M/S Swaminarayan Traders Through Savanbhai Menpara vs. State Tax Officer

Facts

The petitioner, M/s. Swaminarayan Traders, filed a writ application challenging a notice dated June 3, 2019, issued under Section 130 of the Central Goods and Services Tax Act, 2017 (CGST Act). The notice was issued by the State Tax Officer and pertained to the seizure of a truck (registration number GJ-25-U-9952) and 24,890 Kgs of groundnuts. The petitioner sought to quash the notice, drop the proceedings, and secure the release of the vehicle and goods. An interim order was passed directing the release of the vehicle and goods upon the petitioner depositing Rs. 1,60,000/-. The petitioner availed this benefit and got the goods and vehicle released. The proceedings under Section 130 were ongoing.

Held

The Court acknowledged the petitioner's reliance on the judgment in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat, particularly paragraphs 99 to 104. These paragraphs emphasize that Section 130 of the CGST Act, dealing with confiscation, should not be invoked at the very threshold of detention and seizure without a strong case and proper application of mind. The Court highlighted that Section 129 provides for the release of goods and conveyances upon payment of applicable tax and penalty or furnishing security. Invoking Section 130 prematurely renders Section 129 otiose and can lead to unnecessary indefinite detention of goods and conveyances. The Court clarified that while Section 130 can be invoked at the threshold, the authorities must have material to form a bona fide belief of intent to evade tax, and this belief should be based on an objective test, not mere suspicion. The Court noted that the petitioner had already obtained interim relief for the release of goods and vehicle upon payment, and the proceedings under Section 130 were ongoing. The Court directed that it was now open for the petitioner to make good their case that the show cause notice deserves to be discharged. The writ application was disposed of with this direction.

Key Issues

1. Whether the notice dated June 3, 2019, issued under Section 130 of the CGST Act, 2017, is legally valid and justified at the initial stage of detention and seizure of goods and conveyance? The petitioner argued that the authorities have prematurely invoked Section 130 of the CGST Act, rendering Section 129 of the Act insignificant. They contended that Section 130, which deals with confiscation, should not be invoked at the threshold without a thorough examination of the contravention's nature and intent to evade tax. The petitioner relied on the principles laid down in the case of Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat. The respondent (State Tax Officer) did not record any specific arguments in the judgment regarding the validity of the Section 130 notice at this stage.