R.K. Imaging, Proprietor Krunalkumar Manilal Patel vs. State Of Gujarat

Facts

The petitioner, R.K. Imaging, an authorized dealer of Samsung sonography machines, was transporting a machine valued at Rs. 15,50,000/ to Dr. Devchandbhai Prajapati. The vehicle carrying the machine was intercepted by authorities as the driver could not produce an e-way bill. Consequently, the vehicle and the machine were seized. Proceedings were initiated under Section 130 of the GST Act for confiscation. The petitioner had deposited Rs. 3,32,144 towards tax and penalty. The High Court, in an interim order, directed the release of the goods and vehicle upon payment of the tax amount, subject to the final outcome of the petition. The petitioner availed this benefit and got the goods released. The confiscation proceedings under Section 130 were ongoing.

Held

The Court held that while Section 130 of the GST Act can be invoked at the threshold, the authorities must make out a very strong case with sufficient material to justify such action. Mere suspicion is not enough. The notice for confiscation must disclose the materials upon which the belief of intent to evade tax is formed. The Court referred to its decision in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat, emphasizing that Section 130 is an independent provision for confiscation in cases of proven intent to evade tax and should not be invoked without proper application of mind or foundation. The Court noted that the petitioner had deposited the tax and penalty and that the confiscation proceedings were still pending. The Court directed that the petitioner should be allowed to rely on the observations made in the Synergy Fertichem case during the ongoing proceedings and that the show cause notice issued under Form GST-MOV-10 should be discharged if the petitioner makes good his case.

Key Issues

1. Whether the authorities were justified in invoking Section 130 of the GST Act for confiscation of goods and conveyance at the initial stage of detention and seizure, bypassing the provisions of Section 129 of the GST Act? (Question of law) Petitioner's arguments: The petitioner argued that the authorities prematurely invoked Section 130, which deals with confiscation, instead of following the procedure under Section 129 for detention, seizure, and release of goods and conveyance upon payment of applicable tax and penalty. They contended that Section 130 is an aggravated form of action intended for tax evasion and should not be invoked without sufficient material to demonstrate such intent. They relied on the High Court's own pronouncement 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.