Western Enterprises Vs State of Gujarat (Gujarat High Court)
Summary: The Gujarat High Court, in Western Enterprises Vs State of Gujarat, directed the provisional release of goods detained by GST authorities upon payment of ₹18 lakh towards tax and penalty and execution of a bond for the remaining ₹52 lakh towards fine. The Division Bench comprising Justice J.B. Pardiwala and Justice Ilesh J. Vora declined to interfere with the ongoing confiscation proceedings but granted conditional relief pending their adjudication. The dispute arose after M/s. M.M. Enterprise allegedly denied having any transaction with the petitioner. Pursuant to an earlier order dated 28 January 2021, the GST authorities recorded the statement of Chudasama Kishorbhai Mareshbhai, a partner of M/s. M.M. Enterprise, on 29 January 2021. According to the affidavit filed by respondent No. 2, the partner stated that he did not even know the petitioner. The department was also unable to trace the broker allegedly involved in arranging the transaction.
During the hearing, the petitioner’s counsel, Mr. Uchit Sheth, submitted that the petitioner was the seller of the goods and had generated an e-way bill, which would require disclosure of the transaction during assessment proceedings. The State’s counsel, Mr. Chintan Dave, argued that the recipient’s refusal to acknowledge the transaction prima facie indicated that the goods were intended for disposal in the grey market. The High Court permitted the GST confiscation proceedings to continue in accordance with law but ordered provisional release upon deposit of ₹18 lakh and execution of a ₹52 lakh bond to the satisfaction of respondent No. 2. The petitioner was also required to undertake payment of the entire fine in lieu of confiscation if the goods were ultimately held liable to confiscation. The Court did not determine whether the transaction was genuine or whether the goods were liable to confiscation.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Pursuant to our order dated 28th January 2021, an affidavit-in-reply has been filed by the respondent No.2 stating as under:
“1. During the course of hearing of the present writ petition this Hon’ble Court vide order dated 28/01/2021 was pleased to direct the respondent authorities to record appropriate statement of the responsible officer of M/s. M.M. Enterprise. In this regard as per the directions issued by this Hon’ble Court, the statement of the partner of M/s. M.M. Enterprise viz. Chudasama Kishorbhai Mareshbhai was recorded on 29/01/2021. If the said statement is examined, then it will be clear that the partner of M/s. M.M. Enterprise does not even know the petitioner. A copy of statement dated 29/01/2021 is annexed hereto and marked as Annexure-A.”
2. The picture that emerges, as on the date of MOV – 10, is that M/s. M. M. Enterprise is not admitting the transaction with the writ applicant. To a specific question put to Mr. Sheth in this regard, the reply is that such type of transactions are entered into through a broker. The department is also not in a position to trace the particular broker as it appears that although the name of one of the brokers did surface in the course of the inquiry, yet the broker seems to have kept his mobile switched off.
3. The argument of Mr. Sheth is that he is the seller of the goods. He has generated the E-way bill, ultimately, he will have to show the transaction in the assessment proceeding as E-way bill has been generated.
4. On the other hand, the argument of Mr. Dave is that as M/s. M. M. Enterprise is not ready and willing to acknowledge the transaction, prima facie, it would indicate that the goods were to be disposed of in a gray market.
5. Let the proceedings with respect to the confiscation proceed further in accordance with law. We are not inclined to interfere at this stage. However, we are inclined to order provisional release of the goods pending the confiscation proceedings on the condition that the writ applicant shall deposit an amount of Rs.18 Lakh with the respondent No.2 towards the tax and penalty. For the balance amount towards fine of Rs.52 Lakh, the writ applicant shall execute a bond to the satisfaction of the respondent No.2 with an undertaking that ultimately, if the goods are held liable to be confiscated, he shall make good the entire payment towards fine in lieu of confiscation. This writ application is disposed of directing the respondent No.2 to release the goods on payment of Rs.18 Lakh and other conditions as imposed by this Court.
6. With the above, this writ application stands disposed of.
