Om Sai Traders vs. The State Tax Officer (1)

Held

The Court held that it should not interfere with the show cause notice issued by the authority under Section 130 of the Act. The Court was of the view that the authority should be permitted to adjudicate the show cause notice in accordance with law. However, considering that the goods were tobacco and susceptible to damage with the onset of monsoon, the Court directed the writ applicant to deposit an amount of Rs. 10,00,000/- towards tax and penalty. Additionally, to secure the State's interest, the applicant was directed to furnish a Bank Guarantee of Rs. 7,00,000/-, representing the value of the goods. Upon compliance, the authority was directed to release the goods and the vehicle. The adjudication of the Section 130 notice would continue, and the deposit and bank guarantee would abide by the final outcome.

Facts

The petitioner, Om Sai Traders, engaged in tobacco trading, challenges the detention of its goods and vehicle by the State Tax Officer. The goods, purchased from Shiv Shankar Tobacco Private Limited, were being transported when the original vehicle broke down. The goods were transferred to a second vehicle, which was intercepted. The authorities seized the vehicle and goods due to a discrepancy in the e-way bill, specifically the vehicle number not correlating. Proceedings under Section 129 of the CGST Act were initiated, determining a tax and penalty amount of approximately Rs. 9,94,000. Simultaneously, a notice under Section 130 of the CGST Act was issued, proposing confiscation of goods and the vehicle for alleged tax evasion.

Key Issues

1. Whether the issuance of a show cause notice under Section 130 of the CGST Act and GGST Act is justified in the present facts and circumstances, particularly when proceedings under Section 129 of the GST Act have also been initiated? (Mixed question of law and fact, turning on Sections 129 and 130 of the CGST Act). Petitioner's argument: The petitioner contended that there was no sufficient reason for the authority to issue a show cause notice under Section 130, as no case for confiscation was made out. They relied on the Gujarat High Court's decision in Synergy Fertichem P. Ltd. vs. State of Gujarat. The petitioner sought quashing of the Section 130 notice and release of goods and conveyance upon payment of tax and penalty. Revenue's argument: The respondent argued that the inter-state GST on the goods was 18%, while for intra-state transport, it was 2%. They submitted that the materials on record prima facie indicated an intention to evade tax, justifying the issuance of the show cause notice under Section 130 for confiscation.