TaxTMI 
TaxTMI 
2025 (11) TMI 1780
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....ce Tax Act, 2017 and Goods and Services Tax (Compensation to States) Act, 2017 as Section 68 which is only applicable for goods in transit and all subsequent proceedings being without jurisdiction, unconstitutional and violative of Article 265 of the Constitution of India and being against the mandate of Section 68 of the above-mentioned Act and being arbitrary, per-se and in absolute violation of principles of natural justice. ii) Issue a writ order or direction especially in the nature of mandamus directing the respondents in releasing the goods and conveyance as the detention is both illegal and time barred as per the Section 68 read with Rule 138A, 138B & 138C of the GST Act, 2017. iii) Issue a writ, order or direction especially in the nature of Mandamus to the respondent officials for release of illegally detained goods and trucks bearing registration No.RJ32GE9020, as the same have been illegally detained without issuing any detention order under any applicable law; iv) Issue any writ, order or direction that this Hon'ble Court may deem appropriate for compensation of the grave loss suffered by the petitioner and the continuing loss thereafter,....
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....red the vehicle number at 18:50 Hrs after stationing the vehicle. From such premises of the factory, four pieces were taken for sample before unloading. Certain CCTV camera photographs have also been placed. It is stated that on 30.07.2025, a raid was conducted in terms of Section 67 of the Act of 2017 in the morning and the raid party entered the premises at 11:17 AM and after the raid, CCTV cameras were shut down at 11:43 AM. The search was conducted and an order of seizure under INS-02 was issued, but the concerned vehicle was not seized as per law. After search, the inspecting party left the premises on 31.07.2025 at 06:00 AM after providing panchnama. Thereafter, the truck was requisitioned from the boundary of the factory on 30.07.2025 at 11:20 AM by issuing form GST MOV-02, which provided the reasons mentioning as "The genuineness of the goods in transit (its quantity etc.) and/or tendered documents requires further verification" and "The genuineness of supplier of goods for further verification". The vehicle was taken from Bhiwadi to Jaipur, which is 250 Kms away and stationed at Jaipur, while the GST Department was stated to be at Bhiwadi too. 4. Learned counsel for the....
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....s issued for physical verification and inspection of the goods and merely fishing and roving enquiry has been conducted, the respondents must be called upon for their illegal action. The procedure laid down in Section 68 of the Act of 2017 is binding and the same ought to have been followed. 7. The respondents have filed their reply stating therein that the petitioner, in active collusion with a cartel of entities operating across Delhi, Haryana, Punjab and Himachal Pradesh, orchestrated a systematic and well designed scheme to defraud the public exchequer by fabricating and manipulating a chain of sham transactions. In furtherance of fraudulent design, the petitioner has unlawfully availed and claimed input tax credit (ITC) exceeding Rs. 100 crores on the strength of invoices purportedly originated by non-existent, de-registered or suspended firms of Delhi, which firms have been misused for passing on fake credit by exploiting the return-furnishing pattern and mechanism provided on the GST front-end portal. While the petitioner devised and deployed a fictitious supply chain showing procurement of goods from different States, namely, Punjab, Himachal Pradesh and Haryana, in real....
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....tained. The respondents have stated that the concerned firm M/s SS Industries, upon investigation, has been found to be a conduit entity in the purchase of bogus invoices, for which an enquiry has already been conducted by Haryana GST Department. The said M/s SS Industries has claimed supply from Delhi-based firm, M/s Galaxy Enterprises. Upon verification, it was conclusively established that no such firm exists at the declared address and the so called supplier was a fictitious entity. Thus, it raised foundational question as to who, in-fact, commenced the movements of goods in the vehicle RJ-32-GE-9020, and on whose behalf were such goods loaded? Thus, the present case was asserted by the respondents to be a case of tax evasion, although the respondents have admitted the facts generally mentioned by the petitioner relating to vehicle and the goods. It is stated that the vehicle was stationed at Jaipur only as proper officer has its office at Jaipur and since action was taken in terms of Section 68 of the Act of 2017, a lawful order was issued under form MOV-02. Every vehicle proceeded against by the Enforcement Wing, Rajasthan Jaipur, is always stationed at Jaipur office only. Th....
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....ould be apposite to quote Section 68 of the Act of 2017, which provides for inspection of goods in movement, as under: "68. Inspection of goods in movement.- (1) The Government may require the person in charge of a conveyance carrying any consignment of goods of value exceeding such amount as may be specified to carry with him such documents and such devices as may be prescribed. (2) The details of documents required to be carried under sub-section (1) shall be validated in such manner as may be prescribed. (3) Where any conveyance referred to in sub-section (1) is intercepted by the proper officer at any place, he may require the person in charge of the said conveyance to produce the documents prescribed under the said subsection and devices for verification, and the said person shall be liable to produce the documents and devices and also allow the inspection of goods." 13. Sections 73 and 74 of the Act of 2017 laid down the provisions relating to demand of tax not paid or short paid. Section 129 empowers the detaining authorities to detain and seize the goods and also provides the manner and method for release of goods and conveyances in transit. Se....
