Azad Sahid Khan vs. State Of Gujarat

Facts

The petitioner, Azad Sahid Khan, filed a writ application seeking the release of his truck (No. RJ-14-GJ-2683) and its goods, which had been detained since July 6, 2019. The petitioner sought to pay the applicable tax and penalty for release. A coordinate bench of the High Court, on October 23, 2019, issued a rule and granted interim relief, directing the release of the conveyance upon payment of the fine in lieu of confiscation as per the notice under Section 130 of the CGST Act, 2017. The petitioner availed this interim relief and got the vehicle and goods released after paying the tax amount. The proceedings are currently at the show cause notice stage under Section 130 of the CGST Act, 2017.

Held

The Court noted that the petitioner had already availed the benefit of the interim order and secured the release of the vehicle and goods by paying the tax amount. The proceedings are at the show cause notice stage under Section 130 of the CGST Act, 2017, and are to proceed in accordance with law. The Court directed the petitioner to make good their case that the show cause notice deserves to be discharged. The Court referred to and relied upon its own recent pronouncement in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat, particularly paragraphs 99 to 104. These paragraphs emphasize that authorities should not straightway invoke Section 130 without application of mind and justifiable grounds to believe that the contravention was with intent to evade tax. Trivial contraventions or those without a clear intent to evade tax should not automatically lead to confiscation proceedings under Section 130. The Court clarified that while Section 130 can be invoked at the threshold, a very strong case must be made out, supported by material evidence, and the authority must record reasons for their belief in writing. The ratio decidendi is that the invocation of Section 130 must be based on an objective assessment of intent to evade tax, not mere suspicion or trivial contraventions, and Section 129 provides a mechanism for release on payment of tax and penalty.

Key Issues

1. Whether the authorities were justified in straightway invoking Section 130 of the Central Goods and Services Tax Act, 2017, for confiscation at the initial stage of detention and seizure, thereby rendering Section 129 of the Act insignificant? (Question of law) 2. Whether the issuance of a confiscation notice under Section 130 of the CGST Act, 2017, at the threshold, without proper application of mind and justifiable grounds or reasons to believe that the contravention was with a definite intent to evade tax, is permissible? (Question of mixed law and fact) Petitioner's arguments: - The authorities prematurely invoked Section 130 of the CGST Act, 2017, by issuing a confiscation notice at the inception of detention, bypassing the provisions of Section 129 which allow for release on payment of tax and penalty. - The issuance of such a notice without a thorough examination of the nature of contravention and the intent to evade tax renders Section 129 otiose and leads to unnecessary indefinite detention of goods and conveyances. - Reliance was placed on the recent pronouncement of the High Court in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat, specifically paragraphs 99 to 104, which discuss the proper application of Sections 129 and 130. Revenue's arguments: - The judgment records no specific arguments made by the respondent State.