Facts of the Case

The respondent, M/s Rajeev Traders, represented by its proprietor Sri Rajeev Ranjan, was the owner of areca nuts being transported in seven trucks intercepted on 13.09.2021 at Yamanuru under Section 129 of the CGST Act. Following interception, Form GST MOV-01 and MOV-02 were issued, a physical verification report (MOV-04) and valuation report were obtained, and the respondent's statement was recorded under Section 70 of the CGST Act on 27.09.2021, leading to a detention order in Form GST MOV-06 issued on 28.09.2021 under Section 129(1). On the very next day, 29.09.2021, the department invoked Section 130 of the CGST Act and issued a confiscation notice (MOV-10), culminating in a confiscation order dated 24.11.2021. The respondent's appeal against the confiscation order was dismissed on 21.02.2022, prompting a writ petition (WP No.100849/2022), which the learned Single Judge allowed on 16.08.2022, quashing both the confiscation proceedings and the appellate order. The Revenue filed the present intra-court writ appeal challenging that decision.

Issues Involved

  1. Whether the proper officer, having detained goods under Section 129 of the CGST Act, could initiate confiscation proceedings under Section 130 before the 14-day period prescribed under Section 129(6) had elapsed.
  2. Whether the Circular dated 13.04.2018, relied upon by the Revenue, permitted bypassing the Section 129 procedure and directly invoking Section 130.

Petitioner's Arguments (Revenue, as Appellant)

  • Sections 129 and 130 of the CGST Act were mutually independent, and passing a detention order under Section 129 did not bar initiation of confiscation proceedings under Section 130, particularly where the assessee was found guilty of tax evasion.
  • Circular No.41/15/2018-GST dated 13.04.2018 permitted initiation of confiscation proceedings without completing detention proceedings, as held by the Gujarat High Court in Synergy Fertichem Pvt. Ltd. v. State of Gujarat, 2020 (33) GSTL 513, and followed by a Single Judge of the same Court in M.S.Meghdoot Logistics.

Respondent's Arguments

  • The respondent supported the Single Judge's order, contending there was no merit in the Revenue's appeal.

Court Order / Findings

  • The Court held that a harmonious reading of Section 129(6) with the rest of Section 129 shows the proper officer can invoke confiscation proceedings under Section 130 only after the mandatory 14-day period from detention has expired, and since the confiscation notice here was issued the very next day after the detention order (28.09.2021 to 29.09.2021), the confiscation proceedings were illegal, arbitrary and without jurisdiction.
  • The Court held that the Circular dated 13.04.2018 could not override the statutory scheme under Section 129, and could not confer unfettered power on the proper officer to bypass the detention procedure and directly invoke confiscation; it declined to follow the contrary view of the Gujarat High Court in Synergy Fertichem and the Karnataka Single Judge decision in Meghdoot Logistics.
  • The Court clarified that its analysis was confined to the pre-amendment position of Sections 129 and 130 as they stood prior to the Finance Act, 2021 amendment effective 01.01.2022, and left the post-amendment question open for an appropriate case; the Revenue's writ appeal was dismissed and the Revenue was directed to comply with the Single Judge's directions within four weeks.

Important Clarification

Under the CGST Act as it stood before the 01.01.2022 amendment, confiscation proceedings under Section 130 could be initiated only after the 14-day period prescribed under Section 129(6) for compliance with a detention order had elapsed; a departmental circular cannot override this statutory sequence to permit confiscation to be triggered immediately upon detention, and doing so renders the confiscation proceedings void for want of jurisdiction.

Sections Involved

  • Section 129 of the CGST Act, 2017 (pre-01.01.2022) – governs detention, seizure and release of goods and conveyances in transit, with sub-section (6) prescribing a 14-day compliance window before confiscation can be triggered.
  • Section 130 of the CGST Act, 2017 (pre-01.01.2022) – governs confiscation of goods or conveyances and levy of penalty, available only after the Section 129 procedure is exhausted.
  • Circular No.41/15/2018-GST dated 13.04.2018 – departmental instructions on detention and confiscation procedure, held not to override the statute.

Decision – In Favour of

The decision was in favour of the Assessee, with the Revenue's appeal dismissed and the quashing of the confiscation proceedings and appellate order upheld.

Case Details

  • Court: High Court of Karnataka, Dharwad Bench
  • Case Number: Writ Appeal No.100403 of 2022 (T-RES), arising from WP No.100849/2022
  • Neutral Citation: 2023:KHC-D:11299-DB
  • Coram: Hon'ble Mr. Justice S.R. Krishna Kumar and Hon'ble Mr. Justice G. Basavaraja
  • Date of Order: 25 September 2023

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