PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA

1.Heard learned advocate Mr. Uchit N. Sheth for the petitioner and learned Assistant Government Pleader Mr. Krutik Parikh for the respondent State.

2.Having regard to the controversy involved in this petition which is in a very narrow compass, with the consent of learned advocates for the respective parties, the matter is taken up for final hearing today.

3.Rule returnable forthwith. Learned Assistant Government Pleader Mr.Krutik Parikh waives service of notice of rule on behalf of the respondent State.

4.By this petition under Article 226 of the Constitution of India, the petitioner has prayed for quashing and setting aside the order dated 31.05.2022 passed under section 107 of the Central Goods and Services Tax Act, 2017 (For short “ the GST Act”) as well as order of confiscation dated 17.01.2022. The petitioner has further prayed to release the conveyance bearing registration no. GJ- 25-U-9321 along with the goods contained therein.

5.Brief facts of the case are that the petitioner is a proprietorship concern and is engaged in the business of trading of arecanuts. The petitioner is duly registered under the Central/Kerala Goods and Services Tax Act, 2017.

6.The petitioner received order for supply of arecanuts from M/s. Bharath Matha Enterprises situated in Jamnagar at Gujarat. Pursuant to such order, the petitioner transported goods to Jamnagar. The petitioner also duly generated invoice as well as e-way bill on the online GST Portal.

7.It is the case of the petitioner that the proprietor of the recipient of goods was out of station when order had been placed by the Manager and therefore, the proprietor not being aware about such order, filed a complaint on 20.12.2021 with the GST authority that e-way bill was wrongly generated by someone in his name.

8.Based on such complaint, the check-post authority detained the goods and conveyance of the petitioner.

9.The respondent authorities thereafter proceeded to issue impugned confiscation notice dated 17.01.2022 in Form GST MOV 10 on the basis of the compliant made by the recipient of the goods as mentioned in the eway bill.

10. The petitioner immediately upon coming to know of such interception and the reason for the same, contacted the recipient and informed that the goods were being delivered to him pursuant to the order placed by the Manager which was cross-checked by the proprietor who accepted the error on his part.

11. The proprietor of the recipient of the goods immediately sent an email on 23.12.2021 to the respondent authorities acknowledging the mistake committed because of miscommunication and requested for release of goods. The recipient of the goods as well as the petitioner made submissions before the respondent authorities requesting to release the goods and conveyance.

12. It is the case of the petitioner that despite the fact that the very reason for detention and proposed confiscation of goods did not survive, the respondents were neither dropping the confiscation proceedings nor releasing the goods and conveyance and therefore, the petitioner preferred Special Civil Application No. 1125/2022 challenging the confiscation notice and praying for release of goods and conveyance. The petitioner had also intimated the respondents about the filing of the petition before this Court.

13. This Court issued notice to the respondents on 27.01.2022 and restrained the respondents from passing the final order of confiscation.

14. It is the case of the petitioner that during the pendency of the petition, final order of confiscation being From Form GST MOV 11 came to be served upon the petitioner which was claimed to have been passed by the respondents prior to stay being granted by this Court. It is the case of the petitioner that such order was passed without affording any opportunity of hearing to the petitioner.

15. Since final order of confiscation was passed, this Court vide order dated 16.02.2022 relegated the petitioner to avail the alternative remedy of statutory appeal under section 107 of the GST Act.

16. The petitioner therefore preferred appeal before the First Appellate Authority under section 107 of the GST Act. The Appellate Authority issued a query memo containing queries regarding purchaser of the goods. It is the case of the petitioner that all such queries were beyond the initial confiscation notice issued by the Appellate Authority. However, the petitioner replied to such query memo in detail and informed the Appellate Authority that pre-deposit has been made.

17. The First Appellate Authority dismissed the appeal and confirmed the order of confiscation of goods and conveyance by impugned order dated 31.05.2022.

