Cluster Enterprises vs. The Deputy Assistant Commissioner (St)-2

Held

The Court held that the initiation of proceedings under Section 130 of the CGST Act at the threshold could not be faulted, as Section 129 does not necessarily precede all cases under Section 130. However, the Court found that the confiscation orders were vitiated by a violation of the principles of natural justice. Specifically, the show cause notice did not contain sufficient details or material evidence to substantiate the alleged intention to evade tax. Furthermore, the confiscation order included details not provided in the show cause notice, and the respondent failed to provide the requested enquiry report or material on which the notice was based. The Court also noted that the absence of a DIN on the confiscation order, as mandated by CBIC Circular No. 128/47/2019-GST, militated against the validity of the proceedings. Consequently, the confiscation orders were set aside, and the matters were remanded back to the respondent for proper adjudication following the principles of natural justice.

Facts

The petitioner, M/s. Cluster Enterprises, was transporting scrap iron to Telangana. On April 27, 2024, their vehicles were stopped by the Deputy Assistant Commissioner (ST)-2, Regional Vigilance & Enforcement, Kadapa. A notice in Form GST MOV-10 was issued on May 1, 2024, under Section 130 of the CGST Act, proposing confiscation of the goods and vehicle for alleged evasion of tax. The petitioner submitted objections on May 8, 2024. Subsequently, on May 25, 2024, the respondent passed orders confiscating the goods and vehicle, allowing release upon payment of penalty. Aggrieved by these confiscation orders, the petitioner filed two writ petitions before the High Court.

Key Issues

1. Whether the confiscation proceedings initiated under Section 130 of the CGST Act, 2017, were valid, considering the petitioner's contention that detention and seizure should have been initiated under Section 129 of the CGST Act, 2017, and that Section 130 is applicable only in specific circumstances not met here? 2. Whether the show cause notice and subsequent confiscation order violated the principles of natural justice by failing to provide specific reasons and material evidence for the alleged intention to evade tax, and by including details in the confiscation order that were not present in the show cause notice? 3. Whether the absence of a Document Identification Number (DIN) on the confiscation order renders it invalid, as per CBIC Circular No. 128/47/2019-GST? Petitioner's Arguments: The petitioner argued that the authorities erred in invoking Section 130 directly, as Section 129 should have been the precursor for detention and seizure. They contended that the show cause notice lacked specific grounds and material evidence, and that the confiscation order contained new details not provided earlier, violating natural justice. The petitioner also highlighted the absence of a DIN on the confiscation order. Respondents' Arguments: The judgment does not explicitly record arguments made by the respondents. However, the issuance of the show cause notice and confiscation order implies a contention that the actions were justified under the relevant provisions of the GST Act.