M/S Hanuman Trading Co. Through Proprietor Sandip Kumar vs. State Of Gujarat

Held

The Court held that while Section 130 of the GST Act can be invoked at the stage of detention and seizure, the authorities must make out a very strong case and cannot proceed on mere suspicion. The judgment emphasized that for invoking Section 130 at the threshold, the authorities need to record their reasons in writing, which should be reviewed by a superior authority. There must be material on which the authority could form an opinion in good faith that confiscation is necessary. The notice for confiscation must disclose the materials upon which the belief is formed. The Court referred to the Supreme Court's decision in Sheonath Singh's case, stating that while the sufficiency of reasons cannot be investigated, the Court can examine the materials to find out if an honest and reasonable person could base their belief upon them. The formation of opinion must reflect an intense application of mind, and not every contravention warrants confiscation. The Court noted that the petitioner had availed the benefit of interim release and the proceedings were at the show cause notice stage under Section 130, and it was for the applicant to make good their case for discharge of the notice. The writ application was disposed of with the rule made absolute to the extent that the proceedings would continue in accordance with law, allowing the petitioner to rely on the Synergy Fertichem judgment.

Facts

The petitioner, M/s Hanuman Trading Co., filed a writ application challenging an order of detention passed by respondent no. 2 under Section 129(1) of the GST Act, and a subsequent notice for confiscation of goods and conveyance under Section 130 of the GST Act. The goods and conveyance were detained on March 13, 2019. The petitioner argued that the authorities had directly invoked Section 130 without first initiating proceedings under Section 129 and affording an opportunity of hearing. A co-ordinate bench had previously noted blanks in the notice, indicating procedural non-compliance. The Court had granted interim relief, allowing the release of the vehicle and goods upon payment of the tax amount. The proceedings were at the stage of a show cause notice under Section 130.

Key Issues

1. Whether the GST authorities can directly invoke Section 130 of the GST Act for confiscation of goods and conveyance without first initiating proceedings under Section 129 and affording an opportunity of hearing to the concerned person? The petitioner argued that Section 129 of the GST Act mandates a specific procedure for detention and seizure, requiring the issuance of a notice specifying tax and penalty, followed by an opportunity of hearing before passing an order. It was contended that Section 130 can only be resorted to if there is non-compliance with the order passed under Section 129. The petitioner relied on the observations of the Court in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat, which highlighted that invoking Section 130 at the inception renders Section 129 insignificant and can lead to unnecessary detention. The petitioner also pointed to procedural irregularities in the notice issued. The revenue or State did not record specific arguments in the judgment, but the Court's order implies that the revenue was defending the action taken under Section 130.