18. Being aggrieved by the action of the respondent authorities, the petitioner has preferred the present petition.

19. Learned advocate Mr. Uchit Sheth for the petitioner submitted that the Appellate Authority in the impugned order dated 31.05.2022 has failed to consider the fact that the complaint filed by the recipient of goods was subsequently withdrawn as the same was made because of the commercial dispute with regard to an earlier transaction of the petitioner with the same party.

20. It was submitted that the findings recorded by the Appellate Authority that the petitioner did not make statutory pre-deposit is not correct inasmuch as the petitioner deposited 25% of the tax demanded and the challan was also produced for the same. It was submitted that as the petitioner is challenging the confiscation of the goods, question of need for pre-deposit would not arise and dismissal of the First Appeal on ground of non payment of pre-deposit is absolutely mechanical and illegal.

21. It was further submitted that the impugned order is passed in a mechanical manner as it is observed by the Appellate Authority that the provisional release of the goods is not possible in view of the fact that inquiry is still in progress and show cause notice could be issued to the petitioner in due course. It was submitted that if the inquiry was not concluded then question of confiscation of goods and dismissal of appeal of the petitioner would not arise. It was therefore, submitted that the impugned order is passed without considering the facts of the case and only on the basis of conjectures and surmises.

22. Learned advocate Mr. Sheth submitted that the impugned order is passed in breach of principles of natural justice. It was submitted that inspite of informing the officer that the writ petition was filed before this Court challenging the confiscation notice and detention of goods, even then the impugned order of confiscation was passed without giving an opportunity of hearing to the petitioner. The petitioner made submission before the Appellate Authority in this regard but the same is not considered at all and the Appellate Authority dismissed the appeal confirming the order of confiscation of goods and conveyance without giving any cogent reasons in support thereof.

23. It was submitted that the petitioner has generated e-way bill on online portal and therefore, there was no possibility of supplier evading tax on such transaction and in such circumstances, when the petitioner is the supplier of the goods, there is no breach of any of the provisions of the GST Act. It was also pointed out that vehicle which is confiscated has also nothing to do with the entire controversy inasmuch as the same was taken on hire from an individual. It was therefore, submitted that the impugned orders are required to be quashed and set aside.

24. On the other hand, learned Assistant Government Pleader Mr. Krutik Parikh for the respondent authorities submitted that the impugned orders are passed taking into consideration the facts emerging from the record as the petitioner failed to submit any reply to the show cause notice issued by the authority.

25. It was submitted that the Appellate Authority has also considered the submissions made by the petitioners by considering the provisions of section 129 and section 130 of the GST Act as well as the decision of this Court in case of Synergy Fertichem Pvt. Ltd. v. State of Gujarat (Judgment dated 23.12.2019 passed in Special Civil Application No.4730/2019 and allied matters). It was submitted that after considering the provisions of section 129 and 130 of the GST Act as well as CBIC Notification No.39/2021 dated December 21, 2021, the impugned order is passed.

26. We have considered the rival submissions made by both the sides and also perused the impugned order dated 31.05.2022 along with other materials placed on record.

27. It appears that the Appellate Authority has not considered the facts of the case, as it emerges with regard to pre-deposit, more particularly, when the petitioner has stated before the Appellate Authority that 25% of the demand was already deposited by the petitioner and challan was also produced before the Appellate Authority.

28. The Appellate Authority has also not considered the various grounds raised by the petitioner and more particularly, the aspect of not providing opportunity by the authority who passed the order for confiscation of goods and conveyance under section 130 of the Act.

29. The Appellate Authority in reasonings has observed as under :

“6 This office in the light of the provisions of sections 129 and 130 of the Act, 2017 which are delineated as above, and upon reading of the decision of the Division Bench of Gujarat High Court in Synergy Fermitech P. Ltd. (supra), is of the considered view that the it cannot be held that the provisions of section 130 of the Act, 2017 could be invoked in cases of conveyance/goods detained/seized while in transit only if there is a failure to pay the amount of tax and penalty as provided under section 129(6) of the Act. This office, for the reasons discussed hereafter, would also hold that the failure to pay the amount of tax and penalty as contemplated under section 129(6) ibid would be just one of the circumstances in which proceedings under section 130 ibid could be initiated in cases of conveyance/goods detained/seized while in transit.

