M/S Radhe Renewable Energy Development PVT. LTD vs. State Of Gujarat

Facts

The writ applicants, M/s Radhe Renewable Energy Development Pvt. Ltd., challenged detention of raw materials and a truck, along with a notice issued under Section 130 of the CGST Act, 2017. The detention occurred on April 8, 2019, with subsequent notices dated April 28, 2019, and April 30, 2019. The applicants sought quashing of these notices and the detention, and release of the goods and vehicle. An interim order dated May 9, 2019, directed the release of detained goods and conveyance upon payment of computed tax and penalty, and filing of an undertaking to make good any deficit liability. The applicants availed this interim relief and got the vehicle and goods released on payment of tax. The proceedings were at the stage of a show cause notice under Section 130.

Held

The Court held that while authorities can invoke Section 130 of the CGST Act at the threshold of detention and seizure, they must make out a very strong case and cannot act merely on suspicion. The judgment in Synergy Fertichem Pvt. Ltd. v. State of Gujarat was relied upon, emphasizing that for invoking Section 130 at the outset, authorities need to record their reasons in writing, which should be reviewed by a superior authority. The Court stated that there must be material upon which the authority can form an opinion in good faith that confiscation is necessary. The notice for confiscation must disclose the materials on which the belief is formed. The Court noted that any contravention of the Act or Rules does not automatically attract confiscation under Section 130, as it is an independent provision for cases where the intention to evade tax is found. The Court disposed of the writ application, making the rule absolute to the extent that the applicants are to make good their case that the show cause notice deserves to be discharged.

Key Issues

1. Whether the authorities were justified in invoking Section 130 of the CGST Act, 2017, at the threshold, i.e., at the stage of detention and seizure, without sufficient material or application of mind? The petitioner argued that the authorities prematurely invoked Section 130 of the CGST Act, bypassing the provisions of Section 129. They contended that Section 129 provides for the release of goods and conveyances upon payment of applicable tax and penalty or furnishing security, and that issuing a Section 130 notice at the inception renders Section 129 insignificant. The petitioner relied on the Gujarat High Court's judgment in Synergy Fertichem Pvt. Ltd. v. State of Gujarat, specifically paragraphs 99 to 104, which discuss the proper invocation of Section 130. The revenue's arguments are not explicitly recorded in the provided text, beyond their participation in the proceedings and the issuance of the notices under challenge.