Facts of the Case

TN Navarathna Thanga Maligai LLP, a jewellery business based in Coimbatore, along with two of its employees, Mohamed Ashik A (Sales Manager) and K. Azarudeen (Sales Executive), filed WP(C) No.16134 of 2022 before the High Court of Kerala at Ernakulam, challenging Ext.P3 notice issued under Section 130 of the CGST Act and KSGST Act proposing confiscation of gold carried by the second and third petitioners. The gold in question weighed 429.280 grams, of which the petitioners held valid documents for only 166.820 grams; the remaining 262.46 grams was seized without accompanying documents, and Ext.P3 confiscation notice (Form GST MOV-10, dated 27.04.2022) was issued in respect of that quantity. On 15.06.2022, the Court had already granted an interim order restricting Ext.P3 to the 262.46 grams and directing release of the balance 166.820 grams, which was complied with. No final adjudication order had been passed on Ext.P3 by the date of this judgment, 29.11.2023, heard by Justice Dinesh Kumar Singh.

Issues Involved

  1. Whether the confiscation notice under Section 130 was the correct provision to invoke, as opposed to detention/seizure under Section 129.
  2. Whether the writ court should quash Ext.P3 at the show-cause stage itself, before any final order was passed.
  3. How the seized gold ought to be dealt with pending adjudication.

Petitioner's Arguments

  • Contended that the notice ought to have been issued under Section 129 of the CGST Act (dealing with detention and seizure of goods in transit) rather than Section 130 (confiscation), given the supporting e-invoice and job-work delivery documentation produced for the consignment.
  • Relied on an earlier judgment dated 17.10.2017 in WPC No.33177/2017 to argue that goods moved for job work, accompanied by proper documentation, should not attract confiscation proceedings.
  • Sought quashing of Ext.P3 notice as premature and legally unsustainable.

Respondent's Arguments

  • Relied on the physical verification report (GST MOV-04) and the statements recorded from the second petitioner to justify that the gold weighing 262.46 grams, unaccompanied by valid documents at the time of interception, was correctly seized and proceeded against under Section 130.
  • Maintained that the classification of the proceeding under Section 129 or Section 130 was a matter for the adjudicating authority to determine after considering the entire fact situation, not one to be pre-empted by the writ court.

Court Order/Findings

  • The Court observed that since the petitioners had approached it only against the show-cause notice, and no final order had been passed, the question whether the notice should have been issued under Section 129 or Section 130 was one to be decided by the second respondent himself after considering the entire issue.
  • The Court declined to quash Ext.P3 at the threshold and instead directed the petitioners to file a reply within 15 days, after which they were to be given a hearing and the show-cause notice adjudicated afresh in accordance with law.
  • The writ petition was disposed of with this direction and liberty, without any finding on whether Section 129 or Section 130 was the applicable provision.

Important Clarification

  • Kerala High Court has repeatedly declined to interfere with a Section 130 confiscation notice at the show-cause stage, leaving the question of whether Section 129 (detention/seizure) or Section 130 (confiscation) properly applies to be decided by the adjudicating authority in the first instance.
  • A taxpayer challenging only a show-cause notice, without any final order in place, will ordinarily be directed to exhaust the reply-and-adjudication process rather than obtain relief through writ jurisdiction, even where an interim order has partly restricted the notice's scope.

Sections Involved

  • Section 130, CGST Act/KSGST Act, 2017 – provides for confiscation of goods or conveyances and levy of penalty where specified contraventions (such as goods not accounted for) are established.
  • Section 129, CGST Act, 2017 – deals with detention, seizure and release of goods and conveyances in transit, invoked by the petitioners as the provision they contended should have applied instead.

Decision – In Favour of

The disposal is procedural rather than a merits victory for either side: the confiscation notice for 262.46 grams of gold remains alive and is to be adjudicated afresh after the petitioners file their reply, so the outcome is best described as disposed of with directions, in part in favour of the Assessee insofar as the earlier interim release of 166.820 grams stands undisturbed and a fresh hearing was assured, but the Department's confiscation proceeding under Section 130 was not quashed.

Related Case Laws

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

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) No.16134 of 2022
  • CNR: Not available on record
  • Coram: Hon'ble Mr Justice Dinesh Kumar Singh
  • Decision Date: 29 November 2023
  • Disposal Nature: Disposed of with direction to petitioners to file reply to the Section 130 confiscation notice (Ext.P3) within 15 days, to be adjudicated afresh

Link to Download the Order

Download the full judgment (PDF)

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.