Vasu Corporation vs. State Of Gujarat

Facts

The petitioner, Vasu Corporation, filed a writ application challenging the detention of truck no. GJ 04 x 6760 and its goods, and the subsequent notice for confiscation. The vehicle and goods were initially detained under Section 129 of the Gujarat Goods and Services Tax Act, 2017. The petitioner deposited the tax and penalty under protest. Despite this, the respondents proceeded to issue a notice for confiscation under Section 130 of the GST Act. A coordinate bench of the High Court, on May 2, 2019, directed the release of the truck and goods upon payment of tax and penalty, noting that the petitioner had deposited the amounts under protest. The petitioner availed this interim order and got the vehicle and goods released. The proceedings are currently at the show cause notice stage under Section 130.

Held

The Court referred to its recent pronouncement in Synergy Fertichem Pvt.Ltd V/s. State of Gujarat, particularly paragraphs 99 to 104. The Court held that the authorities must first examine the nature of the contravention and whether it was with an intent to evade tax before invoking Section 130. It was emphasized that confiscation under Section 130 is an aggravated form of action, penal in character, aimed at deterring tax evasion, and cannot be invoked for any and every contravention. While Section 130 can be invoked at the threshold, the authorities must make out a very strong case, supported by material evidence, and record their reasons in writing, which should be reviewed by a superior authority. Merely issuing a notice under Section 130 without proper application of mind or sufficient material renders Section 129 practically insignificant. The Court noted that the petitioner had already obtained release of the goods and vehicle and that the proceedings were at the show cause notice stage under Section 130. The Court stated that it is now for the applicant to demonstrate why the show cause notice deserves to be discharged. The writ application was disposed of with the rule made absolute to the extent that the applicant can make their case before the authorities.

Key Issues

1. Whether the issuance of a confiscation notice under Section 130 of the GST Act at the initial stage of detention and seizure, without sufficient application of mind or material to indicate an intent to evade tax, renders Section 129 of the Act otiose? 2. Whether the authorities are justified in invoking Section 130 of the GST Act straightway based on mere suspicion or without a strong case supported by material evidence? Petitioner's Arguments: The petitioner argued that the authorities prematurely invoked Section 130 by issuing a confiscation notice immediately after detention, rendering Section 129, which provides for release on payment of tax and penalty, insignificant. They contended that such an approach leads to unnecessary detention and that confiscation is a penal action requiring a clear intent to evade tax, not merely a contravention of rules. They relied on the judgment in Synergy Fertichem Pvt.Ltd V/s. State of Gujarat. Revenue's Arguments: The judgment does not record specific arguments made by the revenue or State. It notes that the petitioner availed the benefit of the interim order and got the vehicle released, and that proceedings are at the show cause notice stage under Section 130.