S.V.P. Apparels Private LTD. vs. State Of Gujarat

Facts

The petitioner, S.V.P. Apparels Private Ltd., filed a writ application challenging an order dated October 9, 2019, passed under Section 130 of the GST Act. The petitioner sought a writ of prohibition to prevent the respondents from proceeding with the Section 130 order, arguing that the authority lacked the power to pass it without first following the provisions of Section 129. The petitioner also sought interim relief for the release of detained goods and the vehicle. A coordinate bench had previously directed the release of the vehicle and goods upon payment of the applicable tax and penalty. The petitioner availed this interim relief and got the goods and vehicle released. The proceedings were at the show cause notice stage under Section 130.

Held

The Court held that the authority must first look into the nature of the contravention and whether it was with an intent to evade tax before invoking Section 130. Section 130 is an independent provision for confiscation in cases of proven intent to evade tax and is penal in character. The Court referred to its previous decision in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat, emphasizing that authorities cannot straightway issue a notice of confiscation under Section 130 without application of mind or justifiable grounds. The contravention must be of such a nature that the authority is convinced of a definite intent to evade tax. Merely on suspicion, Section 130 cannot be invoked. If Section 130 is invoked at the threshold, the authorities need to record their reasons in writing, which should be reviewed by a superior authority. The notice for confiscation must disclose the materials upon which the belief is formed, and while courts cannot investigate the sufficiency of reasons, they can examine if an honest and reasonable person could base their belief on such materials. The writ application was disposed of with the observation that it was open for the applicant to make good their case that the show cause notice under GST-MOV-10 deserved to be discharged.

Key Issues

1. Whether the authority passing an order under Section 130 of the Central Goods and Services Tax Act, 2017 (CGST Act) can do so without first following the provisions of Section 129 of the CGST Act? Petitioner's Argument: The petitioner contended that the authority has no authority to pass an order under Section 130 of the GST Act without first adhering to the procedures laid down in Section 129. They relied on the principle that Section 129 provides for the release of goods and conveyances on payment of tax and penalty, and that Section 130, dealing with confiscation, should not be invoked prematurely or without proper application of mind. Revenue's Argument: The judgment does not record specific arguments made by the revenue or State. However, the context implies the revenue's position was to proceed under Section 130.