Facts of the Case

M/s Jai Mateshwari Steels Pvt. Ltd. preferred Special Appeal Nos. 341 of 2022 and 342 of 2022 before the High Court of Uttarakhand against orders dated 15 September 2022 passed by the learned Single Judge in Writ Petition (M/S) No. 2160 of 2022 and Writ Petition (M/S) No. 2157 of 2022, respectively.

The learned Single Judge had issued notice in the writ petitions filed by the appellant and granted time to the respondents to file their counter-affidavits. The matters had been posted for 22 December 2022.

The appellant contended before the Division Bench that both the invoice and E-way bill relating to the goods were available and had been produced before the flying squad. According to the appellant, there was no intention to evade any tax or duty, and the tax/duty had been duly deposited.

The appellant further submitted that the confiscation order under Section 130 of the CGST Act had been passed merely on the basis of intelligence information allegedly available with the respondent authorities that the supplier, M/s Paras Allows, was a fake or non-existent firm.

The appellant challenged such action as completely unjustified and illegal. It was further submitted that the goods and vehicle had remained confiscated since 17 May 2022.

The appellant also expressed readiness and willingness to comply with whatever terms and conditions the High Court might consider appropriate for release of the vehicle and goods.

Issues Involved

The principal issues arising from the proceedings were:

  1. Whether confiscation proceedings under Section 130 of the CGST Act could be sustained merely on the basis of intelligence information that the supplier was allegedly a fake or non-existent firm when, according to the appellant, the invoice and E-way bill were available and produced before the flying squad.
  2. Whether the alleged absence of intention to evade tax, coupled with the appellant’s assertion that tax/duty had already been duly deposited, affected the justification for confiscation of the goods and vehicle.
  3. Whether interim relief concerning release of the confiscated goods and vehicle required urgent consideration when the goods and vehicle had allegedly remained confiscated since 17 May 2022.
  4. Whether the learned Single Judge should consider the aspect of interim relief at an earlier date instead of awaiting the date originally fixed in the writ proceedings.

Appellant’s / Petitioner’s Arguments

The appellant, M/s Jai Mateshwari Steels Pvt. Ltd., through learned Senior Counsel, advanced the following submissions:

  • Both the invoice and E-way bill were available and were produced before the flying squad.
  • There was no intention to evade any tax or duty.
  • The tax or duty had been duly deposited.
  • The confiscation order under Section 130 of the CGST Act was allegedly passed only on the basis of intelligence information claimed to be available with the respondent authorities.
  • Such intelligence information allegedly indicated that the supplier, M/s Paras Allows, was a fake/non-existent firm.
  • According to the appellant, confiscation merely on this basis was completely unjustified and illegal.
  • The goods and vehicle had remained confiscated since 17 May 2022, causing the appellant to seek urgent relief.
  • The appellant expressed readiness and willingness to comply with whatever terms and conditions the Court considered appropriate for release of the vehicle and goods.

Respondents’ Arguments

Learned counsel appearing for the State of Uttarakhand/respondents on advance notice submitted that:

  • She had received instructions in the matter.
  • The respondents would be filing their counter-affidavit in the writ proceedings soon.

The judgment does not record a detailed rebuttal by the respondents on the substantive merits of the appellant’s challenge to confiscation under Section 130 of the CGST Act. Therefore, no additional argument beyond what is expressly recorded in the order should be attributed to the respondents.

Court Order / Findings

The Division Bench disposed of the Special Appeals with procedural directions intended to ensure an expedited consideration of the pending writ petitions, particularly on the issue of interim relief.

The High Court directed as follows:

  1. The respondents were directed to positively file their response by 1 November 2022.
  2. A copy of the response was required to be supplied to counsel for the appellants/writ petitioners.
  3. The rejoinder was to be filed before the date fixed before the learned Single Judge.
  4. The Division Bench requested the learned Single Judge to hear the parties at least on the aspect of interim relief on 7 November 2022.
  5. The writ petitions were directed to be listed before the learned Single Judge on 7 November 2022 for consideration.

Accordingly, the Special Appeals were disposed of with the above directions.

Important Clarification

This judgment requires careful reading because the Division Bench did not finally adjudicate the legality or validity of the confiscation order under Section 130 of the CGST Act on merits.

The Court did not conclusively hold in this order that:

  • confiscation under Section 130 was valid;
  • confiscation under Section 130 was invalid;
  • the supplier was actually a fake/non-existent firm;
  • production of invoice and E-way bill automatically defeated confiscation proceedings;
  • absence of intention to evade tax was finally established; or
  • the appellant was immediately entitled to unconditional release of the goods and vehicle.

The statements concerning availability of invoice and E-way bill, absence of intention to evade tax, payment of tax/duty, and the allegation that the supplier was a fake/non-existent firm were recorded in the context of the appellant’s submissions.

The operative relief granted by the Division Bench was essentially to expedite the filing of the respondents’ response and secure early consideration of interim relief by the learned Single Judge.

Therefore, the order should not be presented as a final precedent declaring that confiscation under Section 130 is impermissible whenever an invoice and E-way bill are produced. Its immediate significance lies in the High Court’s procedural intervention for early consideration of interim relief in circumstances where the goods and vehicle had allegedly remained confiscated since 17 May 2022.

Section Involved

Section 130 of the Central Goods and Services Tax Act, 2017

The principal statutory provision specifically referred to in the judgment is Section 130 of the CGST Act, relating to confiscation of goods or conveyances and levy of penalty in circumstances covered by the statutory provision.

In the present matter, the appellant challenged the action of confiscation under Section 130 on the ground that:

  • invoice and E-way bill were allegedly available and produced;
  • there was allegedly no intention to evade tax or duty;
  • tax/duty had allegedly been duly deposited; and
  • the confiscation action was allegedly founded merely on intelligence information that the supplier was a fake/non-existent firm.

However, the Division Bench did not render a final determination on the applicability or validity of Section 130 proceedings on these facts and instead directed expedited consideration before the learned Single Judge.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783493216_1400compressed.pdf

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