hc64 Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

Gujarat High Court

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

• ench: Hemant M. Prachchhak
• /SCA/15195/2021 ORDER DATED: 20/10/2021

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 15195 of 2021

==========================================================

MESSRS TANAY CREATION THROUGH PROP. TANAY MAHAVIR SHAH

Versus

STATE OF GUJARAT

==========================================================

Appearance:

MR DHAVAL SHAH (3109) for the Petitioner(s) No. 1

MS MAITHILI MEHTA, ASST.GOVT.PLEADER for the Respondent(s) No. 1

SERVED BY RPAD (N)(6) for the Respondent(s) No. 2,3,4

==========================================================

CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI

and

HONOURABLE MR. JUSTICE HEMANT M.

PRACHCHHAK

Date : 20/10/2021

ORAL ORDER

(PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1 The petitioner is before this Court seeking the writ of certiorari challenging the order in Form GST MOV-11 dated 15.09.20211 passed by respondent No.2 essentially on the ground that without serving a copy of the order and without even granting an opportunity of hearing, the stay order is passed in clear violation of the principles of natural justice as also violation of the provisions of section 130 of the Central Goods & C/SCA/15195/2021 ORDER DATED: 20/10/2021 Services Tax Act (“the CGST Act” for short).

2 The prayers sought for are as follows:

“9 The Petitioner, therefore, most humbly prays that :-

(a) That this Hon’ble Court be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other or direction for calling upon the following documents papers and after going through the same, the same may kindly be quashed and set aside in the interest of justice;

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 1

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

i Detention order dated 24.08.2021 (Annexure- E) issued under Section 129(1) of the

CGST Act, 2017/GGST Act, 2017 by Respondent No.3; ii Notice dated 24.08.2021 issued under Section 130 of the CGST/SGST Act issued by Respondent No.3 (Annexure F);

iii. Order dated 15.09.2021 (Annexure-A) issued under Section 130 of the CGST Act, 2017/GGST Act, 2017 by Respondent no.2;

• That this Hon’ble Court be pleased to issue a Writ of Mandamus, or a Writ in the nature of Mandamus, or any other appropriate Order or direction directing the Respondents, their servants, agents, or representatives to allow clearance of the goods provisionally detained under Detention Order dated 24.08.2021 (Annexure-E) issued under Section 12991) of the CGST Act, 2017/GGST Act, 2017 by Respondent No.3 after quashing and setting aside the notice dated 24.08.2021 issued under Section 130 of the CGST/GGST Act issued by Respondent No.3 (Annexure F);

• Pending Notice, admission, and finalizing of this petition, this Hon’ble Court may

be pleased to direct the Respondents, their sub- ordinates, agents, or their

representatives to forthwith release the goods provisionally detained and confiscated

in purported exercise of powers under Section 129 and 130 of the CGST Act; C/SCA/15195/2021 ORDER DATED: 20/10/2021

• That pending the hearing and final disposal of the present petition, this Hon’ble Court be pleased to direct the Respondents, agents, officers, and subordinate, restricts them from acting on or in consequence of the detention order dated 254.08.2021 (Annexure-E) and Order Dated 15.09.2021 (Annexure-A) qua the Petitioners;

• for ad-interim relief in terms of prayer

(c) and (d) above;

• for costs of the petition/application and orders thereon; and;

• For such further and other reliefs, as this Hon’ble Court may deem fit and proper

in the facts and circumstances of the case.”

3 Facts in capsulized form as follows:

3.1 The petitioner is a proprietorship firm and has its principal place of business at the address mentioned in the cause title. It has single GST Registration bearing No.27GFLPS3939L1ZH under the provisions of CGST Act and Gujarat State Goods and Service Tax Act, 2017 (‘the GGST Act” for short).

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 2

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

3.2 The petitioner is engaged in the trading of gray fabrics. It purchases goods from various manufacturers from different parts of the country and sell the same to various manufacturers. According to the C/SCA/15195/2021 ORDER DATED: 20/10/2021 petitioner, it has been regularly paying GST on their outward supply or under reverse charge mechanism, wherever there is the liability of GST.

3.3 It is averred that the petitioner sent

goods under four tax invoices to the

processors at Jetpur under the

instructions of the buyers in the truck bearing No.GJ-01-JT-0689 through Kailash Translogistics Pvt. Ltd. The driver of the truck was carrying the goods mentioned in the tax invoice issued by the petitioner, which was intercepted by respondent No.3 on 22.08.2021 for at 11:10 a.m at Kamrej Toll Plaza, Kamrej, Surat.

