Facts of the Case

The respondent, M/s Ravi Trading Company, had its goods — arecanut, a perishable commodity — detained and confiscated by order dated 09.01.2023 under Section 130 of the CGST Act, 2017 read with the Karnataka GST Act, 2017. In the writ petition challenging this confiscation, the respondent sought interim release of the goods given their perishable nature; the Single Judge granted interim relief directing release of the goods (worth Rs.1,43,93,400/-) subject to a 20% deposit and a bond for the full amount, and rejected the Revenue's request to conduct an auction. The Revenue (the tax department) appealed this interim order.

Issues Involved

  1. Whether interim release of perishable confiscated goods, subject to a partial deposit and bond, is an appropriate exercise of discretion pending final adjudication of a Section 130 confiscation proceeding.
  2. Whether the Revenue's interest is adequately protected by such conditional release, or whether an auction should instead be permitted.

Petitioner's Arguments

  • The appellant-Revenue argued that the Single Judge's order directing release of the confiscated arecanut on partial deposit and bond, and rejecting the department's request for auction, warranted interference in appeal.

Respondent's Arguments

  • The respondent (writ petitioner before the Single Judge) had emphasised that the goods being perishable arecanut, immediate release was warranted, especially since more than eight months had passed since the confiscation order without any arrangement being made; it further offered, in the appeal, to furnish additional security by way of specified immovable property to safeguard the Revenue's interest.

Court Order / Findings

  • The Court held that the Single Judge had correctly exercised discretion, noting that the goods were perishable, that over eight months had elapsed since confiscation without resolution, that mere pendency of appeal operates only as a stay and does not prevent the Revenue from proceeding with recovery through other means, and that the conditions imposed (20% deposit and full-value bond) adequately safeguarded the Revenue's interest.
  • Taking into account the respondent's further offer, made during the appeal, to provide additional security by way of specified immovable property (3 acres 2 gunthas at Sirsi, Uttara Kannada) without alienation until disposal of the writ petition, the Court found no illegality or infirmity in the Single Judge's order warranting interference.
  • The appeal was dismissed without interfering with the interim order, all rival contentions in the writ petition were kept open, and the respondent was directed to furnish the additional security within two weeks, upon which the goods were to be released within a further week.

Important Clarification

Where confiscated goods are perishable in nature and prolonged retention would harm both the trader and the ultimate value realisable by the Revenue, courts will uphold conditional interim release (deposit plus bond, potentially supplemented by additional security) pending final adjudication, since an appeal or writ challenge to confiscation operates only as a stay and does not itself prevent the Revenue from pursuing other recovery mechanisms.

Sections Involved

  • Section 130, CGST/KGST Act, 2017 — confiscation of goods and conveyances and levy of penalty.
  • Section 20, IGST Act, 2017 — applies CGST provisions, including Section 130, to inter-State transactions.
  • Form GST MOV-06 and MOV-11 — the detention/seizure order and confiscation order forms under which the goods were initially confiscated.

Decision – In Favour of

The decision is in favour of the Assessee on the interim relief (conditional release of the perishable goods upheld), while the substantive challenge to the confiscation itself remains pending and undecided.

Case Details

Court: High Court of Karnataka, Dharwad Bench
Case No.: Writ Appeal No.100471 of 2023 (T-RES) (Neutral Citation No. 2023:KHC-D:9850-DB)
Coram: Justice S. R. Krishna Kumar and Justice G. Basavaraja
Date of Order: 31.08.2023

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