M/S Active Metals PVT. LTD. vs. State Of Gujarat

Facts

The writ applicant, M/s. Active Metals Pvt. Ltd., engaged in manufacturing and supplying brass items, procured brass scrap from M/s. Nexus Enterprises in Maharashtra. The goods, in transit from Maharashtra to Jamnagar, Gujarat, were intercepted on December 21, 2021. The driver's statement was recorded, and a physical verification of goods and documents was ordered. A report (FORM GST MOV-04) dated December 24, 2021, indicated that the description and quantity of goods matched the invoice and E-way bills. Despite this, the goods and vehicle were detained, leading to the writ application seeking their release and quashing of the detention order (FORM GST MOV-06 dated December 24, 2021). The applicant argued that detention was unlawful as no discrepancies were found in the physical verification report and no notice under Section 129(3) was issued.

Held

The Court held that the indefinite detention of the conveyance and goods was not serving any purpose. While acknowledging the Department's right to conduct inquiries and potentially issue a notice for confiscation under Section 130 of the CGST Act, 2017, the Court found that at that stage, there was no such notice issued. The Court noted that the liability of the writ applicant towards tax and penalty up to the stage of Section 129 of the Act needed to be determined for provisional release. The value of goods was Rs. 39,90,355/-, with 18% tax amounting to Rs. 7,18,264/- and 18% penalty amounting to Rs. 7,18,264/-. The total liability for provisional release under Section 129 was Rs. 14,36,528/-. The Court directed the writ applicant to deposit this amount with the respondent No.4 for the release of the conveyance and goods. The Court explicitly stated that it had not expressed any opinion on the merits of the case and that it was open for the Department to decide on confiscation proceedings and for the applicant to pursue other legal remedies.

Key Issues

1. Whether the detention of goods-in-transit and the conveyance is justified when the physical verification report (FORM GST MOV-04) indicates no discrepancies between the goods, quantity, and supporting documents, and no notice under Section 129(3) of the CGST Act, 2017, has been issued for penalty. Petitioner's arguments: The petitioner contended that since the FORM GST MOV-04 confirmed that the description and quantity of goods matched the invoice, E-way bills, and other documents, the detention was unjustified. They argued that the issuance of the detention order (FORM GST MOV-06) without any recorded discrepancies and without issuing a notice under Section 129(3) was illegal. Furthermore, the petitioner highlighted the incurring of significant demurrage charges due to the prolonged detention. Revenue's arguments: The Revenue stated that they were contemplating issuing a notice under Section 130 of the CGST Act, 2017, for confiscation of goods and vehicle, alleging tax evasion. They pointed out that the GSTIN of M/s. Nexus Enterprises was suspended and suggested that the transaction involved cash payments and bogus vouchers to wrongly avail Input Tax Credit (ITC). The Revenue urged the Court not to interfere with the ongoing departmental inquiry.