Case Law Details

Case Name : A T Trading Company Vs State of Gujarat (Gujarat High Court)
Appeal Number : R/Special Civil Application No. 9676 of 2019
Date of Judgement/Order : 04/03/2020
Related Assessment Year :

A T Trading Company Vs State of Gujarat (Gujarat High Court)

In any circumstances, the authorities concerned cannot invoke Section 130 of the Act at the threshold, I.e., at the stage of detention and seizure. What we are trying to convey is that for the purpose of invoking Section 130 of the Act at the very threshold, the authorities need to make out a very strong case. Merely on suspicion, the authorities may not be justified in invoking Section 130 of the Act straightway. If the authorities are of the view that the case is one of invoking Section 130 of the Act at the very threshold, then they need to record their reasons for such belief in writing, and such reasons recorded in writing should, thereafter, be looked into by the superior authority so that the superior authority can take an appropriate decision whether the case is one of straightway invoking Section 130 of the Act. Any opinion of the authority to be formed is not subject to objective test. The language of Section 130 of the Act leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act or proceed for the purpose of confiscation at the very threshold. But, at the same time, there must be material based on which alone the authority could form its opinion in good faith that it has become necessary to call upon the owner of the goods as well as the owner of the conveyance to show ­cause as to why the goods and the conveyance should not be confiscated under Section 130 of the Act. The notice for the purpose of confiscation must disclose the materials, upon which, the belief is formed. It could be argued that it is not necessary for the authority under the Act to state reasons for its belief. For the time being, we proceed on the basis of such argument. But, if it is challenged that the notice is bereft of the necessary details or the satisfaction of the authority is imaginary or based on mere suspicion, then the authority must disclose the materials, upon which, his belief was formed as it has been held by the Supreme Court in Sheonath Singh’s case [AIR 1971 SC 2451]. In Sheonath Singh (supra), the Supreme Court held that the Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court. The formation of the opinion by the authority that the goods and the conveyance are liable to be confiscated should reflect intense application of mind. We are saying so because it is not any or every contravention of the provisions of the Act or the Rules which may be sufficient to arrive at the conclusion that the case is one of an intention to evade payment of tax. In short, the action must be held in good faith and should not be a mere pretence

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. By this writ­ application under Article 226 of the Constitution of India, the writ ­applicant – a Proprietory concern, engaged in the business of Arecanut, has prayed for the following reliefs:

34(a) Be pleased to issue an appropriate writ, direction or order under Article 226 of the Constitution quashing and setting aside the detention order dated 25/26.04.2019 passed by respondent no.2 and notice dated 26.04.2019 read with revised notice dated 06.05.2019 issued by respondent no.2;

(b) Pending the hearing and final disposal of this petition, be pleased to stay the operation and effect of the impugned detention order dated 25/26.04.2019 and notice dated 26.04.2019 read with revised notice dated 06.05.2019 issued by the respondent no.2 u/s.130 of the Central GST Act, 2017 and to further direct the respondent no.2 to release the goods and the vehicle No.KA­14­B­3156 which has been seized by the Respondent no.2 during the pendency of the writ petition otherwise the petitioner shall suffer irreparable loss and injury.

(c) That any other and further relief which is just and proper may kindle be granted by this Hon’ble Court.

2. We need not to go into the facts in details, as on date, the controversy is in a very narrow compass..

3. On 21st May, 2019, the learned Single Judge of this Court passed the following order:­

“1. Learned Advocate Mr. Pawanshree Agrawal appearing for the petitioner invited the attention of this Court to the order dated 16.05.2019 passed in Special Civil Application No. 9619 of 2019.

2. Having regard to the submissions advanced by the learned advocates for the respective parties, by way of ad ­interim measure, the respondents are directed to release the detained goods together with the conveyance, subject to the petitioner paying the tax and penalty as computed by the respondent authorities and also subject to filing a solemn undertaking before this court to the effect that the petitioner shall make good the deficit liability, if any, as may be determined finally by the authorities for the goods as well as for the vehicle/s subject to the petitioner’s right to challenge the same in accordance with law. For release of the goods and the vehicle/s, the petitioner shall also submit before the concerned authority proof of payment of above referred amounts and also a copy of the solemn undertaking filed in this court as well as documents, namely, PAN card and Aadhar card / Election card for identification of the petitioner and address of the petitioner.

