ORDER

Heard Shri Aloke Kumar, learned counsel for the petitioner and Shri Jagdish Mishra, learned Standing Counsel appearing for the respondents.

This writ petition has been filed for quashing the order dated 29.11.2020 issued in Form GST MOV-11 whereby the vehicle being registration No.HR 55 S 1171 belonging to the petitioner has been confiscated and penalty has been imposed. Further challenge is to the order dated 28.06.2021 whereby the appeal filed by the petitioner under Section 107 of the U.P. Goods and Services Tax Act, 2017 Act against the aforesaid order in Form GST MOV-11, has been dismissed. It has been submitted that since the Appellate Tribunal has not been constituted under Section 109 of the Act, therefore the present petition is filed.

The brief facts of the case are that the petitioner is a proprietorship concern based in Kolkata and engaged in the business of the leasing trucks and other vehicles on hire/fixed freight basis to various transporting entities enabling them to undertake transshipment work. The branch offices of the petitioner-firm are in various cities in India and one of them is at Delhi. The petitioner is the owner of the vehicle being registration No.HR55 S1171. On 06.10.2020, a transporter, namely, M/s Aruna Chaleshwara Transport Company, hired the aforesaid vehicle from Delhi Branch of the petitioner for the purpose of transportation of goods from Delhi to Vijaywada (Bhawanipuram) Andhra Pradesh on payment of consideration. During the course of transshipment, the vehicle was intercepted by the Assistant Commissioner (Mobile Squad), Unit-2, Commercial Tax, Agra (respondent no.3), who, after recording the statement of the driver of the vehicle, issued interception memo on 08.10.2020. Physical verification of the vehicle was done on 14.10.2020 and several items were found in excess and some other undeclared goods were found being transported. These goods and conveyance were seized. Accordingly, an order of demand under Section 129(3) of the Act was issued. Since neither the tax nor the penalty, as demanded, was deposited by the owner of the goods or the transporter, proceedings were initiated in the name of the petitioner by issuance of Form GST MOV-10 dated 23.12.2020. Apparently, the aforesaid Form GST MOV-10 contains the date for appearance of the petitioner as 28.11.2020, which is prior to the date of issuance of the aforesaid notice. On 29.11.2020, an order in Form GST MOV-11 for confiscation of the vehicle of the petitioner was issued and penalty and fine were imposed. The aforesaid order of confiscation was challenged by the petitioner in an appeal under Section 107 of the Act, which came to be dismissed by the order impugned dated 28.06.2021.

The contention of the learned counsel for the petitioner is that clause (v) of sub-section (1) of Section 130 of the Act provides for confiscation of goods or conveyance in case any persons uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of the Act or the rules made thereunder, but, this is subject to the owner of the conveyance proving that it was so used without the knowledge or connivance of himself, his agent and the person in charge of the conveyance. It is further contended that the notice in Form GST MOV-10 and the order passed in Form GST MOV-11, are wholly illegal and in gross violation of the principles of natural justice, inasmuch as the date mentioned in the show cause notice predates the date of the notice itself. Further, it is contended that the order in Form GST MOV-11 mechanically refers to the notice in Form GST MOV-10 without looking into the aspect that the petitioner was not afforded any opportunity of hearing. The learned counsel has also referred to the provision of sub-section (4) of Section 130 which provides that no order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard. It is further contended that the objections of the petitioner were sent to the respondents through the petitioner’s advocate by registered post on 05.12.2020, however, the objections were not considered. It is also contended that thereafter the appeal was filed against the order Form GST MOV-11, which was communicated on 22.03.2021. It is contended that since the petitioner had no knowledge of the undeclared goods on the vehicle and there was no connivance with the transporter, he moved an application on 17.12.2020 before the Station House Officer in Police Station Alipur, Delhi for lodging an FIR. Further, on 25.01.2021, a letter was sent to the Commissioner of Appeals, New Delhi stating that a complaint had already been filed against the accused person in Police Station Alipur on 17.12.2020, but no action has been taken and, therefore, requesting him to register the case against the accused person. It is contended that when no action was taken by the police authorities, the petitioner was left with no option but to file an application dated 28.01.2021 under Section 156(3) of the Cr.P.C. praying for direction to the police authorities to lodge an FIR and conduct a proper and impartial inquiry. It is contended that due to the COVID-19 situation in the country, no final order has been passed on the aforesaid application. It is, therefore, contended that in view of the facts and circumstances of the case, the orders impugned in the present petition deserve to be set aside.