3.4 According to the petitioner, the driver produced all the required documents relating to the goods, including tax-

invoice evidencing description, the value of the goods and rate of IGST of such C/SCA/15195/2021 ORDER DATED: 20/10/2021 transaction and tax on such goods.

3.5 The truck was detained on the ground that (1) bill & E-way bill was mismatched (2) neither in the bill nor in the E-way bill the receiver’s name and full address was mentioned (3) quantity mismatch for the E-

way bill no.221329079634 and the bills produced. It was alleged that the goods were transported to the unknown recipient for evasion of tax. Respondent No.2, therefore, had directed the physical verification of the conveyance, goods and documents in FORM GST MOV-02.

3.6 On 23.08.2021, the petitioner sent a letter in writing requesting to release the goods/conveyance intercepted, and requested not to impose any penalty. It was also urged that on the directions of the buyers, goods were being sent to Jetpur for processing. However, while C/SCA/15195/2021 ORDER DATED: 20/10/2021 preparing tax invoice, inadvertently, the name of the supplier of the goods from whom the petitioner had purchased the goods had been mentioned as Consignee instead of the processors at Jetpur, but in the E-way bill, the correct place of delivery was mentioned i.e. Jetpur, Gujarat.

3.7 By not paying heed to the request, respondent No.3 detained the truck along with the goods and order of detention in Form GST MOV-06 was issued on 24.08.2021, Thereafter, the order was passed on the same day, which was served upon the driver of the truck and not upon the petitioner.

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 3

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

3.8 After the order of 24.08.2020, respondent No.3 also passed an order under section 129(1) of the GGST Act.

3.9 Notice for confiscation of the goods/conveyance for levy of penalty was C/SCA/15195/2021 ORDER DATED: 20/10/2021 served upon the truck driver, although copy was marked to the petitioner and other parties. Not even the copy of the show cause notice was issued to the petitioner. Respondent No.3 calculated demand of tax on goods of Rs.1,14,019/-, demand of penalty at Rs.1,14,019/- and redemption fine at Rs.22,80,362/-, which is equivalent to the value of the goods.

The truck driver was asked to appear on 07.09.2021.

3.10 According to the petitioner, the total amount of tax and the penalty being Rs.1,14,019/- was paid by way of challan dated 01.09.2021. It is lamented by the petitioner that respondent No.2 without considering for provisional release of the goods, straightaway passed an order under section 130 of the CGST Act confirming the order of confiscation and penalty by the C/SCA/15195/2021 ORDER DATED: 20/10/2021 order impugned. The order has been passed against the driver of the truck and the copy of which was served upon the petitioner on 24.09.2021, where the redemption fine also had been imposed.

3.11 It is further the say of the petitioner that though the total amount of tax and penalty had been already paid, the respondents are not inclined to release the goods without payment of redemption of fine, as there is clear violation of the principles of natural justice.

• Accordingly, the present petition is preferred seeking the above mentioned reliefs.

• On issuance of notice, the other side appeared and filed affidavit-in-reply. The State Tax Officer has not disputed that conveyance, which was carrying fabrics, was intercepted and because of the discrepancies C/SCA/15195/2021 ORDER DATED: 20/10/2021 like (i) mismatch in Bill and E-way bill;

(ii) Neither in the bill nor in the E-way bill, the receiver’s name and full address is mentioned. (iii) Mismatch of the quantity mentioned in the E-way bill and the bill produced, action had been initiated by the authority.

• The respondent has denied all the averments set out in the petition. However, according to the respondent, it was M/s. Tanay Creation, the present petitioner, which had filed a reply on 23.08.2021 when the order of detention was passed on 24.08.2021 under section 129(1) of the CGST Act.

• In a request to release the goods, it has mentioned in the communication to the State Tax Officer dated 23.08.2021 that on the directions of the buyer, goods were sent at Jetpur, Gujarat. While preparing tax invoice, inadvertently, the consignee’s address was C/SCA/15195/2021 ORDER DATED: 20/10/2021 not mentioned correctly, but in the E-way bill the correct place of delivery was mentioned i.e. Jetpur, Gujarat.

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 4

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

8 According to this respondent, Rule 138A of the CGST Rules provides for a valid invoice, bill of supply or delivery challan. In absence of that requirement having not been met, the order has been passed. It is further the say of the respondent that it is wrong to say that no opportunity of hearing was given.

One Mr. Anish Goyel had visited the office of the respondent for the purpose of representing the case of the petitioner and Email sent by the petitioner on 28.08.2021 has been taken note of. He also relied on Rule 46 of the GGST Act, which, under the heading of “Rule 46 Tax Invoice” provides that subject to Rule 54, a tax invoice, issued by a registered person, shall contain particulars specified thereunder, which were C/SCA/15195/2021 ORDER DATED: 20/10/2021 missing.

