Sanjay Trading Company Through Proprietor Sanjaykumar Ambadan Gadhavi vs. State Of Gujarat

Facts

The writ applicant, Sanjay Trading Company, engaged in the business of metal scrap and registered under GST in Gujarat, had an order for metal scrap with M/s Bhavya Steels in Thane, Maharashtra. During transit, the vehicle carrying the goods was intercepted. The authorities seized the vehicle and goods, citing the absence of an E-way bill and discrepancies between the invoice and the actual goods. The respondent authorities issued a notice for confiscation under Section 130 of the GST Act. The applicant deposited Rs. 2,33,154 towards tax liability and penalty. The High Court, in an interim order, directed the release of the vehicle and goods upon payment of the tax. The applicant availed this benefit and the proceedings are now at the show cause notice stage under Section 130.

Held

The Court held that while authorities can invoke Section 130 of the GST Act at the threshold of detention and seizure, they must make out a very strong case supported by material evidence, not mere suspicion. The judgment emphasized that the contravention must be with the intent to evade tax payment, and not every contravention warrants confiscation. The Court referred to its previous decision in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat, highlighting that Section 129 provides for release on payment of tax and penalty, and Section 130 is an independent provision for confiscation in cases of tax evasion intent. The Court noted that issuing a Section 130 notice without application of mind or a proper foundation renders Section 129 otiose. The applicant was directed to make good their case that 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 now argue their case based on the principles laid down.

Key Issues

1. Whether the GST authorities can directly invoke Section 130 of the GST Act for confiscation without first resorting to Section 129 of the Act, concerning detention, seizure, and release of goods and conveyances in transit? The petitioner argued that the authorities prematurely invoked Section 130 by issuing a confiscation notice immediately upon detention, bypassing the procedures outlined in Section 129, which provides for release upon payment of applicable tax and penalty. They contended that Section 129 should be the primary recourse for contraventions of the Act or Rules during transit, and Section 130, involving confiscation, should only be invoked when there is a clear intent to evade tax, supported by substantial material. The revenue or State's arguments are not explicitly recorded in the provided judgment excerpt, other than their action of issuing the notice under Section 130.