M/S A Z Enterprises vs. The Deputy Assistant Commissioner- Dac (St)

Held

The Court held that the action of the respondents in directly invoking Section 130 of the CGST Act, 2017, for confiscation without following the procedure under Section 129, and the violation of principles of natural justice by not providing the stipulated fifteen clear days for response, were grounds for intervention. The Court noted that while Section 130 is independent of Section 129, the procedure followed was flawed. Citing a previous common order of a Coordinate Division Bench, the Court allowed the writ petition. The auction notice was set aside. The respondents were granted liberty to initiate proceedings under Section 129 of the CGST/APGST Act, 2017, within two weeks, conduct an inquiry with an opportunity of hearing to the petitioner, and pass appropriate orders. The detained goods were ordered to be released upon the petitioner depositing 25% of their value and executing a personal bond for the balance. The vehicle was to be released upon executing a personal security bond for its value.

Facts

The petitioner filed a writ petition challenging the detention of goods and a vehicle, and the subsequent auction notice, by Respondent Nos. 1 and 2. The petitioner purchased iron scrap from an unregistered dealer and sold it to M/s. Agarwal Foundries Private Limited. The vehicle carrying the goods was intercepted, and proceedings were initiated under Section 130 of the CGST Act, 2017, for confiscation, despite the petitioner claiming to have valid invoices and transport documents. The petitioner argued that the authorities bypassed the procedure under Section 129 and directly invoked Section 130, violating principles of natural justice by not providing the stipulated fifteen clear days for response. The auction was scheduled for May 31, 2024.

Key Issues

1. Whether the action of Respondent Nos. 1 and 2 in detaining the goods and vehicle and proceeding to auction the confiscated goods by invoking Section 130 of the CGST Act, 2017, without following the due process contemplated under Section 129 of the CGST Act, 2017, is illegal, arbitrary, and in violation of the principles of natural justice? Petitioner's Arguments: - The respondent authorities directly invoked Section 130 of the CGST Act, 2017, for confiscation and auction, bypassing the mandatory procedure under Section 129 for detention and seizure. - The show cause notice issued on February 9, 2024, demanding a response within fifteen days, was followed by a direction to appear on February 16, 2024, thus not providing the statutory fifteen clear days, violating principles of natural justice. - The matter is covered by a previous common order of a Coordinate Division Bench of the High Court. Revenue's Arguments: - The learned Government Pleader fairly conceded the petitioner's submissions and stated that the Court may pass appropriate orders by imposing certain conditions.