• According to the respondent, mere payment of tax and penalty would not suffice. Redemption fine is imposed when there is discrepancy and as the order has been passed after issuance of the notice under the MOV 10, the representation has been made, duly signed by the proprietor of the petitioner, on 23.08.2021.

1. It is further the say of the respondent that sections 129 and 130 both are independent provisions. Therefore, the authority has rightly acted upon by issuing the show cause notice under section 130. There were 21 E-way bills of various consignors, of which 15 were found to be in order and, therefore, the goods qua those 15 E-way bills were released.

1. According to the respondent, in case of two E-way bills of another consignor M/s. Latika Creations also, there were discrepancies C/SCA/15195/2021 ORDER DATED: 20/10/2021 noted. M/s. Latika Creation has made the entire amount of demand on 06.10.2021 and the goods have been released.

1. It is the say of the respondent that alternative efficacious remedy is available under section 107 against the order passed under section 130 of the GGST and CGST Act.

1. We have heard Mr. Dhaval Shah, learned advocate appearing for the petitioner.

1. Mr. Shah, learned advocate for the petitioner, has argued fervently along the line of the petition and urged emphatically a clear violation of principles of natural justice and violation of statutory provisions. He has also relied on the following decisions:

(1) Sitaram Roadways (URP) vs. State of Gujarat, [2019] 112 taxmann.com 54 (Gujarat) (2) Synergy Fertichem Pvt. Ltd. vs. State of Gujarat, 2019 SCC Online Guj 6127.

C/SCA/15195/2021 ORDER DATED: 20/10/2021 15 Ms. Maithili Mehta, learned Assistant Government Pleader for the respondent-

State has strongly resisted this petition and urged not to interfere in the writ jurisdiction when the order is legal and valid.

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 5

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

16 Taking firstly the issue of alternative efficacious remedy available in the form of appeal, much has been pressed into service by learned Assistant Government Pleader urging that the Court need not indulge when there is efficacious remedy available under the statute. Ordinarily, this Court by way of self-restraint chose not to interfere where there is statutory remedy provided it is otherwise alternative and efficacious.

However, there are notable exceptions, under which the Court always entertains the writ petition. One of them is breach of the principles of natural justice, that is one C/SCA/15195/2021 ORDER DATED: 20/10/2021 issues which has been reiteratively harped upon by the petitioner.

17 As could be noticed from the chronology of events, the show cause notice that had been issued under section 129 and thereafter under section 130 of the CGST Act is only to the truck driver and neither to the truck owner nor to the petitioner in its capacity of the owner of the goods. The respondent has unsuccessfully pointed out to the Court as to how there has been representation on the part of the owner of the goods at the stage of passing the order under MOV 11. However, the respondent has not pointed out as to whether any show cause notice was issued to any of these or whether any opportunity of hearing had been availed. Admittedly, there is no show cause notice issued to the owner of the goods, at any C/SCA/15195/2021 ORDER DATED: 20/10/2021 juncture. It is also not in dispute that the petitioner has already paid the amount of Rs.2,28,038/- by way of tax and penalty.

However, the amount of redemption fine, equivalent to the value of the goods, which have been confiscated is to the tune of Rs.22,80,362/- as imposed by the respondent authority has obviously not been paid.

18 Without further delving into the merits of the matter, apt will be to refer to the decision of this Court in the case of Sitaram Roadways (URP) (supra). It was a case where the competent authority intercepted conveyance of assessee transporter carrying goods and detained the same. As the person in charge of the conveyance was not in a position to produce the mandatory documents in the nature of invoice and E-way bill, the order was passed in Form GST MOV02 by the competent authority and directed the person C/SCA/15195/2021 ORDER DATED: 20/10/2021 in-charge of the conveyance to station the conveyance at his risk and responsibility.

