M/S Moon Traders Through Harshadkumar Bhogilal Raval 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 it was issued without complying with the mandatory procedural requirements of Section 129(3) and 129(4) of the CGST Act. The Court noted that the respondents could not demonstrate that the procedure under Section 129 had been followed. The Court reiterated its earlier observation 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. It emphasized that all contraventions do not automatically attract confiscation under Section 130. The Court directed that the writ applications stand disposed of, making the rule absolute to the extent that the proceedings would continue in accordance with law, allowing the applicants to argue their case regarding the discharge of the show cause notice.

Facts

The petitioners, Synergy Fertichem Pvt. Ltd., filed multiple writ applications challenging notices issued by Respondent No. 2 under the GST Acts. The primary issue involved the detention and seizure of goods in transit via truck GJ-07-UU-7250. The petitioners sought quashing of the detention notices and release of the goods and truck. A coordinate bench had previously granted interim relief, directing the release of goods and the truck upon an undertaking from the petitioner, noting that the show cause notice under Section 130 of the CGST Act appeared to have been issued without following the procedure under Section 129, and that the goods were perishable. The proceedings were at the stage of a show cause notice under Section 130.

Key Issues

1. Whether the show cause notice issued under Section 130 of the CGST Act, 2017, is legally sustainable when the procedure contemplated under Section 129(3) and 129(4) of the CGST Act, 2017, has not been followed by the proper officer? Petitioner's contention: The petitioner argued that the authorities issued a notice under Section 130 of the Act imposing penalty, redemption fine, and confiscation without first initiating proceedings under Section 129. They contended that Section 129 must be followed before Section 130 can be invoked. They also highlighted that the goods were perishable and IGST had already been paid at the time of import. Revenue's contention: 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 dispute that the procedure under Section 129(3) and (4) was not followed when questioned by the Court.