2025 (6) TMI 108 - HC - GST

Gujarat HC refuses writ petition in GST detention case, directs petitioner to pursue Section 107 statutory appeal instead

The Gujarat HC declined to exercise extraordinary jurisdiction under Article 227 in a GST detention and confiscation matter. The petitioner challenged ... Challenge to impugned orders of detention, notice of confiscation, and order of confiscation issued under the GST regime - respondent authority has passed the impugned orders without giving any opportunity of hearing and without considering the reply filed by the petitioner - violation of principles of natural justice - HELD THAT:- In view of the findings arrived at by the respondent authority it appears that the existence of relation between the two entities i.e. M/s. Dhatu Metallo Industries Private Limited and M/s. Mewad Scrap and contentions raised by the petitioner, is giving rise to the disputed of questions of fact and therefore we are not inclined to entertain this petition while exercising our extraordinary jurisdiction under Article 227 of the Constitution of India in view of the decision of the Hon’ble Apex Court in case of The Assistant Commissioner of State Tax and Others V/s. M/s. Commercial Steel Limited [2021 (9) TMI 480 - SUPREME COURT], wherein it is held 'There was, in fact, no fact, no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance. In this backdrop, it was not appropriate for the High Court to entertain a writ petition. The assessment of the facts would have to be carried out by the appellate authority. As a matter of fact, the High Court has while doing this exercise proceeded on the basis of surmises. However, since we are inclined to relegate the respondent to the pursuit of the alternate statutory remedy under Section 107, this Court makes no observation on the merits of the case of the respondent.' Thus, without entering into the merits of the matter the petition is disposed of, so as to enable the petitioner to avail alternative efficacious remedy by preferring an appeal under Section 107 of the GST Act to challenge the impugned order passed in Form GST MOV - petition disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter include:Whether the impugned orders of detention, notice of confiscation, and order of confiscation issued under the GST regime were passed in accordance with the statutory provisions and principles of natural justice.Whether the petitioner was denied an opportunity of hearing before the issuance of the impugned orders.Whether the factual findings regarding the non-existence of the supplier's business premises and the suspicious nature of the transactions were justified and supported by evidence.Whether the petitioner's challenge under Article 227 of the Constitution of India was maintainable in the face of alternative statutory remedies available under the GST Act, specifically under Section 107.Whether the alleged malafide intentions of circular trading and issuance of fake invoices and e-way bills were adequately substantiated to warrant confiscation of goods.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of the impugned orders of detention, notice, and confiscation under GST lawThe relevant legal framework comprises the provisions of the Central Goods and Services Tax (CGST) Act, particularly Section 130 which deals with detention, seizure, and confiscation of goods and conveyances in transit, and the procedural forms prescribed under the GST Rules (Forms GST MOV-1, MOV-6, MOV-10, and MOV-11).The Court examined the sequence of actions taken by the respondent authority: physical interception of goods and conveyance, issuance of inspection forms, detention order citing non-existence of the supplier's business, issuance of show cause notice under Section 130, and finally the confiscation order.The Court noted that the detention and confiscation orders were premised on findings that the supplier M/s Dhatu Metallo Industries Private Limited was not found at the registered address, and that its supplier M/s Mewad Scrap had its registration cancelled for issuing invoices without actual supply, indicating possible tax evasion.The respondent authority relied on physical verification reports, GST portal data, and the fact that e-way bills were generated for the intercepted vehicle even after its detention, suggesting fraudulent conduct and circular trading. The Court found that these findings raised serious concerns regarding the genuineness of the transactions.However, the petitioner contended that the orders were passed without considering their reply and without affording an opportunity of hearing, thereby violating principles of natural justice.Issue 2: Alleged violation of principles of natural justice and opportunity of hearingThe petitioner argued that the impugned orders were passed without hearing and without due consideration of their submissions.The Court observed that the person in charge of the conveyance was served with notice, and the petitioner had filed replies to the show cause notice. The Court, however, did not delve into the merits of whether the hearing was adequate but referred to the established principle that writ jurisdiction under Article 227 is not to be exercised where alternative statutory remedies exist.Issue 3: Existence of disputed questions of fact and sufficiency of evidenceThe Court highlighted that the factual issues regarding the existence of the supplier's business, the relationship between the entities involved, and the suspicious nature of the e-way bills and invoices gave rise to disputed questions of fact.It was noted that the inspection reports and GST portal data indicated non-existence of the business at the declared address and suspicious generation of e-way bills even after detention of the vehicle.The Court emphasized that such factual disputes are to be adjudicated by the appropriate statutory authorities and appellate forums, not by the High Court in exercise of extraordinary writ jurisdiction.Issue 4: Maintainability of the petition under Article 227 in presence of alternative remedy under Section 107 of the CGST ActThe Court relied heavily on the precedent set by the Supreme Court which held that writ petitions under Article 226/227 challenging orders passed under the GST Act are generally not maintainable if an alternative statutory remedy is available, except in cases involving breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to the vires of the statute.In the present case, none of these exceptions were established. The Court noted that the petitioner had a statutory remedy under Section 107 to appeal against the confiscation order.Accordingly, the Court declined to entertain the petition and directed the petitioner to avail the alternate remedy.Issue 5: Allegations of circular trading and issuance of fake input tax credit invoicesThe confiscation order detailed that the intercepted vehicle had e-way bills generated from different states even after detention, suggesting malafide intentions to evade tax through circular trading and fake invoices.The Court accepted that such findings, if substantiated, constitute serious violations warranting confiscation under the GST regime.However, the Court did not examine the merits of these allegations but left the matter to be adjudicated through the statutory appellate process.3. SIGNIFICANT HOLDINGSThe Court held:'The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is: (i) a breach of fundamental rights; (ii) a violation of the principles of natural justice; (iii) an excess of jurisdiction; or (iv) a challenge to the vires of the statute or delegated legislation.''In the present case, none of the above exceptions was established. There was, in fact, no fact, no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance.''The assessment of the facts would have to be carried out by the appellate authority. As a matter of fact, the High Court has while doing this exercise proceeded on the basis of surmises.''Therefore, without entering into the merits of the matter the petition is disposed of, so as to enable the petitioner to avail alternative efficacious remedy by preferring an appeal under Section 107 of the GST Act to challenge the impugned order passed in Form GST MOV.'The Court thus established the principle that challenges to confiscation orders under GST must primarily be pursued through the statutory appellate mechanism, and writ jurisdiction is to be exercised sparingly and only in exceptional circumstances.Final determinations included dismissal of the petition under Article 227 without adjudicating the merits, and direction to the petitioner to pursue remedy under Section 107 of the CGST Act.