Shri Mishra, learned Standing Counsel has urged that the petitioner deserves no indulgence from this Court. The contention is that though in the counter affidavit, the aspect of non-compliance of sub-section (4) of Section 130 of the Act, which provides for opportunity of hearing prior to confiscation of conveyance, has not been addressed, yet, under the facts and circumstances of the case, this Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, may be pleased not to interfere in the matter. It is contended that the third proviso to sub-section (2) of Section 130 of the Act provides that the owner of a conveyance be given an option to pay in lieu of the confiscation of the conveyance, a fine equal to the tax payable on the goods being transported thereon. It is contended that the interception admittedly took place on 08.10.2020 and the physical verification was done on 14.10.2020 and at the time of physical verification, the signature of the driver namely, Taiyyab, was taken as is appearing from a perusal of the Form GST MOV-4 that has been filed as Annexure-CA-1 to the counter affidavit. On 31.10.2020, the seizure order was passed in Form GST MOV-9 and it was on 17.12.2020 that an application was filed before the SHO for lodging of an FIR. It is contended that in case the petitioner was aggrieved by the order of seizure or wanted to avail of the benefit available to the owner of the conveyance in clause (v) of sub-section (1) of Section 130 of the Act, he could have demonstrated so from his conduct immediately after the physical verification of the vehicle on 14.10.2020 which was done in the presence of driver of the petitioner. It is contended that in the memo of appeal that has been filed challenging the order in Form GST MOV-11, there is no whisper of the facts that are being pleaded and argued before this Court. Learned Standing Counsel has referred to the findings of the appellate authority to demonstrate that the appellate order has been passed strictly in accordance with the statute and given the conduct of the petitioner in the matter, no indulgence is called for.

Having heard the learned counsel for the parties and on perusal of the record, it appears that the after detention of the vehicle for inspection, the statement of the driver of the conveyance was recorded in Form GST MOV-1 and an inspection memo in Form GST MOV-2 was issued and then the goods were sent for physical verification. On physical verification, some goods were found being transported without there being any corresponding Tax Invoice. A report was accordingly prepared in Form GST MOV-4 on 14.10.2020 and a copy thereof was duly received by the driver of the conveyance after making due declaration by appending his signature thereon. A copy of Form GST MOV-4 is appended as Annexure No.1 to the counter affidavit, to which there is no denial. Thereafter, the goods and conveyance were seized and detention memo in Form GST MOV-6 was issued. An order/notice dated 31.10.2020 in Form GST MOV-9 was issued in the name of the driver of the conveyance under Section 129 (3) of the Act specifying the tax and penalty. Subsequently, a show-cause notice in Form GST MOV-10 dated 23.12.2020 was issued which has been enclosed as Annexure No.8 to the writ petition. Evidently, the aforesaid Form GST MOV-10 dated 23.12.2020 contains the date for appearance of the petitioner as 28.11.2020, which date is prior to the date of issuance of the aforesaid notice. It appears that a confiscation order dated 29.11.2020 (Annexure No.9 to the writ petition) under Section 130 of the Act was passed in Form GST MOV- 11 that was addressed to the driver of the petitioner.

It is pertinent to mention here that the allegation in the writ petition regarding the defective show cause notice in Form GST MOV-10 enclosed as Annexure no.8 to the writ petition has not been denied in the counter affidavit. It is also not the case of the respondents in the counter affidavit that there is any typographical or clerical error in Form GST MOV-10. Only a statement has been made in paragraph no. 11 of the counter affidavit that a notice dated 21.11.2020 in Form GST MOV-10 was issued, but no copy thereof has been enclosed.

On behalf of the petitioner, legal notices were sent to the respondent no.3 as well as to the transporter that were dispatched on 05.12.2020 and 07.12.2020 respectively. In the notice to the respondent no.3 a protest was lodged regarding the seizure of the conveyance (truck) and denying any involvement with the incident and claiming innocence. In the notice to the transporter, it was stated that the conduct in carrying objectionable goods in the truck and without the petitioner’s knowledge and permission is an act of fraud, criminal breach of trust and criminal conspiracy, and return of the truck was demanded. On 17.12.2020 an information was submitted to the SHO of Police Station Alipur, Delhi requesting him to lodge an FIR against the transporter. Thereafter, it appears that when no steps were taken by the police, a communication was sent to the Commissioner of Police, New Delhi to register the case against the transporter. Then an application under Section 156 (3) of the Code of Criminal Procedure was lodged on behalf of the petitioner in the Court of the Chief Metropolitan Magistrate, District North, Rohini Court, Delhi which appears to have been registered on 01.02.2021 and is pending.

