M/S A And S Metal vs. State Of Gujarat

Facts

The petitioner, M/s A and S Metal, filed a writ application challenging an order of detention dated July 12, 2019, passed by respondent no. 2 under Section 129(1) of the GST Act, and a subsequent notice dated July 13, 2019, for confiscation of goods and levy of penalty under Section 130 of the GST Act. The goods and conveyance (Truck No. GJ-20-V-9564) were intercepted at Bhavnagar. The petitioner argued that the actions were illegal, unlawful, contrary to facts and evidence, and violative of natural justice. The Court, in an interim order dated July 26, 2019, noted a strong prima facie case and directed the release of goods upon payment of Rs. 1,27,820/- towards penalty and tax. The petitioner availed this benefit and got the goods and vehicle released. The proceedings were at the stage of a show cause notice under Section 130.

Held

The Court held that the authorities are not justified in straightway issuing a notice of confiscation under Section 130 of the Act without proper application of mind and justifiable grounds. Section 129 provides for the release of goods and conveyances upon payment of applicable tax and penalty or furnishing security. Section 130 is an independent provision for confiscation in cases where there is an intention to evade tax, which is penal in nature. The Court emphasized that not every contravention attracts confiscation. For invoking Section 130 at the threshold, authorities need to make out a very strong case with material evidence, not mere suspicion. The notice for confiscation must disclose the materials upon which the belief is formed. The Court noted that the proceedings were at the stage of a show cause notice under Section 130 and directed the petitioner to make good their case that the notice deserves to be discharged, allowing them to rely on the pronouncement in Synergy Fertichem Pvt. Ltd. The writ application was disposed of with the rule made absolute to the extent of the Court's observations.

Key Issues

1. Whether the respondent authorities were justified in directly invoking Section 130 of the GST Act for confiscation of goods and conveyance at the initial stage of detention and seizure, without properly considering the provisions of Section 129. Petitioner's arguments: The petitioner contended that the actions of the respondent authorities were illegal, unlawful, contrary to the facts and evidence on record, violative of the principles of natural justice, and against the provisions of the Act and Rules. Specifically, they argued that the authorities prematurely invoked Section 130 for confiscation instead of following the procedure under Section 129 for release upon payment of tax and penalty. They relied on the reasoning in the case of 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 in response to the petitioner's contentions regarding the invocation of Section 130 versus Section 129.