Kothi Steel Limited vs. State Tax Officer(2), Mobile Squad, Bhavnagar

Held

The Court held that the opinion of "intention to evade tax" for goods in transit must be formed within the timeframes prescribed by Rule 138C of the CGST Rules, 2017, which is a maximum of six days. If no such opinion is formed within this period, the goods and conveyance are required to be released under Section 129. The Court clarified that even if goods are released under Section 129 upon payment of tax and penalty, confiscation proceedings under Section 130 can be initiated subsequently if incriminating evidence is found during an inquiry. However, the Court found that the notices of confiscation in the present cases required re-examination in light of these observations. Consequently, all matters were remanded to the respondent-authorities for reconsideration. The Court directed that confiscation notices or orders contrary to the judgment should be withdrawn, and goods seized during transit should be released under Section 129 if an infringement under that section is found. The Court also warned of contempt proceedings for defiance of its observations.

Facts

The petitioners, M/s Panchhi Traders and others, are aggrieved by the confiscation of their goods seized during transit under Section 129 of the Central Goods and Services Tax (CGST) Act, 2017. The goods were intercepted and detained by the Proper Officer. The petitioners contend that the authorities resorted to seizure and confiscation based on portal entries and alleged evasion of tax by third parties. The core of the dispute revolves around the proper procedure and timelines for forming an opinion of tax evasion to justify confiscation under Section 130 of the CGST Act, as opposed to release under Section 129.

Key Issues

1. Whether the confiscation of goods and conveyance under Section 130 of the CGST Act, 2017, is permissible when the opinion of intention to evade tax is not formed within the timelines prescribed by Rule 138C of the CGST Rules, 2017? Petitioner's arguments: The petitioners argued that the authorities improperly resorted to confiscation. They contended that the opinion of evasion of tax must be formed within the stipulated timeframes (24 hours for a summary report and three days, extendable to six days, for a final report) as per Rule 138C. If no such opinion is formed within these periods, the goods and conveyance should be released under Section 129. They also argued that confiscation actions were based on third-party evasion and portal entries, not on direct findings related to their goods in transit. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue or State. However, it refers to the revenue's actions of seizing and confiscating goods. The judgment also notes that the revenue relied on the portal entries and alleged evasion of tax by third parties.