Facts of the Case

Aman Kumar Rathaur, the petitioner-consignor, challenged interception proceedings in Form GST MOV-02 dated 06.03.2023 and an order dated 13.03.2023, whereby a conveyance carrying an iron scrap consignment weighing 17,360 kg valued at Rs.8,39,876.80 (inclusive of tax) was intercepted at Mandi Gobindgarh by the State Tax Officer-cum-Proper Officer, Mobile Wing, Ludhiana, and directed to be stationed for inspection. A consequential show cause notice dated 13.03.2023 was issued under Section 130 of the CGST Act, 2017, alleging that purchases had been made from M/s. BN Traders, which had shown no corresponding purchase and paid no tax, tentatively determining a tax liability of Rs.76,41,499/-. Four connected writ petitions filed by the same petitioner (CWP Nos. 5902, 6300, 6304 and 6288 of 2023) involving common questions were heard and disposed of together.

Issues Involved

  1. Whether the interception and show cause notice under Section 130 were without jurisdiction on the ground that the goods were not 'in transit' but had allegedly been seized from the consignee's premises.
  2. Whether the writ court could examine and pronounce on the genuineness of the underlying purchases and alleged tax evasion at the show cause notice stage.
  3. Whether the petitioner should be relegated to respond to the show cause notice before the authorities rather than seek quashing through a writ petition.

Petitioner's Arguments

  • The goods were not in transit, as evidenced by the tax invoice and e-way bill showing the consignment was meant for delivery to M/s. Bansal Casting, and hence the authorities acted beyond jurisdiction in intercepting and issuing the notice.
  • Since the interim order had already stayed passing of the MOV-02 order, the petitioner sought release of goods and quashing of the interception and show cause notice.

Respondent's Arguments

  • Only a show cause notice was under challenge, relying on the Supreme Court's ruling in The State of Punjab vs. M/s. Shiv Enterprises and others, which held that entertaining a writ petition against a Section 130 show cause notice and quashing it was not justified.
  • The vehicle in question had already been released, and no further proceedings were being taken in view of the interim order.

Court Order/Findings

  • The Court found that the inspection under Form GST MOV-02 was undertaken to verify the genuineness of goods in transit and documents, and that it was for the petitioner to explain the purchases from M/s. BN Traders before the authorities rather than before the writ court.
  • Following the Supreme Court's ruling in Shiv Enterprises that writ courts should not entertain challenges to Section 130 show cause notices or opine on disputed questions of fact regarding tax evasion, the Court held that the petitioner had an alternative remedy to place its case before the respondents.
  • The writ petitions were disposed of with liberty to the petitioner to respond to the show cause notices, and all interim orders (including the earlier stay on MOV-02) were vacated.

Important Clarification

Writ courts will generally decline to quash a show cause notice issued under Section 130 of the CGST Act on the ground that goods were allegedly not 'in transit' or that purchases were genuine, since these are disputed questions of fact to be examined by the adjudicating authority in the first instance; following the Supreme Court's ruling in State of Punjab vs. Shiv Enterprises, such challenges are more appropriately resolved through a reply to the notice and the statutory adjudication process, not through Article 226 proceedings.

Sections Involved

  • Section 130, CGST Act, 2017 — provides for confiscation of goods/conveyances and levy of penalty for contravention with intent to evade tax.
  • Section 129, CGST Act, 2017 — governs interception, detention and inspection of goods and conveyances in transit (Form MOV-02 stage).

Decision – In Favour of

This is disposed of with directions, leaning towards the Department on the interim question: the Court declined to quash the Section 130 show cause notice and relegated the petitioner to the alternative remedy of responding to the authorities, though goods/conveyance had already been released and interim protection was vacated without a final finding on tax evasion.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Punjab and Haryana at Chandigarh
  • Case No.: CWP-5902-2023 and connected matters (CWP-6300-2023, CWP-6304-2023, CWP-6288-2023)
  • CNR: 2023:PHHC:157162-DB
  • Coram: Hon'ble Mr. Justice G.S. Sandhawalia and Hon'ble Ms. Justice Lapita Banerji
  • Decision Date: 08-12-2023
  • Disposal Nature: Disposed of with liberty (alternative remedy)

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