Makwana Enterprise vs. State Of Gujarat

Held

The Court held that the detention and confiscation were not legally sustainable. It was undisputed that the goods were in transit with valid e-way bills and invoices, and the physical verification report (Form GST MOV 4) found no discrepancies. The seizure was based solely on the buyer's alleged past wrongful availment of input tax credit, and the buyer had informed the petitioner that no proceedings were initiated against them. The Court referred to Section 68 of the GST Act concerning inspection of goods in movement and CBI&C Circular No. 41/2018, emphasizing that goods should be released if documents are in order. Citing the precedent in Shri Anant Jignesh Shah Vs. Union of India, the Court stated that confiscation is not permitted on assumptions about past contraventions by the driver or buyer. Therefore, the Court ordered the release of the goods and conveyance. The Court did not interfere with any show-cause notice that might be contemplated against the buyer or the petitioner regarding past transactions, leaving those proceedings to continue.

Facts

Makwana Enterprise, a registered dealer in brass scrap, filed a writ petition seeking to quash a detention order (Form GST MOV 6) and a confiscation notice (Form GST MOV 10) issued by the State Tax Officer. The petitioner was transporting goods from Maharashtra to Gujarat on September 5, 2021, with proper tax invoices, transport receipts, and e-way bills. Upon interception on September 6, 2021, the driver produced all required documents. A physical verification report (Form GST MOV 4) found no discrepancies. However, a confiscation notice under Section 130 of the GST Act was issued on September 9, 2021, citing discrepancies in the buyer's past transactions and alleged wrongful input tax credit claims by the buyer. The petitioner stated no proceedings had been initiated against the buyer. The petitioner relied on CBI&C Circular No. 41/2018 and a High Court judgment.

Key Issues

1. Whether the detention of goods and conveyance and issuance of a confiscation notice under Section 130 of the GST Act are legally sustainable when the driver produced valid e-way bills and tax invoices, and the physical verification report found no discrepancies in the documents vis-à-vis the goods being transported? 2. Whether the confiscation of goods and conveyance can be premised on alleged past wrongful availment of input tax credit by the buyer, especially when no proceedings have been initiated against the buyer for such alleged discrepancies? Petitioner's Arguments: The petitioner argued that the respondents lacked the authority to seize the vehicle and goods as there were no discrepancies in the furnished documents. They relied on CBI&C Circular No. 41/2018, which clarifies that if documents are in order, the conveyance should be allowed to proceed. They also cited the High Court's decisions in Shri Anant Jignesh Shah Vs. Union of India and Insha Trading Company Vs. State of Gujarat. Revenue's Arguments: The State argued that the buyer had wrongly availed input tax credit using fake bills in past transactions, necessitating intervention with the vehicle as it was destined for that buyer. They contended that the authority needed to check the buyer's transactions due to alleged tax evasion.