Dangar Vashrambhai Arjanbhai vs. State Of Gujarat

Facts

The petitioner, Dangar Vashrambhai Arjanbhai, engaged in the transport business, filed a writ application challenging the order of detention dated July 10, 2019, passed by respondent no. 3 under Section 129(1) of the GST Act, concerning truck no. GJ-04-X-7165. The petitioner also challenged the notice issued by respondent no. 2 on July 22, 2019, for confiscation of goods and levy of penalty under Section 130 of the GST Act. The petitioner claimed the actions were illegal and violated natural justice. The Court, by an interim order dated August 2, 2019, directed the release of the truck and goods upon payment of Rs. 2,29,520/- towards tax and penalty, which the petitioner complied with. The proceedings are currently at the show-cause notice stage under Section 130.

Held

The Court held that authorities may not be justified in straightway issuing a notice of confiscation under Section 130 of the GST Act without proper application of mind or justifiable grounds. For invoking Section 130 at the threshold, a very strong case must be made out, and mere suspicion is insufficient. The authorities need to record written reasons for their belief, which should be reviewed by a superior authority. While the court cannot investigate the sufficiency of the reasons for belief, there must be material on which an authority could form its opinion in good faith. The notice for confiscation must disclose the materials upon which the belief is formed. The Court noted that Section 129 provides for release on payment of tax and penalty, and invoking Section 130 prematurely renders Section 129 otiose. Confiscation under Section 130 is penal in character and intended to deter tax evasion, requiring proof of intent to evade tax. The Court directed that the petitioner should make good his case that the show-cause notice deserves to be discharged, implying the proceedings under Section 130 should be critically examined based on the principles laid down.

Key Issues

1. Whether the authorities were justified in straightway invoking Section 130 of the GST Act for confiscation at the threshold, without properly considering the provisions of Section 129, particularly when the contravention might be trivial or not with intent to evade tax? (Section 129, Section 130, Section 135 of the GST Act) Petitioner's Arguments: The petitioner argued that the actions of the respondents were illegal, unlawful, contrary to facts and evidence, and violative of principles of natural justice. The petitioner sought quashing of the detention order and the confiscation notice, emphasizing that Section 129 provides for release on payment of tax and penalty, and Section 130 should not be invoked without proper application of mind and sufficient grounds, especially when the intent to evade tax is not established. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue or state. However, the actions of the respondents in issuing a detention order under Section 129(1) and a show-cause notice for confiscation under Section 130 indicate their stance that a contravention occurred justifying such actions.