Thereafter, notice was issued in Form GST MOV-02 for confiscation of the goods or conveyance and levy of penalty under section 130 of the CGST Act. The assessee was directed to appear before the competent authority and without waiting for the assesssee to appear before him, the competent authority passed an order on 24.08.2019. When in fact, he was to appear on 28.08.2021. An order was passed of confiscation under section 130 of the CGST Act in Form GST MOV-

11 computing the tax, penalty, fine in lieu of confiscation of goods and fine in lieu of confiscation of conveyance. This was held to be an order in breach of the principles of natural justice on two counts. Firstly, the matter was kept for hearing on 28.08.2019, the competent authority passed the order on C/SCA/15195/2021 ORDER DATED: 20/10/2021 24.08.2019 without affording any opportunity of hearing to the assessee. Secondly, the order was a totally non-speaking order, which does not reflect

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 6

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

the reason as to why the competent authority had come to the conclusion that the goods and the conveyance were liable to be confiscated and thus these grounds rendered the same unsustainable. The Court after quashing and setting aside the order restored the same to the file of the competent authority to decide it afresh in accordance with law on affording the opportunity of hearing. It also further directed the competent authority to pass a reasoned order by also directing that the conveyance and the goods be released, since the tax and penalty have been already deposited.

19 Reference also needs to be made of the decision of this Court in the case of C/SCA/15195/2021 ORDER DATED: 20/10/2021 Synergy Fertichem Pvt. Ltd. (supra), where the reference is also made by this Court of the decision of Sitaram Roadways (URP) (supra). Relevant paragraphs are reproduced hereunder:-

“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 C/SCA/15195/2021 ORDER DATED: 20/10/2021 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. 105. We would like to remind the Revenue of the observations made by this Court in the case of Sitaram Roadways vs. State of Gujarat, Special

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 7

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

Civil Application No.15107 of 2019, decided on 10th October, 2019. We quote the observations; “8. Section 130 of the CGST Act provides for confiscation of goods or conveyances and levy of penalty. Sub-section (4) thereof provides that no order for confiscation of goods or conveyance or for imposition of penalty shall be issued without C/SCA/15195/2021 ORDER DATED: 20/10/2021 giving the person an opportunity of being heard. In the present case, on a perusal of the documents annexed along with the petition it appears that pursuant to the notice dated 21.8.2019 issued by the respondent, the petitioner appeared before the respondent on 24.8.2019 and showed willingness to pay the amount of tax and penalty for the purpose of securing release of the vehicle in question. Thereafter, the second respondent, without affording any opportunity of hearing to the petitioner as contemplated under sub-section (4) of section 130 of the CGST Act, has proceeded to pass the impugned order on 24.8.2019. It appears that merely because the petitioner appeared before the respondent and showed willingness to pay the tax and penalty for the purpose of securing release of the vehicle in question, the second respondent has proceeded to pass the impugned order without hearing the petitioner on the question of confiscation of the goods and conveyance.

9. As can be seen from the impugned order, it is in the format provided therefor, viz. in FORM GST MOV-11. In paragraph 1 of the impugned order all the blanks have been filled up which indicate the registration number of the conveyance and the time, place and date and by whom the conveyance came to be intercepted. Paragraphs 3 and 4 thereof do not contain any details in the blank spaces meant to be filled in. One of the significant paragraphs in the statutory form is paragraph 5, which reads thus: “The person in charge has not filed any objections/the objections filed were not acceptable for the reasons stated below: a)… b) …. Thus, in terms of the statutory format provided for passing an order under section 130 of the CGST Act, the officer adjudging is required to provide the reasons for confiscating the goods and conveyance. Reference may also be made to paragraph 6 of the statutory form, which reads thus: “6. In view of the above, the C/SCA/15195/2021 ORDER DATED: 20/10/2021 following goods and conveyance are confiscated by the undersigned by exercising powers vested under section 130 of the Central Goods and Services Tax Act ” On a conjoint reading of paragraphs 5 and 6, it is clear that the officer adjudging the case passed the order confiscating the goods and conveyance described in paragraph 6, for the reasons set out in paragraph 5. 10. In this regard a perusal of the impugned order of confiscation, shows that column 5 wherein the officer adjudging it is required to set out the reasons for concluding that the goods and conveyance are required to be confiscated, is totally blank. As a necessary corollary it follows that the goods and conveyance have been ordered to be confiscated without disclosing the reasons therefor. The impugned order is, therefore, a non-speaking order, which is totally bereft of any reasons whatsoever. 11. At this stage, it may be apposite to refer to the legislative scheme contained in section 130 of the CGST Act. Sub-section (1) of section 130 thereof, reads thus: 130. Confiscation of goods or conveyances and levy of penalty.– (1) Notwithstanding anything contained in this Act, if any person– (i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (ii) does not account for any goods on which he is liable to pay tax under this Act; or (iii) supplies any goods liable to tax under this Act without having applied for registration; or (iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 8

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods C/SCA/15195/2021 ORDER DATED: 20/10/2021 or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122. 12. Thus, in terms of clauses (i) and (iv) of sub-section (1) section 130 of the CGST Act, the goods can be confiscated provided that the person supplies or receives goods in contravention of the provisions of the Act or the rules made thereunder with the intent to evade payment of tax; or contravenes any provisions of the Act and the rules made thereunder with the intent to evade payment of tax respectively. Insofar as clauses (ii) and

