M/S Kohitoor Transport LLP vs. State Of Gujarat

Held

The Court held that while Section 130 of the CGST Act can be invoked at the threshold of detention and seizure, the authorities must make out a very strong case with material evidence, not mere suspicion. The judgment in Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat was relied upon, emphasizing that Section 130 is an independent provision for confiscation in cases of intent to evade tax, and its invocation requires an intense application of mind. The Court noted that issuing a Section 130 notice at the inception without proper application of mind renders Section 129 practically insignificant. The Court stated that the authorities must record reasons for their belief in writing, which should be reviewed by a superior authority. The notice for confiscation must disclose the materials upon which the belief is formed. The Court observed that not every contravention of the Act or Rules automatically attracts confiscation under Section 130. The writ application was disposed of with the observation that it is now for the applicant to make good their case that the show cause notice deserves to be discharged.

Facts

The petitioner, M/s Kohitoor Transport LLP, filed a writ application challenging a detention order dated September 17, 2019 (Form GST MOV-6) and a confiscation notice dated September 24, 2019 (Form GST MOV-10) issued by the State of Gujarat authorities. The petitioner sought the release of truck number RJ-27-GC-7676 and its goods without payment of tax, penalty, or security. An earlier order dated October 23, 2019, by a coordinate bench noted discrepancies in the physical verification report and the basis for market value determination. The court granted interim relief, directing the release of the conveyance and goods upon the petitioner filing an undertaking to pay any ultimately determined tax, penalty, or fine. The petitioner availed this relief by paying the tax amount, and the proceedings are now at the show cause notice stage under Section 130 of the CGST Act.

Key Issues

1. Whether the detention and confiscation orders, and subsequent show cause notice under Section 130 of the CGST Act, were issued arbitrarily and without proper application of mind, rendering Section 129 of the Act insignificant? Petitioner's arguments: The petitioner contended that the authorities straightway invoked Section 130 of the CGST Act, bypassing the procedures outlined in Section 129. They argued that this approach renders Section 129, which provides for release on payment of tax and penalty or security, otiose. The petitioner also argued that the confiscation notice was issued without sufficient material or application of mind, merely on suspicion, and that the driver's contravention should not be presumed to be with 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 record specific arguments made by the revenue or State. However, the context implies the revenue defended the issuance of the detention and confiscation orders and the subsequent show cause notice.