Synergy Fertichem PVT.LTD vs. State Of Gujarat

Held

The Court held that the show cause notice issued under Section 130 of the CGST Act was prima facie issued without complying with the requirements of Section 129 of the CGST Act. The Court noted that the learned Assistant Government Pleader was not in a position to point out that the procedure contemplated under subsections (3) and (4) of Section 129 had been followed. The Court reiterated its earlier observations from a related judgment (Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat), emphasizing that Section 130, providing for confiscation, is an independent provision for cases involving intent to evade tax and is penal in character. It clarified that while Section 130 can be invoked at the threshold, the authorities must make out a very strong case with material evidence, not mere suspicion, and record reasons in writing for such belief. The Court stated that the notice for confiscation must disclose the materials upon which the belief was formed. The writ applications were disposed of, with the rule made absolute to the extent that the proceedings would proceed in accordance with law, allowing the applicants to make good their case that the show cause notice deserves to be discharged.

Facts

The petitioners, Synergy Fertichem Pvt. Ltd., filed multiple writ applications challenging notices issued under the GST Act. Specifically, they sought to quash a notice dated March 1, 2019, and direct the release of goods and truck number GJ-07-UU-7250, which were detained/seized under Sections 129 and 130 of the GST Acts. The goods were perishable and had already incurred integrated goods and services tax upon import. The initial proceedings involved a show cause notice under Section 130 of the CGST Act, which the petitioners argued was issued without first following the procedure under Section 129. The Court had previously granted interim relief, directing the release of goods and the truck upon an undertaking from the petitioners.

Key Issues

1. Whether the show cause notice issued under Section 130 of the CGST Act, 2017, is vitiated for non-compliance with the procedural requirements of Section 129 of the CGST Act, 2017? Petitioner's Argument: The petitioner argued that the respondent authorities failed to follow the mandatory procedure under Section 129(3) and 129(4) of the CGST Act, which requires issuing a notice and providing an opportunity for a hearing before passing an order for tax and penalty. They contended that proceeding directly to Section 130 for confiscation without adhering to Section 129 renders the action impermissible. They also highlighted that the goods were perishable and IGST had already been paid on import. Revenue's Argument: The revenue argued that the goods were detained under Section 129(1) of the CGST Act because they were not accompanied by an Eway bill during transit, justifying the detention order. They did not provide specific arguments addressing the procedural compliance with Section 129(3) and (4) when queried by the Court.