Devi Tradelink vs. State Of Gujarat

Held

The Court held that the show cause notice issued under Section 130 of the CGST Act was prima facie unsustainable as the procedure contemplated under Section 129(3) and 129(4) of the CGST Act had not been followed. The Court noted that the proper officer had not issued a notice specifying the tax and penalty payable under Section 129(3) nor afforded an opportunity of hearing as required by Section 129(4) before proceeding under Section 130. The Court emphasized that Section 130 is an independent provision for confiscation in cases of intent to evade tax and requires a strong case with material evidence, not mere suspicion. The judgment referred to its own prior pronouncement in Synergy Fertichem Pvt. Ltd. v. State of Gujarat, highlighting that Section 130 should not be invoked at the threshold without proper application of mind and sufficient material. The Court directed that the proceedings should go ahead in accordance with law, allowing the applicants to make good their case that the show cause notice deserves to be discharged. The writ applications were disposed of with the rule made absolute to the extent of the interim relief granted.

Facts

The petitioners, Synergy Fertichem Pvt. Ltd., filed multiple writ applications challenging notices issued by the GST authorities. The core issue revolved around the detention and proposed confiscation of goods and a truck (GJ-07-UU-7250) for alleged contravention of GST provisions, specifically the absence of an e-way bill. The authorities initially issued a detention order under Section 129 of the CGST Act and subsequently a show cause notice under Section 130 of the CGST Act proposing confiscation of goods and the vehicle, demanding a sum of Rs. 60,72,639. The petitioners argued that the procedure under Section 129 was not followed before initiating proceedings under Section 130, and that the goods were perishable. The High Court, by interim order, directed the release of goods and the truck upon an undertaking from the petitioner.

Key Issues

1. Whether the show cause notice issued under Section 130 of the CGST Act for confiscation of goods and conveyance is legally sustainable when the procedure contemplated under Section 129(3) and 129(4) of the CGST Act, including issuance of notice and providing an opportunity of hearing for determination of tax and penalty, has not been followed by the proper officer? Petitioner's Arguments: The petitioner contended that Section 130 proceedings cannot be initiated without first completing the procedure under Section 129. They argued that the show cause notice under Section 130 was issued prematurely and without proper application of mind, especially considering the goods were perishable and IGST had already been paid on import. They relied on the principle that Section 129 must be exhausted before resorting to Section 130. Revenue's Arguments: The revenue argued that the detention order was justified under Section 129(1) as the goods were not accompanied by an e-way bill during transit. They submitted that the detention order was validly issued. The judgment notes that the learned Assistant Government Pleader was not in a position to point out that the procedure under Section 129(3) and 129(4) had been followed.