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....ct of the notice specified in sub-section (3) shall be deemed to be concluded. [(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under subsection (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under subsection (3): Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less: Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.] 130. Confiscation of goods or conveyances and levy of penalty.- (1) [Where] any person- (i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (ii) does....
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....time not exceeding three months to pay fine in lieu of confiscation, dispose of such goods or conveyance and deposit the sale proceeds thereof with the Government." 14. In order to streamline the procedure to be followed for collecting, recovering and seizure, the Central Goods And Services Tax Rules, 2017 laid down the rules. The rules also provide the manner in which notice shall be served on the defaulters, or for the purpose of seizure of the goods. Rule 138 of the Rules 2017 lays down the information to be furnished prior to commencement of movement of goods and generation of e-way bill. Such information has to be specified in form GST EWB-01, which has to be placed on the common portal, whereupon a unique number would be generated. On the said portal, there is a validity period of the e-way bill provided in terms of Rule 138(10). Rule 138A lays down documents and devices to be carried by a person-in-charge of a conveyance, while Rule 138B allows verification of documents by authorized proper officer, who may intercept any conveyance. A physical verification of conveyances shall be carried out and a summary report is required to be prepared in terms of Rule 138C within twen....
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....-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable. Explanation.- For the purposes of the rules under the provisions of this Chapter, the "applicable tax" shall include central tax and State tax or Central tax and the Union territory tax, as the case may be and the cess, if any, payable under the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017). (2) In case the person to whom the goods were released provisionally fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the tax, interest and penalty and fine, if any, payable in respect of such goods. 141. Procedure in respect of seized goods.- (1) Where the goods or things seized are of perishable or hazardous nature, and if the taxable person pays an amount equivalent to the market price of such goods or things or the amount of tax, interest and penalty that is or may become payable by the taxable person, whichever is lower, such goods or, as the case may be, things shall be released forthwith, by an order in FOR....
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....s GPS enabled and had reached its destination. In the circumstances, it cannot be said to be a vehicle in transit. The petitioner-company was required to receive the goods, which had reached to its destination, however the same were seized by issuing Form MOV-02. A perusal of the Form GST MOV-02, dated 30.07.2025 (Annexure P-16), reflects that the goods were allegedly intercepted at 11:20 AM on 30.07.2025, whereas the goods were already stationed outside the factory since 29.07.2025. We, therefore, find that the procedure adopted by the authorities was not in accordance with law. The reasons mentioned in GST MOV-02, as noted supra, do not reflect that there was no e-way bill. It is only that the genuineness of supplier of the goods for further verification was the reason for seizure of the conveyance for which the vehicle was directed to be parked at Jhalana Doongri, Jaipur. The photographs annexed as Annexure P-17 reflect that the concerned officer was in the petitioner-company's factory premises at 11:20 AM on 30.07.2025, where he entered at 11:16 AM. The proceedings, as initiated, therefore, seem to be not strictly in consonance with the provisions of the Act and it is primarily....
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....nes' would also include an attempt by persons to take advantage of the provisions of the rules in a manner to evade tax. In other words, contravening the provisions of the act would also include the abuse of the process of law. 21. In the present case, we are satisfied that the petitioner has colluded with other persons to develop a systematic scheme to defraud the public exchequer. For this purpose, the petitioner has fabricated and manipulated sham transactions resulting in causing public loss to the public exchequer by claiming huge amount of input tax credit. While we agree with the learned counsel for the petitioner that the rules are required to be strictly followed for the purpose of seizure of goods and conveyances, as required under Section 129 of the Act of 2017, but if the purpose is to defraud the public exchequer and to take advantage of some loopholes, such a person cannot be given any benefit in law, or in equity. Admittedly, the GST provisions are in the nascent stage and there may be several trading problems which may arise, however on account of vigilance of the officers if they are able to catch such persons who have misused the provisions and have thereby tak....
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....lend its seal of approval to a subterfuge that seeks to render a legal mandate ineffective. 25. The aforesaid proposition is substantiated by the recent judgment of the Hon'ble Supreme Court in the matter of Tomorrowland Ltd. v. Housing & Urban Development Corporation Ltd., (2025) 4 SCC 19, wherein it has been held as follows: "56. It needs no emphasis that whosoever comes to the court claiming equity, must come with clean hands. The expression 'clean hands connotes that the suitor or the defendant have not concealed material facts from the court and there is no attempt by them to secure illegitimate gains. Any contrary conduct must warrant turning down relief to such a party, owing to it not acting in good faith and beguiling the court with a view to secure undue gain. A court of law cannot be the abettor of inequity by siding with the party approaching it with unclean hands. This also brings to mind the oft-quoted legal maxim-he who seeks equity must do equity." 26. In the present case, it has come on record that the petitioner generated fictitious outward liability through bogus entities with empty credit ledgers and claimed fake credit merely because in the p....