(iii) are concerned, the very fact that the person does not account for the goods on which he is liable to pay tax under the Act; or supplies any goods which are liable to tax under the Act without having applied for registration, would be sufficient for ordering confiscation of the goods. Therefore, while making an order of confiscation under section 130 of the CGST Act, the officer adjudging it will have to state as to which clause of sub-section (1) of section 130 of the CGST Act is attracted in the facts of the said case. If it is the case of the officer adjudging it that the case falls under clauses

(i) or (iv) of sub-section (1) of section 130 of the CGST Act, then for the purpose of making an order of confiscation, he will have to come to the conclusion that the goods were supplied or received in contravention of the provisions of the Act or the rules made thereunder with the intent to evade payment of tax. In other words, the officer adjudging the case, while making an order of confiscation under clauses (i) or (iv) of sub-section (1) of section 130 of the CGST Act, has to record twin satisfaction: firstly that there is a contravention of the provisions of the Act or the rules made thereunder, with specific reference to the provision of the Act or the rules that has been contravened; and secondly, that such contravention is with the intent to evade payment of tax. Therefore, in a case falling under clauses (i) and (iv) of sub-

C/SCA/15195/2021 ORDER DATED: 20/10/2021 section (1) of section 130 of the CGST Act, the proper officer is required to record a specific finding as to why he has come to the conclusion that the contravention is with the intent to evade payment of tax. In cases falling under clause (ii) of sub-section (1) of section 130 of the CGST Act, the proper officer will be required to record a finding that the person concerned has not accounted for the goods in respect of which is he liable to pay tax; and in cases falling under clause (iii) thereof, he would be required to record a finding that the person concerned has supplied goods which are liable to tax under the Act without having applied for registration.

1. In the present case, the impugned order is totally silent as regards which provision of the Act or the rules has been contravened; which clause of sub-section (1) of section 130 of the CGST Act is attracted in the present case; and as to why the officer adjudging it has come to the conclusion that there is contravention of the provisions of the Act and the rules made thereunder with the intent to evade payment of

1. Moreover, a perusal of the impugned order reveals that fine determined in lieu of confiscation of goods is equal to the market value of the goods viz. Rs.6,81,556/-. Reference may therefore be made to sub-section (2) of section 130 of the CGST Act, which reads thus: “(2) Whenever confiscation of

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 9

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

any goods or conveyance is authorised by the Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit: PROVIDED that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon. PROVIDED FURTHER that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129. PROVIDED ALSO that where any such conveyance is used for the carriage of the C/SCA/15195/2021 ORDER DATED: 20/10/2021 goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon.” Thus, sub-section (2) of section 130 of the CGST Act provides that the fine leviable shall not exceed the market value of the goods, less the tax chargeable thereon. It is, therefore, clear that the fine provided under the first proviso to sub-section (2) of section 130 of the CGST Act is the maximum fine leviable. Consequently, the proper officer adjudging the case is required to examine the seriousness of the contravention and impose fine accordingly. It is not as if in every case the proper officer should levy the maximum fine. The order of confiscation should, therefore, reflect due application of mind on the part of the proper officer to the quantum of fine imposed by him. 15. A perusal of the impugned order reveals that the proper officer has levied more than the maximum fine leviable in terms of the first proviso to sub-section (2) of section 130 of the CGST Act, inasmuch as, he has levied fine equal to the market value of the goods without deducting the tax chargeable thereon. Moreover, there is nothing in the order to reflect application of mind to the quantum of fine.

16. At this juncture reference may be made to the decision of the Supreme Court in Kranti Associates (P) Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496, wherein the court in the context of necessity to give reasons, has held thus: “47. Summarising the above discussion, this Court holds: (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi- judicial authority must record reasons in support of its conclusions. (c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

C/SCA/15195/2021 ORDER DATED: 20/10/2021

(d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision- maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. (g) Reasons facilitate the process of judicial review by superior courts. (h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice. (i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery (j) Insistence on reason is a requirement for both judicial accountability and

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 10

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

• If a judge or a quasi- judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

• Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubber-stamp reasons” is not to be equated with a valid decision-making (m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader C/SCA/15195/2021 ORDER DATED: 20/10/2021 scrutiny. (See David Shapiro in Defence of Judicial Candor.) (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg See Ruiz Torija v. Spain, (1994) 19 EHRR 553 and Anya v. University of Oxford, 2001 EWCA Civ 405 (CA), wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions”.

