Dharma Lubes PVT. LTD. vs. State Of Gujarat

Held

The Court disposed of the writ application by making the rule absolute to the extent that the applicant has already obtained the release of the vehicle and goods by paying the tax amount as per the interim order. The Court directed that it is now open for the writ applicant to make good their case that the show cause notice issued under Section 129 of the CGST Act, 2017, deserves to be discharged. The Court did not decide the merits of the show cause notice itself but allowed the applicant to pursue their defense in the ongoing proceedings. The reasoning relies heavily on the observations made in the Synergy Fertichem Pvt. Ltd. case, emphasizing that Section 130 (confiscation) should not be invoked arbitrarily at the threshold without proper application of mind and material evidence of intent to evade tax. The Court clarified that while Section 130 can be invoked at the threshold, a very strong case must be made out, supported by recorded reasons and material, and not based on mere suspicion. The proceedings under Section 129 are to continue in accordance with law.

Facts

The writ applicant, Dharma Lubes Pvt. Ltd., filed a Special Civil Application seeking the release of a truck and its goods. The truck was detained under the Central Goods and Services Tax Act, 2017. The High Court, in an interim order dated October 23, 2019, directed the release of the vehicle and goods upon payment of the tax amount as per the impugned notice. The applicant complied with this order and obtained the release. The proceedings are currently at the show cause notice stage under Section 129 of the CGST Act, 2017. The Court noted that the applicant could rely on a recent pronouncement in the case of Synergy Fertichem Pvt. Ltd. V/s. State of Gujarat.

Key Issues

1. Whether the authorities are justified in directly invoking Section 130 of the CGST Act, 2017 (confiscation) at the initial stage of detention and seizure under Section 129, without a thorough application of mind regarding the intent to evade tax? Petitioner's Contention: The petitioner, through reliance on the Synergy Fertichem judgment, implicitly argues that Section 130 should not be invoked without sufficient grounds and a clear intent to evade tax, and that Section 129 provides for release upon payment of tax and penalty. The petitioner's primary relief sought was the release of the vehicle and goods, which has been achieved. The current proceedings are at the show cause notice stage under Section 129. Revenue's Contention: The revenue, represented by the learned Assistant Government Pleader, has not explicitly recorded arguments in this specific order. However, their participation implies a defense of the detention and the subsequent proceedings initiated under the GST Act.