Shri Arasuri Transport Co. vs. Union Of INDIA

Held

The Court held that while Section 130 of the CGST Act can be invoked at the threshold of detention and seizure, the authorities must make out a very strong case, supported by material evidence, to justify such action. Merely on suspicion, invoking Section 130 straightway is not justified. The judgment in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat was relied upon, emphasizing that the contravention must be with a definite intent to evade payment of tax. The Court clarified that Section 129 proceedings should not be rendered otiose by premature invocation of Section 130. The authorities must record their reasons for believing that confiscation is necessary, and these reasons should be subject to scrutiny by superior authorities. The notice for confiscation must disclose the materials upon which the belief is formed. The Court noted that the writ application stands disposed of, making the rule absolute to the extent that the applicant can now make good their case before the authority regarding the discharge of the show cause notice.

Facts

The petitioner, Shri Arasuri Transport Co., filed a writ application challenging an order of detention dated August 31, 2019, and a show cause notice dated September 4, 2019, both issued by Respondent No. 2. The petitioner sought to quash these orders and direct the release of detained goods and conveyance. A coordinate bench of the High Court, on September 19, 2019, had directed the immediate release of the goods and conveyance upon payment of the tax amount. The petitioner availed this interim relief and got the goods and conveyance released. The proceedings are currently at the stage of a show cause notice under Section 130 of the CGST Act, 2017.

Key Issues

1. Whether the issuance of a show cause notice under Section 130 of the Central Goods and Services Tax Act, 2017 (CGST Act) at the threshold, immediately upon detention and seizure of goods and conveyance, is justified without a thorough application of mind regarding the intent to evade tax? Petitioner's Arguments: The petitioner relies on the pronouncement in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat, specifically paragraphs 99 to 104. They argue that Section 129 of the CGST Act, which provides for release of goods and conveyance upon payment of tax and penalty or furnishing security, is rendered insignificant if Section 130 (confiscation) is invoked prematurely. The petitioner contends that confiscation under Section 130 should only be invoked when there is a clear intent to evade tax, and a trivial contravention or lack of an e-way bill, for instance, should not automatically lead to confiscation proceedings. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue or State. However, the context implies that the revenue issued the detention order and show cause notice under Section 130, suggesting a belief that the contravention warranted such action.