The first appellate authority in its order has not adverted to the show cause notice Form GST MOV-10. The appeal has been dismissed on the ground that the vehicle owner was required to demonstrate that the conveyance is not liable for confiscation as he had no role in the conspiracy to transship undeclared goods; that the detention, seizure and confiscation of the goods and conveyance were lawfully done. It is pertinent to mention here that though in the appellate order the name of the driver of the petitioner is mentioned as the appellant, however, this was later corrected by the authority by mentioning the name of the petitioner instead of the driver.

As stated above, this petition has been filed against the order of the first appellate authority for the reason that the Appellate Tribunal has not been constituted under Section 109 of the Act. Where infringement of fundamental rights and non-compliance of the principles of natural justice are apparent, this Court would not hesitate to interfere even if suitable grounds were not raised in the memo of appeal filed before the first appellate authority.

The provisions of Section 130 of the Act are quoted below:-

“130. Confiscation of goods or conveyances and levy of penalty.- (1) Notwithstanding anything contained in this Act, if any person-

(i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made there under with intent to evade payment of tax; or

(ii) does not account for any goods on which he is liable to pay tax under this Act; or

(iii) supplies any goods liable to tax under this Act without having applied for registration; or

(iv) contravenes any of the provisions of this Act or the rules made there under with intent to evade payment of tax; or

(v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made there under unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.

(2) Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit:

Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon:

Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129:

Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon.

(3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

(4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard.

(5) Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government.

(6) The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession.

(7) The proper officer may, after satisfying himself that the confiscated goods or conveyance are not required in any other proceedings under this Act and after giving reasonable time not exceeding three months to pay fine in lieu of confiscation, dispose of such goods or conveyance and deposit the sale proceeds thereof with the Government.”

Thus, as regards the owner of the conveyance, clause (v) of subsection (1) of Section 130 of the Act provides him with a right to demonstrate that the conveyance was so used without the knowledge or connivance of himself, his agent, if any, and the person in charge of the conveyance. On failure of submitting adequate proof, confiscation of the conveyance may be authorised under sub-section (2) of Section 130 of the Act, and thereafter a liability is also fixed on the owner of the conveyance under the third proviso to sub-section (2) for paying a fine equal to the tax payable on the goods being transported in the conveyance, in lieu of the confiscation of the conveyance. As a corollary to this, where the owner of the conveyance has proved that the conveyance was so used without his knowledge or connivance etc., then he would not be saddled with a liability as mentioned in the third proviso to sub-section (2). It is important to note that sub-section (3) of the Section 130 of the Act imposes further liability on the owner of the goods or the conveyance. However, sub-section (4) of Section 130 of the Act provides for an opportunity of hearing to a person before any order of confiscation of goods or conveyance or for imposition of penalty is issued.

The act of confiscation imposes a serious civil liability on the person whose conveyance is confiscated. Therefore, compliance of the principles of natural justice is an essential prerequisite and an inalienable and inherent right of the person proceeded against under Section 130 of the Act.

The Supreme Court in the case of Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise and Ors. (2015) 8 SCC 519 has observed as follows:-

“27. It, thus, cannot be denied that the principles of natural justice are grounded in procedural fairness which ensures taking of correct decisions and procedural fairness is fundamentally an instrumental good, in the sense that procedure should be designed to ensure accurate or appropriate outcomes. In fact, procedural fairness is valuable in both instrumental and non-instrumental terms.

28. It is on the aforesaid jurisprudential premise that the fundamental principles of natural justice, including audi alteram partem, have developed. It is for this reason that the courts have consistently insisted that such procedural fairness has to be adhered to before a decision is made and infraction thereof has led to the quashing of decisions taken. In many statutes, provisions are made ensuring that a notice is given to a person against whom an order is likely to be passed before a decision is made, but there may be instances where though an authority is vested with the powers to pass such orders, which affect the liberty or property of an individual but the statute may not contain a provision for prior hearing. But what is important to be noted is that the applicability of principles of natural justice is not dependent upon any statutory provision. The principle has to be mandatorily applied irrespective of the fact as to whether there is any such statutory provision or not.

