1. This Court vide common oral order dated 18.04.2022 has passed the following order:
“1. We have heard Mr. Maulik Nanavati, the learned counsel appearing for the writ-applicant and Mr. Utkarsh Sharma, the learned AGP appearing for the respondents at length.
2. It appears from the materials on record that the writ-applicant herein is engaged in the business of metal scrap. The writ-applicant received an order of purchase of brass scrap from one M/s. Raj Khodal Metal, Jamnagar. The writ-applicant entered into a sale transaction of 2785 kgs. and 2590 kgs. respectively of brass scrap with M/s. Raj Khodal Metal, Jamnagar. Thus, the writ-applicant us the seller and M/ s. Raj Khodal Metal, Jamnagar is the purchaser. Two consignments of the goods were dispatched to M/s. Raj Khodal Metal, Jamnagar in two trucks owned by the Jamnagar Transport company. Separate e-way bills were generated for the movement of the consignments.
3. On 08.04.2022, when the goods were in transit, both the conveyance came to be intercepted near Theba Chowkdi, Jamnagar by the State Tax Officer, Mobile Squad, Division-11 (ENF), Jamnagar.
4. The writ-applicant is here before this Court as he has been served with a show-cause notice in Form GST MOV-10 dated 11.04.2022 calling upon him to show cause as to why the goods should not be confiscated under Section-130 of the GST Act.
5. The principal argument of Mr. Nanavati is that even if the authority concerned thought fit to issue notice under Section- 130 of the Act in Form GST Mov-10, the authority could not have overlooked or ignored Sub-section (3) of Section-129 of the Act. The argument proceeds on the footing that in accordance with Subsection (3) of Section-129, the Proper Officer is obliged to issue a notice within seven days of detention or seizure specifying the penalty payable and thereafter, pass an order within a period of seven days from the date of service of said notice for payment of penalty under clause (a) or clause (b) of Sub-section (1).
6. According to Mr. Nanavati, the aforesaid omission on the part of the Proper Officer renders the further proceedings bad in law.
7. Per contra, Mr. Sharma would submit that Sections-129 and 130 of the Act are distinct and independent of each-other. Once the Proper Officer decides to issue notice in Form GST Mov-10 calling upon the owner of the conveyance and the goods to show cause as to why the goods and conveyance should not be confiscated, then it is not obligatory for the Proper Officer to issue notice as contemplated under Subsection (3) of Section-129.
8. Mr. Nanavati has placed reliance on one decision of the Karnataka High Court in the case of M.S. Meghdoot Logistics Vs. Commercial Tax Officer; Writ Petition No.10832 of 2020; decided on 21.12.2020, wherein in Paragraph-29 of the judgment, the High Court has observed as under:-
“29. In the light of the above discussion it is held that if after interception of conveyance with goods in transit and detention of the conveyance and seizure of the Goods with issuance of notice under section 129(3) of the Act, and when there is information about the intent to evade payment of tax, it is not open to the proper officer to treat the notice under section 129(3) of Act as having abated or truncate such proceedings and initiate proceedings under 130 of the Act for confiscation with the issuance of notice thereunder. The proper officer, who has detained the conveyance and seized the goods, when he is able to form opinion that there is an attempt to evade payment of tax, will have to determine the applicable tax and penalty under Section 129 of the Act while simultaneously initiating proceedings for adjudging confiscation under Section 130 of the Act. If during the pendency of these proceedings, a request for provisional release as contemplated under sub-clause (3) of Section 129 of the Act, is submitted, the same will have to be considered in the light of the provisions of Section 129 read with subclause (6) of Section 67 of the Act. If after adjudging confiscation, the option to pay Fine in addition to the tax payable, penalty and other charges is not exercised despite opportunity under section 130(7) of the Act, the Proper officer will have to take and hold possession of the things confiscated subject to consequences as contemplated thereunder.
For the foregoing, the writ petition is disposed of restoring the Show Cause Notice dated 25.08.2020 (Annexure- E) directing the respondent to decide, in accordance with law, on the proposed levy of tax, penalty and cess as proposed therein with reasonable opportunity of hearing to the petitioner, who shall have the liberty to seek provisional release of goods/conveyance as provided for under sub-clause (2) of Section 129 of the Act. The respondent is also directed to contemporaneously decide on the impugned Show Cause Notice dated 07.09.2020 (Annexure-A) in accordance with the provisions of Section 130 of the Act.”
9. We shall definitely decide the larger issue raised in this writ application. However, we would like to know the exact amount payable by the writ-applicant in terms of Sub-section (3) of Section129. We are exploring the possibility of ordering provisional release of the goods on the condition that the writ-applicant shall deposit the entire amount towards penalty. There is some confusion as regards the exact amount due and payable towards penalty. We want Mr. Sharma to tell us the correct figure.
