request for the inquiry report constituted a violation of the principles of natural justice.

3. Non-affixture of DIN on the Order of Confiscation:
The court examined the requirement of affixing a DIN on orders or communications from tax authorities, as mandated by the Central Board of Indirect Taxes and Customs circular dated 23.12.2019. The circular does not distinguish between orders communicated directly to dealers and those uploaded on the portal. The absence of a DIN on the confiscation order dated 25.05.2024 rendered the proceedings invalid.

Conclusion:
The court allowed the writ petitions, setting aside the confiscation orders dated 25.05.2024 and remanding the matters back to the 2nd respondent for proper adjudication, following the principles of natural justice. The court emphasized the need for detailed reasons in show-cause notices and the inclusion of a DIN on all orders or communications from tax authorities. There were no orders as to costs, and any pending miscellaneous petitions were closed.

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