M/S Kanak Ratna Steel, Proprietor Sachin Rajmal Jain vs. State Of Gujarat

Facts

The petitioner, M/s. Kanak Ratna Steel, filed a writ application challenging a notice for confiscation of goods and levy of penalty under Section 130 of the GST Act, and the detention of their goods and truck (RJ-06-GC-4460). The goods, comprising 7,677 kgs of SS Sheet/Coil/Plate, were sold to M/s. Raj Rishi Steels in Jaipur. The truck was intercepted near Shamraji within Gujarat, and the goods were seized. The petitioner argued that only one invoice was generated for 2115.600 kg worth Rs. 2,24,253. The High Court, in an interim order, directed the release of goods and the vehicle upon the petitioner depositing Rs. 2,12,246 towards tax and penalty, subject to the final outcome of the writ application. The petitioner availed this benefit. The proceedings were at the show cause notice stage under Section 130.

Held

The Court held that while Section 130 of the GST Act can be invoked at the threshold of detention and seizure, the authorities must make out a very strong case and cannot proceed merely on suspicion. The decision to invoke Section 130 requires a written record of reasons for such belief, which should be reviewed by a superior authority. The formation of opinion for confiscation must reflect an intense application of mind, and there must be material on which the authority can form its belief in good faith that evasion of tax was intended. The Court noted that the petitioner had deposited tax and penalty as per the interim order and that the proceedings were at the show cause notice stage. The Court directed that it is now for the applicant to make good his case that the show cause notice deserves to be discharged, and disposed of the writ application accordingly.

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. Petitioner's arguments: The petitioner contended that the authorities prematurely invoked Section 130 by issuing a confiscation notice right at the inception of detention and seizure. They argued that Section 129 provides for the release of goods and conveyances upon payment of applicable tax and penalty or furnishing security, and that Section 130 should not be invoked without proper application of mind or a strong case demonstrating intent to evade tax. They relied on the judgment in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue. However, the context implies the revenue's action was to detain and initiate confiscation proceedings under Section 130.