(o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “due process”.

” 17. In CCT v. Shukla & Bros.,(2010) 4 SCC 785, the Supreme Court held thus: “14. The principle of natural justice has twin ingredients; firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Such rule being applicable to the administrative authorities certainly requires that the judgment of the court should meet with this requirement with higher degree of satisfaction. The order of an administrative authority may not provide reasons like a judgment but the order must be supported by the reasons of rationality. The distinction between passing of an order by an administrative or quasi-judicial authority has practically extinguished and both are required to pass reasoned orders.”

18. In Tata Engineering & Locomotive Co. Ltd. v.

C/SCA/15195/2021 ORDER DATED: 20/10/2021 Collector of Central Excise, Pune, 2006 (203) ELT 360 (SC), the Supreme Court was dealing with a case where by a cryptic and non-speaking order, the Tribunal had upheld the order passed by Commissioner by applying the ratio of the decision of the Larger Bench in TISCO Ltd., without recording any findings of fact. The court held that it is not sufficient in a judgment to give conclusions alone but it is necessary to give reasons in support of the conclusions arrived at. The court, set aside the order of the Tribunal as the findings recorded by the Tribunal were cryptic and non-speaking, and remitted the matter back to the Tribunal for taking a fresh decision by a speaking order in accordance with law after affording due opportunity to both the 19. In State of Punjab v. Bhag Singh, 2004 (164) ELT 137 (SC), the Supreme Court was considering a case where the High Court had dismissed the appeal without giving any reasons. The

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 11

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

court held that reasons introduce clarity in an order. On plainest consideration of justice, the High Court ought to have set forth its reasons, howsoever brief, in its order indicative of an application of mind, all the more when its order is amenable to further avenue of challenge. The absence of reasons has rendered the High Court order not sustainable. The court further held that right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before the court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out.

• Thus, the Supreme Court has consistently held that a quasi-judicial authority must record reasons in support of its conclusions and that reasons are an indispensable component of a decision making process. In CCT v. Shukla & Bros C/SCA/15195/2021 ORDER DATED: 20/10/2021 (supra) the Supreme Court has held that giving reasons in support of the conclusions arrived at is an ingredient of the principles of natural justice.

• Viewed in the light of the principles enunciated in the decisions referred to hereinabove, the impugned order is in breach of the principles of natural justice on two counts: firstly, that though the matter was kept for hearing on 28.08.2019, the second respondent passed the impugned order on 24.08.2019 without affording any opportunity of hearing to the petitioner; and secondly, because the impugned order is a totally non-speaking order which does not reflect the reason as to why the proper officer has come to the conclusion that the goods and the conveyance are liable to be confiscated, which renders the order unsustainable. The impugned order, therefore, deserves to be set aside and the matter is required to be remitted to the proper officer to decide the matter afresh in accordance with law, keeping in mind the principles discussed herein above, after affording reasonable opportunity of hearing to the petitioner.”

20 On summation of this is para 183 of the said decision would be profitable to be reproduced: “FINAL CONCLUSION:-

183. We would sum up our conclusion of the points raised in the writ applications as follows;

“(i) Section 129 of the Act talks about detention, seizure and release of goods and conveyances in transit. On the other hand, Section 130 talks about confiscation of goods or conveyance and levy of tax, penalty and fine thereof. Although, both the sections start with C/SCA/15195/2021 ORDER DATED: 20/10/2021 a non-obstante clause, yet, the harmonious reading of the two sections, keeping in mind the object and purpose behind the enactment thereof, would indicate that they are independent of each other. Section 130 of the Act, which provides for confiscation of the goods or conveyance is not, in any manner, dependent or subject to Section 129 of the Act. Both the sections are mutually exclusive.

(ii) The phrase “with an intent to evade the payment of tax” in Section 130 of the Act assumes importance. When the law requires an intention to evade payment of tax, then it is not mere failure to pay tax. It must be something more. The word “evade” in the context means defeating the

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 12

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

provisions of law of paying tax. It is made more stringent by use of the word “intent”. The assessee must deliberately avoid the payment of tax which is payable in accordance with law. However, the element of mens rea cannot be read into 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 detention and seizure of the goods and conveyance, the case has to be of such a nature that on the face of the entire transaction, the authority concerned should be convinced that the contravention was with a definite intent to evade payment of tax. The action, in such circumstances, should be in good faith and not be a mere pretence. In other words, the authorities need to make out a very strong case. Mere suspicion may not be sufficient to invoke 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 C/SCA/15195/2021 ORDER DATED: 20/10/2021 take an appropriate decision whether the case is one of straightway invoking Section 130 of the Act.

