Facts of the Case

The petitioner, M/s Shiv Scrap Sales, claimed to be a registered dealer under the GST Act and was engaged in the business of supplying mixed scrap to dealers situated at different places.

According to the petitioner, the seized goods had been dispatched in transit after generation of an e-Way bill on 14.11.2022 at 9:43 p.m., which remained valid up to 17.11.2022. The petitioner asserted that the goods were accompanied by a valid tax invoice and e-Way bill in original, which were carried by the driver.

While the goods were in transit, they were intercepted at Agra on 15.11.2022.

The petitioner challenged the basis of seizure and contended that no valid reason had been assigned for detaining and seizing the goods. According to the petitioner, the reason stated in Form GST MOV-06 was that the purchaser firm was not in existence and that the transaction involved a fake sale and invoice. The petitioner asserted that this allegation was absolutely false.

The petitioner further claimed that it had submitted an application before the Department/Revenue asserting itself to be the owner of the seized goods. However, despite such ownership claim, notice under Section 129 of the CGST Act, 2017 had allegedly been issued in the name of the driver.

The High Court noted that the application annexed as Annexure-8 to the writ petition was undated and that there was no proof of its receipt in the office of Respondent No. 2.

Issues Involved

The principal issues arising before the High Court were whether the seizure and detention of goods could be challenged at that stage on the ground that the goods were accompanied by a valid tax invoice and e-Way bill; whether the allegation recorded in the GST movement forms that the transaction represented a fake sale and invoice could be examined by the writ court at that stage; whether proceedings under Section 129 could continue when the petitioner disputed the legality of detention; whether a person claiming to be the owner of seized goods was entitled to proper notice and opportunity of hearing under Section 129(3) of the CGST Act, 2017; and whether notice issued in the name of the driver was sufficient after the petitioner allegedly asserted ownership of the seized goods.

Petitioner’s Arguments

The petitioner submitted that it was a registered GST dealer engaged in the supply of mixed scrap to dealers at different places.

It was argued that the goods were lawfully in transit after generation of an e-Way bill on 14.11.2022 at 9:43 p.m., valid until 17.11.2022, and that the interception occurred at Agra on 15.11.2022, during the period of validity of the e-Way bill.

The petitioner further contended that:

  • A valid tax invoice and e-Way bill were carried in original by the driver.
  • No proper reason had been assigned for seizure of the goods.
  • The reason stated in Form GST MOV-06, namely that the purchaser firm was non-existent and that the transaction involved a fake sale and invoice, was absolutely false.
  • Since the detention order itself was illegal, the authority had no jurisdiction to proceed under Section 129(3) of the CGST Act, 2017.
  • The petitioner had already asserted before the Revenue that it was the owner of the seized goods.
  • Despite the ownership claim, notice under Section 129 had continued to be issued in the name of the driver.
  • Once the petitioner asserted ownership, proceedings under Section 129 were required to be conducted after giving due notice and opportunity to the petitioner.

Respondent’s Arguments

The Revenue was represented before the Court, and the petitioner’s submissions were opposed in the context of the ongoing seizure proceedings.

The order records that the findings in Form GST MOV-07 indicated that the invoice was for a fake sale. This circumstance was relevant to the Court’s conclusion that the dispute regarding validity of the seizure order could not be examined at that stage.

The Revenue-side position, as reflected in the record considered by the Court, was therefore connected with the finding that the invoice related to an alleged fake sale and with the statutory proceedings under Section 129.

However, the judgment does not record a detailed, separately structured set of oral arguments advanced by the respondent Revenue. Accordingly, no additional argument should be attributed to the respondents beyond what is expressly reflected in the order.

Court Order / Findings

The Allahabad High Court declined to examine the dispute regarding the validity of the seizure order at that stage.

The Court specifically noted the finding recorded in Form GST MOV-07 that the invoice was for a fake sale. In view of that recorded finding, the Court held that the dispute concerning the validity of seizure could not be examined at that stage.

The Court further found that the petitioner had an appropriate remedy of approaching the competent authority by filing a proper application containing details of its name and its claim regarding ownership of the goods.

Importantly, the Court observed that the application annexed as Annexure-8 to the writ petition:

  • was undated; and
  • had no proof of receipt in the office of Respondent No. 2.

Accordingly, the High Court disposed of the writ petition with the following directions:

  • The petitioner shall approach the competent officer by filing a proper application asserting its claim of being the owner of the seized goods.
  • The petitioner shall file such application along with a copy of the High Court’s order.
  • If such an application is filed before the competent officer, the officer shall duly deal with it.
  • The competent officer shall grant an opportunity of hearing to the petitioner.
  • Proper notice shall be given to the petitioner in accordance with Section 129(3) of the CGST Act, 2017.

Important Clarification

The High Court expressly clarified that it had not entered into the merits of the petitioner’s claim.

Therefore, the judgment should not be interpreted as holding that:

  • the seizure of the goods was illegal;
  • the allegation of fake sale was incorrect;
  • the invoice was genuine;
  • the purchaser firm was actually in existence;
  • the petitioner had conclusively proved ownership of the seized goods; or
  • the petitioner was automatically entitled to release of the goods.

The limited effect of the order was procedural. The petitioner was directed to properly approach the competent officer with an ownership claim, and if such an application was filed, the competent officer was required to deal with it and provide proper notice and opportunity of hearing under Section 129(3).

The judgment is significant because it reinforces that where a person claims ownership of seized goods, such claim should be formally placed before the competent authority, and the authority must deal with the application while following the notice and hearing requirements contemplated by Section 129(3).

Sections / Provisions Involved

Section 129 of the CGST Act, 2017 – Detention, Seizure and Release of Goods and Conveyances in Transit: The proceedings arose from interception and seizure of goods during transit.

Section 129(3) of the CGST Act, 2017: This was the central statutory provision expressly considered by the High Court. The Court directed that, upon the petitioner filing a proper application asserting ownership of the seized goods, the competent officer should grant an opportunity of hearing by issuing proper notice in accordance with Section 129(3).

Form GST MOV-06: Referred to in relation to the seizure of goods and the stated reason that the purchaser firm was allegedly non-existent and the transaction represented a fake sale and invoice.

Form GST MOV-07: The Court noted the finding recorded therein that the invoice was for a fake sale.

E-Way Bill Framework under the GST Law: The petitioner relied upon the fact that an e-Way bill had been generated on 14.11.2022 at 9:43 p.m. and remained valid up to 17.11.2022 when the goods were intercepted on 15.11.2022.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783070155_399compressed.pdf 

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