7 For provisional release of goods application filed under section 67 of the Act, 2017 this office finds that, inquiry is still in progress, it is expected from both the appellant as well as the recipient of the goods that they shall cooperate in the inquiry and file their appropriate reply to the show cause notice if, any served, or wherever called for obtaining statement shall abide to attend the office without seeking adjournment. Considering the commodity is perishable and confiscated of goods for more than four months and vehicle should be released subject to the final outcome of the confiscation. Central Government has brought into effect the provisions of Finance Act, 2021 effective from 1st January, 2022. In the Budget of 2021- 22, changes in Finance Bill, 2021 were proposed to make changes in CGST/GGST Act, 2017. Accordingly, COST/GGST Act, COST/GGST Rules and IGST Act, 2017 has been amended. The CBIC vide Notification No. 39/2021-Central Tax dated December 21, 2021 notified the below mentioned amendments w.c.f. January 01, 2022. Amendment has been made to insert a proviso to Section 107(6) of the COST/GGST Act, to provide that appeal against order passed under Section 129(3) of the CGST/GGST Act in Form MOV-09, can be filed before the Appellate Authority only after depositing 25% of the penalty imposed to the department (the limit has been enhanced from 10% of the pre deposit). The appellant has not produce any challan of pre deposit till date there for above appeal together with application for provisional release of goods and conveyance is dismissed. In accordance with the statutory provision. Further appeal before constituted Tribunal or before the Hon’ble High Court.

Summation:

For what has been discussed hereinabove, present appeal filed by the appellant is dismissed and, while not setting aside the order passed by the proper officer of mobile squad-(3), Enforcement, Division 8,Bhilad Vapi and approving such order, the goods in question are to be held liable to absolute confiscation. The appellant shall be liberty to prefer an appeal before the Tribunal if, constituted or prefer an appeal before Hon’ble High Court.

Conclusions and directions: Accordingly, and in view of the above:

(a) this appeal is dismissed;

(b) the impugned order in Form GST MOV 11 dated 17/01/2022, as passed by the proper officer, mobile squad-(3), Enforcement, Division 8,Bhilad Vapi stands confirmed;

(c) the detention order for the questions of release of goods and vehicle stand concluded with this order and hence, the prayer for keeping litigation stands open the option of further statutory appeal is allowed.”

30. Thus the Appellate Authority has passed the impugned order without considering the submissions made by the petitioner and therefore, the same is required to be quashed and set aside by remanding the matter back to the Appellate Authority to pass a fresh de novo order after giving an opportunity of hearing to the petitioner. Such exercise shall be completed within a period of 12 weeks from the date of receipt of this order.

31. At this stage, learned advocate Mr. Uchit Sheth has shown willingness to deposit the amount of tax and penalty and to furnish a bond for fine in lieu of confiscation of goods before the authority for release of goods and conveyance.

32. Accordingly, the petitioners are directed to deposit a sum of Rs.3,00,300/- towards tax and a sum of Rs. 6,00,600/- for penalty and fine in lieu of confiscation of conveyance, totalling Rs. 9,00,900/- before the respondent authorities within a period of two weeks from the date of receipt of this order on furnishing a bond of Rs. 60,06,000/- within a period of two weeks from receipt of this order. The respondent authority is therefore, directed to release the goods and conveyance.

33. It is clarified that this Court has not gone into the merits of the matter and the Appellate Authority shall decide the appeal without being influenced by any observations made in earlier order or by this Court in accordance with law.

34. Rule is made absolute to the above extent. No order as to costs.