• Even if the goods or the conveyance is released upon payment of the tax and penalty under Section 129 of the Act, later, if the authorities find something incriminating against the owner of the goods in the course of the inquiry, if any, then it would be permissible to them to initiate the confiscation proceedings under Section 130 of the Act.

• Section 130 of the Act is not dependent on clause (6) of Section 129 of the Act.

• Sections 129 and 130 respectively of the Act are mutually exclusive and independent of each other. If the amount of tax and penalty, as determined under Section 129 of the Act for the purpose of release of the goods and the conveyance, is not deposited within the statutory time period, then the consequence of the same would be forfeiture of the goods and the vehicle with the Government. This does not necessarily imply that the confiscation proceedings can be initiated only in the event of the failure on the part of the owner of the goods or the conveyance in depositing the amount towards the tax and liability determined under Section 129 of the Act.

• For the purpose of Section 129(6) of the Act, it would not be necessary for the department to establish any intention to evade payment of tax. If the tax and penalty, as determined under Section 129, is not deposited within the statutory time period, then the goods and the conveyance shall be liable to be put to auction and the sale proceeds shall be deposited with the Government.

• Similarly, the reference to Sections 73 and 74 respectively of the Act is not warranted for the purpose of interpreting Sections 129 and 130 of the Act, more particularly, when they all are independent of each other. The provisions of Sections 73 and 74 of the Act are similar to the C/SCA/15195/2021 ORDER DATED: 20/10/2021 provisions of Section 11A of the Central Excise Act and Section 28 of the Customs Act, which deal with the adjudication proceedings. Despite this, Section 110 is present in the Customs Act, which speaks about seizure and similarly, Section 129 is

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 13

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

present in the Act for detention/ seizure. Therefore, Sections 129 and 130 of the Act have non-obstante clauses, whereby they can be operated upon in spite of Sections 73 and 74 of the Act.

• The provisions of sections 73 and 74 respectively of the Act deal with the ‘demands and recovery’ to be made by the assessing officer based upon the assessment, whereas the provisions of Section 129 of the Act deal with the ‘detention/ seizure’. While assessing the returns, if the assessing officer finds that the amount of tax has not been paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilized for any reason, either with mala fide intention or without the same, as the case may be, the provisions of Section 73/74 of the Act would be invoked. However, the provisions of Section 129 of the Act deal with situation where the evasion of tax/contravention of the Act/Rules is detected during transit itself, requiring the adoption of summary like proceedings. Therefore, the said provisions operate in different spheres.

• The comparison of the provisions of Customs Act/ Excise Act on one hand and the provisions of the Act on the other, as sought to be drawn on behalf of the writ applicants, is not correct. Section 110(1) of the Customs Act is not comparable to Section 129(1) of the Act inasmuch as, the provisions of Section 110 of the Customs Act contemplates that the proper officer may seize the goods which are liable for confiscation, whereas the provisions of Section 129 contemplate that the proper officer may detain/ seize the goods/ conveyance in transit in contravention of the provisions of the Act or the Rules.

C/SCA/15195/2021 ORDER DATED: 20/10/2021

• The provisions of Sections 110(2) and 124 of the Customs Act do not contemplate that the goods which are seized are to be released in a specific time limit, much less, within a period of six months. Apropos this, the said sections merely cast a duty on the department to issue a show cause notice within a period of six months from the date of seizure of goods, but the same does not contemplate as to in how much time, the same has to be adjudicated upon. Therefore, the contention raised on behalf the writ applicants that the goods which are seized are to be released within a short span of time and that the legislature has not contemplated to retain the goods pending the confiscation proceedings. is not tenable. In addition to the above, even otherwise, the provisions of Section 110A of the Customs Act, which deal with the ‘provisional release’ of the goods, do not contemplate the release of the goods only on payment of penalty and interest but the proposed amount of fine is also to be included for provisional release of the goods. In view of this, the amount of fine should be taken into account while directing the provisional release of the goods/ conveyance as per Section 129(2) read with Section 67(6) of the Act read with Rule 140 of the Rules.

• Although there is no serious challenge to the validity of the provisions of Sections 129 and 130 respectively of the Act, yet it is a settled principle of law that the power to levy tax includes all the incidental powers to prevent the evasion of such tax. The power to seize and confiscate the goods in the event of evasion of tax and the power to levy penalty are meant to check tax evasion and is intended to operate as a deterrent against the tax-evaders and are, therefore, ancillary or incidental to the power to levy tax on the goods and thus, fall within the ambit and scope of the legislative powers.