10. Issue notice to the respondents returnable on 20.04.2022. No notice now be issued by the Registry to the respondents as Mr. Sharma has already entered appearance on their behalf. On the returnable date, notify this matter on top of the board.”
3. Today, when the matter was taken up for hearing, as directed by this Court, Mr. Utkarsh Sharma, the learned AGP has placed on record the details of exact amount payable by the writ applicant in terms of Sub-Section 3 of Section 129 of the CGST Act, 2017. The same is ordered to be taken on record. The calculation provided by the respondent authority reveals that total amount payable which includes penalty, by the writ applicant of Special Civil application no. 7425 of 2022 comes to around Rs.4,48,400 and for Special Civil application no. 7426 of 2022, comes to around Rs.4,81,248.
4. We have heard Mr. Maulik Nanavati , the learned advocate appearing for writ applicants and Mr. Utkarsh Sharma, Learned AGP for the respondent state authorities.
5. Mr. Maulik Nanavati, the learned advocate appearing for the writ applicants has vehemently submitted that the respondent No.1 herein in absence of discrepancy being found at the stage of MOV- 6 as regards preliminary inspection of the goods vis-a-vis invoice bills and corresponding E-way bills furnished by the driver of the conveyance and in absence of evasion of tax, the respondent No.1 has no authority to assume jurisdiction under Section 130 of the Act, 2017. He further submitted that as per Section 130 of the Act, the proper officer assumes the jurisdiction to pass the order of confiscation of the goods or conveyance only when the Authority finds that there was an “intention to evade the payment of tax”. He further relied upon the decision of this Court in the case of Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat, Special Civil Application No.15623 of 2019. Paras 101 and 102 read thus:
“….101. We are of the view that at the time of detention and seizure of goods or conveyance, the first thing the authorities need to look into closely is the nature of the contravention of the provisions of the Act or the Rules. The second step in the process for the authorities to examine closely is whether such contravention of the provisions of the Act or the Rules was with an intent to evade the payment of tax. Section 135 of the Act provides for presumption of culpable mental state but such presumption is available to the department only in the cases of prosecution and not for the purpose of Section 130 of the Act. What we are trying to convey is that in a given case, the contravention may be quite trivial or may not be of such a magnitude which by itself would be sufficient to take the view that the contravention was with the necessary intent to evade payment of tax….
102. In such circumstances, referred to above, we propose to take the view that in all cases, without any application of mind and without any justifiable grounds or reasons to believe, the authorities may not be justified to straightway issue a notice of confiscation under Section 130 of the Act. For the purpose of issuing a notice of confiscation under Section 130 of the Act at the threshold, i.e,. at the stage of Section 129 of the Act itself, the case has to be of such a nature that on the face of the entire transaction, the authority concerned is convinced that the contravention was with a definite intent to evade payment of tax.
….(ii) The phrase “with an intent to evade the payment of tax” in section 130 of the Act assumes importance. When the law requires an intention to evade payment of tax, then it is not mere failure to pay tax. It must be something more. The word “evade” in the context means defeating the provisions of law of paying tax. It is made more stringent by use of word “intent”. The assessee must deliberately avaoid the payment of tax which is payable in accordance with law. However, the element of means rea cannot be read into Section 130 of the Act….. (emphasis added)’
6. He further submitted that he is agreeable to deposit requisite tax and penalty and once that tax and penalty as determined by the Proper Officer is paid, all proceedings are deemed to be concluded as provided under sub section (5) of section 129 of the CGST Act. He thereafter relied upon the amendment incorporated in section 130 of the Act, 2017 and submitted that the proper officer cannot proceed for confiscation of goods and conveyance in transit. He submitted that even otherwise this Court in exercise of powers conferred under Article 226 of the Constitution of India has got wide jurisdiction and can always consider the relief of the provisional release of conveyance and goods pending the proceedings under Section 130 of the Act, 2017.
