Insha Trading Company Through Proprietor Mustak Jamalbhai Sheikh vs. State Of Gujarat

Held

The Court held that the actions of the third respondent were illegal and arbitrary. It was found that although Form GST MOV-02 was issued for physical verification, no report in Part A of Form GST EWB-03, Form GST MOV-04, or Part B of Form EWB-03 was prepared or uploaded as required by Circular No. 41/15/2018-GST. The Court noted that Clause (g) of the circular mandates the issuance of a release order in Form GST MOV-05 if no discrepancies are found. Despite the vehicle being detained for verification of the 'bilty', no discrepancy was recorded in the affidavit-in-reply. The Court observed that the reasons for confiscation under Section 130 of the CGST Act were unrelated to the initial grounds for detention. The Court found no valid ground for the detention of the vehicle. Therefore, the order of confiscation under Section 130 and the demand of tax and penalty were quashed and set aside. The Court directed the immediate release of the conveyance and goods. It was clarified that this order would not prevent the respondents from proceeding against the petitioner for other contraventions mentioned in the affidavit-in-reply.

Facts

The petitioner, Insha Trading Company, challenged an order dated 08.04.2019 by the State Tax Officer (third respondent) under Section 130 of the CGST Act, which ordered the confiscation of a vehicle and its goods. The petitioner, a registered dealer in metal, was transporting brass electrical parts from Jamnagar to Delhi. The vehicle was intercepted on 14.01.2019, and the driver produced the invoice, e-way bill, and lorry receipt. The vehicle was detained for verification of the 'bilty' (consignment note) details, which were prima facie disproportionate. Subsequently, an order under Section 129(1) of the CGST Act was issued for detention. A notice under Section 130 of the CGST Act was then issued for confiscation, citing alleged discrepancies in e-way bills generated by the petitioner in December 2018, suggesting non-payment of IGST or non-genuine purchases. The impugned order followed, confiscating the goods and conveyance.

Key Issues

1. Whether the detention and subsequent confiscation of the vehicle and goods were justified under the CGST Act, considering the documents produced and the procedure followed by the proper officer? 2. Whether the proper officer followed the prescribed procedure, including physical verification and reporting, as stipulated in Circular No. 41/15/2018-GST dated 13.04.2018, before proceeding under Sections 129 and 130 of the CGST Act? Petitioner's Arguments: The petitioner argued that all required documents were produced at the time of interception. They contended that no report in Part A of Form GST EWB-03 or Form GST MOV-04 was uploaded or furnished, despite Form GST MOV-02 being issued for physical verification. Reliance was placed on Circular No. 41/15/2018-GST, which mandates that if no discrepancy is found, the conveyance should be released. The petitioner asserted that no discrepancy was found in the documents, making the detention and subsequent actions illegal and arbitrary. Revenue's Arguments: The respondent relied on their affidavit, stating that searches at the petitioner's business premises revealed no stock or books of accounts. They alleged collusion between the petitioner and the transporter and claimed that the stated suppliers from Kolkata were non-existent, suggesting local purchases without paying tax. The revenue argued that the petitioner purchased goods locally without tax and sold them to Delhi dealers, showing state tax in the invoice.