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 14

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

• The goods are not liable to be detained on the ground that the tax paid on the product was C/SCA/15195/2021 ORDER DATED: 20/10/2021 less. In such circumstances, the Inspecting Authority is expected to alert the Assessing Authority to initiate appropriate proceedings “for assessment of any alleged sale at which the dealer will have his opportunities to put forward his pleas on law and on fact. The process of detention of the goods cannot be resorted to when the dispute is bona fide, especially concerning the exigibility of tax and, more particularly, the rate of that tax.

• Even in the absence of the physical availability of the goods or the conveyance, the authority can proceed to pass an order of confiscation and also pass an order of redemption fine in lieu of the confiscation. In other words, even if the goods or the conveyance has been released under Section 129 of the Act and, later, confiscation proceedings are initiated, then even in the absence of the goods or the conveyance, the payment of redemption fine in lieu of confiscation can be passed. (xvi) The extraordinary powers under Article 226 of the Constitution, directing for release of the vehicles or goods, during the pendency of the confiscation, can only be sparingly exercised under extraordinary situations and circumstances when injustice occurs because of non-fulfillment of the conditions for confiscation.”

21 Adverting to the facts of the instant case, unlike in the case of Sitaram Roadways (URP) (supra) where there was a show cause notice issued to the petitioner and the date had also been fixed for hearing and where the allegation was of only passing the order C/SCA/15195/2021 ORDER DATED: 20/10/2021 without affording the opportunity of hearing and that too by a non-speaking order, in the instant case, what is to be noticed glaringly is a complete absence of any notice and gross violation of principles of natural justice.

The petitioner, who is the owner of the goods has not been afforded the opportunity at all as no service of show cause notice is also made to the petitioner and the opportunity was only afforded to the driver.

• urprisingly, expressed show cause notice was only to the driver and to none else. This Court notices that neither to the petitioner nor to the owner of the conveyeance bearing No.GJ-01-JT-0689, which was intercepted by the State Tax Officer, any notice of show cause had been issued. However, the order dated 03.10.2021 (Annexure-H) reflects that the order of detention in Form GST MOV-06 was served upon the person in-charge of the C/SCA/15195/2021 ORDER DATED: 20/10/2021 conveyance on 24.08.2021. Notice was also issued under the provisions of sub-section(3) of section 130 of the GST Act. This also is neither to the petitioner nor to any other person, but exclusively to the driver who has been termed as person in charge of the conveyance. The tax invoice contained full address of M/s. Tanay Creations of Room No.20, 2nd Floor, 20 Patel Building, Dadi Sheth Agyari Lane, Kalbadevi, Mumbai City, along with GSTN:27GFLPS3939L1ZH and the contact details. It also contains names of Krishna Processors & India Pvt. Ltd, Kedarmal Kanhaiyalal and Shree Mohata Textiles.

• herefore, not only there has been no service of any show cause notice prior to the passing of an order under Form GST MOV-10 or Form GST MOV 11, but also no opportunity of hearing was made

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 15

Messrs Tanay Creation Through … vs State Of Gujarat on 20 October, 2021

available to the petitioner. That itself is a ground for this Court to C/SCA/15195/2021 ORDER DATED: 20/10/2021 entertain this petition. The order impugned is in the complete breach of the principles of natural justice for not having issued the show cause notice in the first place and not even having afforded any opportunity of hearing to the petitioner. Quashment of the order will sub-serve the purpose and hence the impugned order passed by the competent authority dated 15.09.2021 will need to be quashed and set aside.

• Resultantly, the petition succeeds and is allowed accordingly. The impugned order dated 15.09.2021 is quashed and set aside. We choose to restore the matter to the file of the respondent NO.3 to issue the notice under section 130 of the GGST and CGST Act and to decide the matter afresh in accordance with law, on affording reasonable opportunity of hearing on serving the show cause notice to the petitioner. It shall also pass a C/SCA/15195/2021 ORDER DATED: 20/10/2021 reasoned order to enable the parties to be aware of the reasons for his allowance or rejection.

• Admittedly, the petitioner has deposited the amount of tax and penalty and, therefore, the conveyance as well as goods in question shall be released by the competent authority within 07 days from the date of receipt of the copy of this order, subject to the final outcome of proceedings under section 130 of the CGST Act.

• Petition stands disposed of accordingly.

(MS. SONIA GOKANI, J. ) (HEMANT M. PRACHCHHAK,J) SUDHIR

Indian Kanoon – http://indiankanoon.org/doc/140815729/ 16