Facts of the Case

The petitioner, M/s KPM Enterprises, purchased Areca Nuts (Betel Nuts) from Karnataka for transportation to Delhi. During transit, the goods and conveyance were intercepted by the Rajasthan GST authorities. After verification, the authorities detained and subsequently confiscated the goods and the vehicle by passing an order under Section 130 of the Rajasthan Goods and Services Tax Act, 2017.

The Department alleged that the documents accompanying the goods were suspicious and that the purchaser firm appeared to be non-existent, making the transaction appear bogus. Consequently, confiscation proceedings were initiated and completed.

 

Issues Involved

  1. Whether the confiscation order passed under Section 130 was without jurisdiction.
  2. Whether proceedings under Section 129 should have been followed before invoking Section 130.
  3. Whether confiscation could be sustained without a proper finding regarding intention to evade tax.
  4. Whether the writ petition was maintainable despite the availability of a statutory appellate remedy under Section 107.
  5. Whether disputed questions regarding the existence of the petitioner-firm and tax evasion could be decided in writ jurisdiction.

 

Petitioner's Arguments

  • The confiscation order was passed without following the statutory procedure prescribed under Section 129, which specifically governs detention and seizure of goods in transit.
  • The authorities directly invoked Section 130 without complying with the mandatory mechanism under Section 129.
  • No finding was recorded establishing any intention to evade tax, making confiscation legally unsustainable.
  • The petitioner contended that its GST registration cancellation had already been quashed by the Delhi High Court, thereby disproving the allegation that it was a non-existent or bogus firm.
  • It was argued that the confiscation order violated the principles of natural justice and lacked jurisdiction.

 

Respondent's Arguments

  • The State contended that the confiscation order was appealable under Section 107, making the writ petitions not maintainable.
  • The Department submitted that the documents accompanying the goods were suspicious and the purchaser firm was found to be non-existent during field verification.
  • The authorities argued that the transaction appeared bogus and therefore justified confiscation under Section 130.
  • It was further submitted that the issues raised involved disputed questions of fact, which could not appropriately be adjudicated under writ jurisdiction.

 

Court Order / Findings

The Rajasthan High Court dismissed both writ petitions while granting liberty to the petitioner to pursue the statutory appellate remedy.

The Court observed:

  • The principal disputes regarding the existence of the petitioner-firm, intention to evade tax, and compliance with the procedure under Section 129 involved disputed questions of fact.
  • Such disputed factual issues cannot ordinarily be adjudicated in writ jurisdiction, particularly when an effective statutory appeal is available.
  • The confiscation proceedings were not found to violate principles of natural justice since a show cause notice had been issued and adequate opportunity of hearing had been provided.
  • The Court noted that penalty had been computed after determining the applicable integrated tax and therefore could not be said to have been imposed without tax assessment.
  • Since the confiscation order was appealable under Section 107, the petitioner was directed to avail the statutory appellate remedy.
  • Liberty was also granted to seek release of the confiscated goods and conveyance before the competent authority.

 

Important Clarification

  • Availability of an effective statutory appeal under Section 107 generally discourages exercise of writ jurisdiction.
  • Questions relating to compliance with Section 129, existence of intention to evade tax, and factual disputes regarding the genuineness of transactions are matters best decided by the appellate authority.
  • A confiscation order under Section 130 will not ordinarily be interfered with under Article 226 where disputed factual issues require adjudication.
  • Compliance with principles of natural justice is satisfied where proper show cause notice and opportunity of hearing are provided before confiscation.

Sections Involved

  • Section 68 of the CGST/RGST Act, 2017
  • Section 107 of the Rajasthan Goods and Services Tax Act, 2017
  • Section 129 of the Rajasthan Goods and Services Tax Act, 2017
  • Section 130 of the Rajasthan Goods and Services Tax Act, 2017
  • Principles of Natural Justice

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1782970005_90compressed.pdf

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