3. Issue Notice returnable on 19.06.2019. Direct Service is permitted.”

4. The order passed by this Court referred to above was availed and the goods and the conveyance ultimately came to be released upon payment of the requisite amount towards the tax and penalty.

5. We are called upon to look into the legality and validity of the notice dated 26th April 2019, issued by the State Tax Department in Form GST MOV­10. The notice issued by the State Tax Department to the writ ­applicant in Form GST MOV­10 calls upon the writ ­applicant to show cause as to why the goods and the conveyance should not be confiscated under Section­130 of the Central Goods and Services Tax Act, 2017. The show ­cause notice in Form GST MOV­10 is substantially on the following grounds:­

(i) Vehicle was intercepted from the route where it is not supposed to go as per the route of E­way Bill and destination.

(ii) Upon site visit, it is revealed that no actual business is being carried out from the place of M/s. Natraj Enterprise, 2, Sundaram Complex, New Railway Colony, Ground Floor, Sabarmati, Ahmedabad­380005.

(iii) The value of goods being transported is shown too low compared to its real market value i.e. Rs.210 against rs.225 real value of Arecanut.

6. While making good, the principal argument canvassed by the learned counsel appearing for the writ ­applicant that the impugned show ­cause notice in Form GST MOV­10 deserves to be quashed. It is pointed out that there is no any whisper in the entire notice that the alleged contravention was with an intent to evade the payment of tax.

7. Mr. Agrawal, the learned counsel appearing for the writ­ applicant vehemently submitted that the most important ingredient for the purpose of confiscation of the goods or the conveyance is the intention on the part of the dealer to evade the payment of tax. According to Mr. Agrawal, the said decision on the part of the authority concerned is missing in the Form GST MOV­10. It is submitted that the show ­cause notice, in such circumstances, could be termed as without jurisdiction.

8. In support of the aforesaid submissions, strictly reliance has been placed by the learned counsel on the recent pronouncement of this Court in the case of Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat; Special Civil Application No.4730 of 2019and allied matters; decided on 23rd December, 2019, more particularly, the observations made by the Bench in the Paragraphs­101 to 104.

9. On the other­ hand, this writ­ application has been vehemently opposed by Mr. Soaham Joshi, the learned AGP appearing for the State. The learned AGP would submit that since the matter is at the stage of show­ cause notice, the writ ­applicant should be asked to file an appropriate reply and make his case good before the authority for the purpose of getting the show­ cause notice discharged. The learned AGP would submit that mere omission in the show­ cause notice with regard to intent to evade the payment of duty by itself would not make the show­ cause notice susceptible. The complaint that itself is without jurisdiction or without any application of mind.

10. Mr. Agrawal, the learned counsel appearing for the writ ­applicant in rejoinder submitted that even if, all the three grounds stated in the show­ cause notice are accepted as true, such grounds are not sufficient to attract the provisions of Section­ 130 of the Act i.e. for the purpose of confiscation of the goods and the conveyance.

11. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether we should quash the impugned show­ cause notice?

12. In Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat [Supra], this Court had the occasion to explain the provisions of Sections ­129 and 130 of the Act in details. We may quote the relevant paragraphs, upon which the reliance has been placed by the learned counsel appearing for the writ ­applicant.

“101. We are of the view that at the time of detention and seizure of goods or conveyance, the first thing the authorities need to look into closely is the nature of the contravention of the provisions of the Act or the Rules. The second step in the process for the authorities to examine closely is whether such contravention of the provisions of the Act or the Rules was with an intent to evade the payment of tax. Section 135 of the Act provides for presumption of culpable mental state but such presumption is available to the department only in the cases of prosecution and not for the purpose of Section 130 of the Act. What we are trying to convey is that in a given case, the contravention may be quite trivial or may not be of such a magnitude which by itself would be sufficient to take the view that the contravention was with the necessary intent to evade payment of tax.

102. In such circumstances, referred to above, we propose to take the view that in all cases, without any application of mind and without any justifiable grounds or reasons to believe, the authorities may not be justified to straightway issue a notice of confiscation under Section

130 of the Act. For the purpose of issuing a notice of confiscation under Section 130 of the Act at the threshold, i.e,. at the stage of Section 129 of the Act itself, the case has to be of such a nature that on the face of the entire transaction, the authority concerned is convinced that the contravention was with a definite intent to evade payment of tax. We may give one simple example. The driver of the vehicle is in a position to produce all the relevant documents to the satisfaction of the authority concerned as regards payment of tax etc., but unfortunately, he is not able to produce the e­way bill , which is also one of the important documents so far as the Act, 2017 is concerned. The authenticity of the delivery challan is also not doubted. In such a situation, it would be too much for the authorities to straightway jump to the conclusion that the case is one of confiscation, i.e, the case is of intent to evade payment of tax.

