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 the conveyance were intercepted by the GST authorities in Rajasthan. After verification, the authorities issued a show cause notice and subsequently passed an order under Section 130 of the GST Act confiscating both the goods and the vehicle.

The Department alleged that the documents accompanying the goods were suspicious and that the purchaser was a non-existent entity, making the entire transaction appear bogus. The petitioner challenged both the confiscation proceedings and the validity of the confiscation order before the Rajasthan High Court.

 

Issues Involved

  1. Whether confiscation under Section 130 could be ordered without first following the procedure prescribed under Section 129 of the GST Act.
  2. Whether the confiscation order was passed without jurisdiction and in violation of the principles of natural justice.
  3. Whether there was sufficient material to conclude that the petitioner intended to evade tax.
  4. Whether the writ petition was maintainable despite the availability of a statutory appeal under Section 107 of the GST Act.
  5. Whether penalty and fine could be imposed without proper assessment of tax.

 

Petitioner's Arguments

  • The petitioner contended that the confiscation order was passed without jurisdiction.
  • It was argued that the authorities bypassed the mandatory procedure prescribed under Section 129 and directly invoked Section 130 of the GST Act.
  • The petitioner submitted that no finding regarding intention to evade tax had been recorded, making the confiscation order legally unsustainable.
  • The petitioner further submitted that the allegation that it was a non-existent firm was incorrect because the Delhi High Court had already quashed the cancellation of its GST registration, thereby recognizing its legal existence.
  • It was also argued that the confiscation proceedings violated the principles of natural justice.

 

Respondent's Arguments

  • The Department raised a preliminary objection regarding maintainability, contending that the confiscation order was appealable under Section 107 of the GST Act.
  • It was argued that the issues raised involved disputed questions of fact that could not be decided in writ jurisdiction.
  • The authorities submitted that the documents accompanying the goods were suspicious and that the purchaser was found to be non-existent during field verification.
  • According to the Department, the transaction appeared bogus and was undertaken with the intention to evade tax, thereby justifying confiscation under Section 130.

 

Court Order / Findings

The Rajasthan High Court dismissed both writ petitions.

The Court observed that several issues raised by the petitioner—including the existence of the petitioner-firm, compliance with the procedure under Section 129, and the intention to evade tax—involved disputed questions of fact that could not appropriately be adjudicated in writ jurisdiction.

The Court further held that:

  • The confiscation proceedings were preceded by a show cause notice and an opportunity of hearing, and therefore were not prima facie violative of the principles of natural justice.
  • The confiscation order itself contained a finding that the transaction appeared to have been undertaken with the intention to evade tax because the purchasing firm was allegedly bogus.
  • The penalty imposed was based upon the applicable integrated tax and therefore could not be said to have been imposed without assessment.
  • Since an effective statutory remedy of appeal under Section 107 was available, the High Court declined to exercise its extraordinary writ jurisdiction.

Accordingly, the writ petitions were dismissed with liberty to the petitioner to file a statutory appeal under Section 107 and seek release of the confiscated goods and conveyance.

 

Important Clarification

  • Mere challenge to confiscation proceedings under Section 130 may not be entertained in writ jurisdiction where disputed questions of fact are involved.
  • Availability of an effective statutory appeal under Section 107 is a significant ground for the High Court to decline interference.
  • Whether the authorities complied with Section 129 before invoking Section 130 can involve factual determination requiring adjudication before the appellate authority.
  • Allegations relating to the existence of the taxable person and intention to evade tax are factual issues ordinarily unsuitable for determination in writ proceedings.
  • Confiscation proceedings are less likely to be interfered with where the taxpayer has been issued a show cause notice and granted an opportunity of hearing.

Sections Involved

  • Section 68 of the CGST/RGST Act, 2017
  • Section 107 of the CGST/RGST Act, 2017
  • Section 129 of the CGST/RGST Act, 2017
  • Section 130 of the CGST/RGST Act, 2017

 

 

Sections Involved

  • Section 68 – Inspection of goods in movement.
  • Section 107 – Appeals to the Appellate Authority.
  • Section 129 – Detention, seizure and release of goods and conveyances in transit.
  • Section 130 – Confiscation of goods or conveyances and levy of penalty.


Link to download the order -
https://www.mytaxexpert.co.in/uploads/1782970983_94compressed.pdf

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