Venkateshwara Traders vs. The Union Of INDIA

Held

The Court acknowledged that arecanuts are perishable goods. Considering the factual aspects requiring examination, the Court directed that upon the petitioner furnishing a bank guarantee or solvency security equivalent to the invoice value of the purchase, the goods shall be released. The Court clarified that the release of goods would not prejudice the merits of the demand being raised by the Department, which is to be independently examined by the authorities. This examination is to be completed within three months, and the solvency security must be filed within fifteen days for the goods to be released. The writ petitions were disposed of accordingly.

Facts

The petitioner, Venkateshwara Traders, a proprietorship in Karnataka, is challenging an order dated 08.07.2025 passed under Section 130 of the CGST Act, 2017. This order imposed a penalty and fine totaling Rs. 53,33,125/- on the petitioner for alleged evasion of tax. The petitioner was engaged in trading arecanuts and had issued a tax invoice for a supply of 250 bags of non-edible arecanuts valued at Rs. 18,20,000/- to M/s. Aryan Traders, a registered dealer in Delhi. The impugned order confirmed a penalty of Rs. 2,31,875/-, a fine of Rs. 46,37,500/-, and an additional penalty and fine in lieu of confiscation of convenience, each also amounting to Rs. 2,31,875/-. The petitioner contends that Section 130 of the CGST Act was wrongly invoked and seeks release of the goods and setting aside of the order.

Key Issues

1. Whether the provisions of Section 130 of the Central Goods and Services Tax Act, 2017, were correctly invoked by the authorities against the petitioner for the alleged transportation of goods without proper documentation. Petitioner's contention: The petitioner argued that Section 130 of the CGST Act could not have been invoked in this case and prayed for the release of the goods and setting aside of the order dated 08.07.2025. The petitioner's counsel submitted that the goods were being supplied to a registered dealer and that the invocation of Section 130 was inappropriate. Revenue's contention: The State contested the claim, stating that summons were issued to the petitioner, but no personal appearance was made. The State argued that the petitioner, through a 'web of sham firms and bogus transactions,' had defrauded the State exchequer and that the Court should not exercise its extraordinary jurisdiction. The State asserted that written replies were considered before passing the orders.