103. We take notice of the fact that practically in all cases, after the detention and seizure of the goods and the conveyance, straightway notice is issued under Section 130, and in the said notice, one would find a parrot like chantation “as the goods were being transported without any valid documents, it is presumed that the goods were being transported for the purposes of evading the tax”. We have also come across notices of confiscation, wherein it has been stated that the the driver of the conveyance is presumed to have contravened the provisions of the Act or the Rules with an intent to evade payment of tax. This, in our opinion, is not justified. The resultant effect of such issue of confiscation notice at the very threshold, without any application of mind or without there being any foundation for the same, renders Section 129 of the Act practically otiose. We take cognizance of the fact that once the notice under Section 130 of the Act is issued, then the vehicle is not released even if the owner of the goods is ready and willing to pay the tax and the penalty that may be determined under Section 129 of the Act. Such approach leads to unnecessary detention of the goods and the conveyance for an indefinite period of time. Therefore, what we are trying to convey is that all cases of contravention of the provisions of the Act or the Rules, by itself, may not attract the consequences of such goods or the conveyance confiscated under Section 130 of the Act. Section 130 of the Act is altogether an independent provision which provides for confiscation in cases where it is found that the intention was to evade payment of tax. Confiscation of goods or vehicle is almost penal in character. In other words, it is an aggravated form of action, and the object of such aggravated form of action is to deter the dealers from evading tax.

104. In the aforesaid context, we would like to clarify that we do not propose to lay down, as a proposition of law, or we should not be understood to have taken the view that, in any circumstances, the authorities concerned cannot invoke Section 130 of the Act at the threshold, I.e., at the stage of detention and seizure. What we are trying to convey is that for the purpose of invoking Section 130 of the Act at the very threshold, the authorities need to make out a very strong case. Merely on suspicion, the authorities may not be justified in invoking Section 130 of the Act straightway. If the authorities are of the view that the case is one of invoking Section 130 of the Act at the very threshold, then they need to record their reasons for such belief in writing, and such reasons recorded in writing should, thereafter, be looked into by the superior authority so that the superior authority can take an appropriate decision whether the case is one of straightway invoking Section 130 of the Act. Any opinion of the authority to be formed is not subject to objective test. The language of Section 130 of the Act leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act or proceed for the purpose of confiscation at the very threshold. But, at the same time, there must be material based on which alone the authority could form its opinion in good faith that it has become necessary to call upon the owner of the goods as well as the owner of the conveyance to show ­cause as to why the goods and the conveyance should not be confiscated under Section 130 of the Act. The notice for the purpose of confiscation must disclose the materials, upon which, the belief is formed. It could be argued that it is not necessary for the authority under the Act to state reasons for its belief. For the time being, we proceed on the basis of such argument. But, if it is challenged that the notice is bereft of the necessary details or the satisfaction of the authority is imaginary or based on mere suspicion, then the authority must disclose the materials, upon which, his belief was formed as it has been held by the Supreme Court in Sheonath Singh’s case [AIR 1971 SC 2451]. In Sheonath Singh (supra), the Supreme Court held that the Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court. The formation of the opinion by the authority that the goods and the conveyance are liable to be confiscated should reflect intense application of mind. We are saying so because it is not any or every contravention of the provisions of the Act or the Rules which may be sufficient to arrive at the conclusion that the case is one of an intention to evade payment of tax. In short, the action must be held in good faith and should not be a mere pretence.”

13. We are of the view that the writ ­applicant makes his case good before the authority concerned and point out the principle explained by this Court in the aforesaid decision. It shall also open for the writ­ applicant to file a detail reply and take all legal grounds available to him for the purpose of getting notice discharged.

14. We dispose of this writ­ application with a direction to the authority concerned to hear the writ ­applicant or any of his representative and take into consideration the submissions, which have been canvassed before us. The submissions, which have been canvassed before us, shall be looked into by the authority keeping in mind the observations made by this Court in the Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat [Supra] referred to above. The authority concerned shall undertake this exercise at the earliest and pass an appropriate order in accordance with law within a period of four weeks from the date of receipt of the writ of this order.

With the above, this writ­ application stands disposed of.

Direct service is permitted.

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