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35. From the aforesaid discussion, it becomes clear that the opportunity to provide hearing before making any decision was considered to be a basic requirement in the court proceeding. Later on, this principle was applied to other quasi-judicial authorities and other tribunals and ultimately it is now clearly laid down that even in the administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking a decision is necessary. It was, thus, observed in A.K. Kraipak case [(1969) 2 SCC 262] that if the purpose of rules of natural justice is to prevent miscarriage of justice, one fails to see how these rules should not be made available to administrative inquiries. In Maneka Gandhi v. Union of India [(1978) 1 SCC 248] also the application of principle of natural justice was extended to the administrative action of the State and its authorities. It is, thus, clear that before taking an action, service of notice and giving of hearing to the noticee is required. In Maharashtra State Financial Corpn. v. Suvarna Board Mills [(1994) 5 SCC 566], this aspect was explained in the following manner: (SCC p. 568, para 3)

“3. It has been contended before us by the learned counsel for the appellant that principles of natural justice were satisfied before taking action under Section 29, assuming that it was necessary to do so. Let it be seen whether it was so. It is well settled that natural justice cannot be placed in a straitjacket; its rules are not embodied and they do vary from case to case and from one fact-situation to another. All that has to be seen is that no adverse civil consequences are allowed to ensue before one is put on notice that the consequence would follow if he would not take care of the lapse, because of which the action as made known is contemplated. No particular form of notice is the demand of law. All will depend on facts and circumstances of the case.”

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40. In this behalf, we need to notice one other exception which has been carved out to the aforesaid principle by the courts. Even if it is found by the court that there is a violation of principles of natural justice, the courts have held that it may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that the order passed is always null and void. The validity of the order has to be decided on the touchstone of “prejudice”. The ultimate test is always the same viz. the test of prejudice or the test of fair hearing.”

In the light of the aforesaid decision, the present case has to be considered. The facts and circumstances narrated above reflect that the show cause notice dated 23.12.2020 was misleading and incorrect. Where a show cause notice in Form GST MOV-10 is issued, which is a preclude to possibility of imposition of liability in the nature of civil consequences against a person, the same has to be specific, containing necessary and correct particulars that may enable the noticee to clearly understand the matter and appear or file his reply on the date and in the manner specified in the notice. Evidently, the show cause notice sent in the aforesaid Form GST MOV-10 dated 23.12.2020 does not comply with the aforesaid requirement as the date for appearance is stated as 28.11.2020. The quandary and dilemma that can visit a person served with such a show cause notice can only be imagined. The plight of the petitioner is well reflected in the aforesaid legal notices a sent by him as well as his repeated efforts to get an FIR lodged against the aforesaid transporter and other persons. The learned Standing Counsel implying that the petitioner would be deemed to have knowledge of proceedings for confiscation because the signature of its driver appears on the Form MOV-4, is misplaced. The proceedings and consequences of seizure and of confiscation are different. Had the show cause notice Form GST MOV-10 been properly prepared, the petitioner could have had adequate opportunity to represent his case and, subject to such proof as required by clause (v) of sub-section (1) of Section 130 of the Act, would not have been saddled with the liability under sub-sections (2) and (3) of Section 130 of the Act. Therefore, the show cause notice Form GST MOV-10 that was issued was defective which resulted in denial of opportunity to the petitioner, and as such, cannot be said to be a show cause notice in the eyes of law.

Thus, not only have the principles of natural justice not been complied with by the respondents, the petitioner has also been prejudiced by such non-compliance. There is no material on record to demonstrate that an opportunity of hearing was duly granted to the petitioner as is the mandate of sub-section (4) of Section 130 of the Act.

Under the circumstances, the order dated 28.06.2021 (as corrected on 25.09.2021) passed by the Additional Commissioner Grade II (Appeal)-I, State Tax, Agra as well as the order dated 29.11.2020 Form GST MOV-11 passed by the Assistant Commissioner (Mobile Squad) Unit-2, Commercial Tax, Agra cannot be sustained and are hereby quashed. However, in the interest of justice, it is left open to the respondents to issue a fresh show cause notice to the petitioner and proceed thereafter in accordance with law.

Subject to the aforesaid observations, this writ petition is allowed.