Facts of the Case

On 08.09.2020, a vehicle carrying arecanut belonging to the transporter, M/S. Sreelakshmi Transport (proprietor Manjunath, GSTIN 32BOQPN8124M2ZE), was intercepted and detained in Karnataka under Section 129(1) of the Karnataka Goods and Services Tax Act, 2017. The Revenue issued a notice under Section 130 in Form MOV-10 on 21.09.2020 and, on 12.01.2021, passed an order confiscating the goods and imposing tax and penalty in Form MOV-11. After being permitted to appeal on depositing the entire tax and penalty, the transporter paid Rs. 59,41,688 via Form GST DRC-03 on 25.02.2021. The Joint Commissioner of Commercial Taxes (Appeals), Davanagere, by order dated 06.01.2022, allowed the appeal in part, set aside the confiscation under Section 130, but directed payment of tax and penalty under Section 129(1)(b) and release of the goods and vehicle. Both the transporter (Writ Petition No. 105057/2023, seeking refund and release) and the Revenue (Writ Petition No. 102770/2022, seeking restoration of confiscation) challenged this appellate order before the Dharwad Bench; the petitions were heard together and decided on 11.12.2023 by Justice Anant Ramanath Hegde.

Issues Involved

  1. Whether an order of confiscation under Section 130 of the Act of 2017 (as it stood before the 2022 amendment) could be passed without first complying with the procedure under Section 129(6).
  2. Whether the transporter was entitled to refund of the tax and penalty of Rs. 59,41,688 deposited under Section 129(1)(b), along with release of the detained goods and vehicle.
  3. Whether the Revenue's parallel writ petition, seeking restoration of the confiscation order, was maintainable in light of settled Karnataka High Court precedent.

Petitioner's Arguments

  • The transporter, relying on Rajeev Traders v. Union of India, argued that confiscation under Section 130 without first complying with the notice-and-order procedure under Section 129(6) was without jurisdiction.
  • It was also argued that applicable tax had been paid on invoices raised in Kerala, where the goods were loaded, so no finding of tax evasion could stand, making the penalty under Section 129(1)(b) equally impermissible.

Respondent's Arguments

  • The Revenue contended that Rajeev Traders was per incuriam, having missed the earlier ruling in M.S. Meghdoot Logistics, and that the non-obstante clause in the pre-amendment Section 130 made confiscation independent of Section 129(6), relying on the Gujarat High Court's ruling in Synergy Fertichem Pvt. Ltd.
  • It urged that the materials on record — an empty vehicle's implausible travel timeline and fake consignor/purchaser details — established deliberate tax evasion justifying confiscation, relying on the Supreme Court's ruling in State of U.P. v. M/S Kay Pan Fragrance on precedent.

Court Order/Findings

  • The Court held the per-incuriam challenge to Rajeev Traders was unavailable, since a Division Bench, in Writ Appeal No. 10041/2022, had already confirmed the view taken in that case.
  • The Court held that Section 130, as it stood prior to the 2022 amendment, could be invoked only after complying with the procedure under Section 129(6), and since that procedure was admittedly not followed, the confiscation order was unsustainable.
  • Writ Petition No. 102770/2022 filed by the Revenue was dismissed, and Writ Petition No. 105057/2023 filed by the transporter was allowed; the transporter was held entitled to refund of Rs. 59,41,688, with release of the vehicle and goods within four weeks.
  • Since the deposit had been credited to the GST authority's account in Kerala, a direction was issued to that authority to refund the amount, with liberty to move this Court if aggrieved; the Court clarified its order would not restrict any authority from independently invoking Section 130 for genuine tax evasion.

Important Clarification

Prior to the 2022 amendment, confiscation under Section 130 of the CGST/SGST Act could be invoked only after the procedure under Section 129(6) — notice and, if necessary, an order for goods/conveyance not released — was first completed. An enforcement authority cannot leapfrog straight to confiscation by relying on the pre-amendment non-obstante clause without first exhausting Section 129(6); this remains binding Karnataka High Court precedent (Rajeev Traders, as confirmed in appeal).

Sections Involved

  • Section 129, Central/Karnataka Goods and Services Tax Act, 2017 – governs detention, seizure and release of goods and conveyances in transit, including payment of tax and penalty under Section 129(1)(b).
  • Section 129(6) – prescribes the procedure to be followed, including notice and order, where the tax and penalty demanded on detained goods are not paid, as a precondition before invoking Section 130.
  • Section 130 (pre-2022 amendment) – empowers confiscation of goods and conveyance, held here to be invocable only after compliance with Section 129(6).

Decision – In Favour of

The Karnataka High Court allowed the transporter's writ petition and dismissed the Revenue's petition, holding that confiscation under Section 130 without prior compliance with Section 129(6) is unsustainable, and directing refund of the entire tax and penalty deposited along with release of the vehicle and goods. This is a clear decision in favour of the Assessee (the transporter).

Related Case Laws

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

Case Details

  • Court: High Court of Karnataka, Dharwad Bench
  • Case No.: Writ Petition No. 105057 of 2023 (T-RES) with WP No. 102770 of 2022
  • CNR: Not available on record
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 11 December 2023
  • Disposal Nature: Allowed (transporter's petition allowed; Revenue's petition dismissed)

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