7. On the other hand, Mr. Utkarsh Sharma, the learned AGP has strongly opposed the aforesaid prayers of the writ applicants by drawing attention of this Court to amendment incorporated under Sections 129 and 130 of the Act, 2017, w.e.f. 01.01.2022. He emphasized on the substitution of word “Notwithstanding” with word “Where” in Section 130 of the Act, 2017 and submitted that the aforesaid amendment reflects the intention of the Legislation to delink the proceedings arising out Sections 129 and 130 of the Act, 2017. He therefore, submitted that even in absence of any final adjudication of the proceedings under Section 129 of the Act, the proper officer having formed opinion as regards the supply or receipt of any goods in contravention of any of the provisions of the Act or the Rules made thereunder, with an intention to evade the payment of tax, can be considered a valid ground to confiscate the goods or conveyance and the proper officer is thus empowered to levy the penalty. He further submitted that the respondent authority has therefore rightly exercised such powers having noticed that the writ applicant is involved in availment of fake input tax credit. He therefore submitted that the writ petition may not entertain writ petition at the stage of issuance of section 130 notice, more particularly, when the transaction of the writ applicant is found suspicious. He relied upon the reasons to believe drawn by the proper at the stage of MOV-10, produced at page no. 28 and submitted that there is cogent material available with the respondent authority to form opinion as regards evasion of tax and authority has rightly issued notice under section 130 of the Act, 2017. He therefore submitted that the writ applicant may be relegated to the respondent authority for adjudication under section 130 of the Act. He apprehended that once the goods and conveyance are provisionally released it would be difficult to confiscate the same even in case the proceedings under section 130 of the Act is concluded against the writ applicant. He therefore submitted that the writ applicant may be put to strict conditions to secure the interest of the revenue , if the Court considers for provisional release of the Goods and conveyance.
8. It appears from the record that the writ applicant is served with Form – GST MOV – 10 dated 11.04.2022 whereby the proper officer has continued to detain the goods and conveyance, without considering for release of same by offering payment of tax as envisaged under section 129 of the Act. It further transpires that on same day , the respondent No.1 herein proceeded to issue notice dated 11.04.2022 under Section 130 of the CGST Act, 2017 calling upon the writ applicant as to why the goods and conveyance may not be confiscated. It appears that while the goods were in transit, on 8.04.2022, the same were intercepted by the State Tax Officer, Mobile squad , Jamnagar, Division-1 (ENF) whereby the statement of the driver was recorded and the respondent authority had in exercise of power conferred under sub-section (3) of section 68 of the Act, 2017 issued FORM GST MOV-02, dated 8.04.2022, for physical verification of goods in movement. The respondent authority has thereafter issued FORM GST MOV-04, dated 11.04.2022 and followed by FORM GST MOV-06, wherein the authority records that the transaction is found suspicious though no discrepancies have been found in the E-way bills and the invoices. It is the case of the writ applicant that the authority without determining the tax and the penalty amount continued to detained the goods and conveyance and proceeded to issue notice under section 130 of the Act.
9. Thus, the moot question which arises for our consideration is whether the respondent authority is entitled to seize and detain the goods in transit and the conveyance, more particularly, when it is accompanied by a lawful e-way bill, invoices and without determining and offering the writ applicant opportunity to deposit tax, if any and penalty, the respondent authority were justified to distinctly proceed for confiscation proceedings by issuing notice under section 130 of the Act, 2017. Both sides have raised substantial legal issues regarding amendment made in various section of the Act, 2017 which is required to be considered after hearing respective parties on length. However, on ensuing summer vacation, time is constrain. For the reasons aforesaid, we are inclined to admit these matters. Hence, rule returnable on 23.06.2022.
10. So far as prayer with regards to provisional release as contemplated under sub-clause (3) of section 129 of the Act, is submitted, the same will have to be looked into in light of the provisions of section 129 read with sub-clause (6) of section 67 of the Act. If after adjudging proceedings under section 130 of the Act, ultimately if the proper officer finds any contravention with intention to evade tax, the question of Fine may also arose in addition to the tax payable, penalty and other charges, and if not realized then the proper officer will be required to proceed for confiscation and auction of the goods and conveyance so detained. The Court has to strike balance as against the prayer of provisional release of goods and conveyance vis-a-vis securing revenue interest pending adjudication of confiscation proceedings.
11. By way of interim order, pending the hearing of these petitions, we direct respondent authorities to provisionally release the goods and conveyance subject to the condition that the writ applicant shall deposit the total amount payable, including penalty, as determined by the respondent authority within period of one week from date of receipt of this order and upon realisation of such amount, the respondent authority shall forthwith release such goods and conveyance. We further direct the respondent authority to proceed with hearing of section 130 proceedings by giving proper opportunity to the writ applicants to furnish their objections along with supporting documents as well as by giving proper opportunity of hearing to the writ applicants. The respondent authority shall deal with all the objections that may be raised by the writ applicant including the aspect of jurisdiction of authority to proceed distinctly under section 130 of the Act. The respondent authority shall conclude such proceedings within period of one month and place on record the final order before this Court. However, it is further directed that the respondent authority shall not take any coercive steps against the writ applicants, pursuant to any order which may be passed under section 130 of the Act. Needless to clarify that all contentions and arguments of the respective parties are kept open at the time of final adjudication of these matters.