Messrs Meghmani Organics LTD. vs. State Of Gujarat

Facts

The writ applicant, Messrs Meghmani Organics Ltd., a chemical manufacturer, was transporting a consignment of CPC Blue valued at Rs. 25,70,000 from its Panoli factory to its Vatva factory. The applicant contended this was an intra-state branch transfer, not liable for GST. However, on June 23, 2019, the mobile squad detained the conveyance, issuing a detention order (GST MOV-06) for non-generation of Part-B of the e-way bill. The applicant immediately deposited Rs. 9,25,200, leading to the release of goods and conveyance. Subsequently, a show-cause notice (GST MOV-07) under Section 129(3) of the Act was issued, proposing recovery of applicable tax and penalty. The applicant filed a written reply on July 5, 2019, for a hearing scheduled on July 8, 2019. However, an order (Reference No. ZA2407190000680) was passed on July 2, 2019, confirming the tax and penalty.

Held

The Court held that the impugned order dated July 2, 2019, was unsustainable in law due to a gross violation of the principles of natural justice. The Court noted that the order was passed on July 2, 2019, prior to the scheduled hearing date of July 8, 2019, and the petitioner's written reply dated July 5, 2019, was not considered. This was found to be a violation of Section 129(4) of the CGST Act, 2017, which mandates an opportunity of being heard before determining tax, interest, or penalty. The Court explicitly stated it was not delving into the justification of the seizure and detention but focused solely on the procedural impropriety. Consequently, the Court quashed and set aside the impugned order and remitted the matter back to the respondent No. 2 for fresh consideration after providing the writ applicant with an appropriate opportunity of hearing.

Key Issues

1. Whether the impugned order dated July 2, 2019, passed by the respondent No. 2, confirming the imposition of tax and penalty, is sustainable in law, particularly in light of the principles of natural justice and Section 129(4) of the CGST Act, 2017? The petitioner argued that the order was passed before the scheduled date of hearing and without considering their written reply, constituting a gross violation of natural justice. They contended that as it was a branch transfer, no GST liability arose under Section 7 of the CGST Act. The revenue, represented by the Assistant Government Pleader, argued that since the entire amount was deposited on the day of seizure, there was no necessity for a further opportunity of hearing. The petitioner also argued that the seizure and detention were not justified.