Confiscation and penal proceedings under section 130 can only initiate after completion of process under section 129.

Confiscation and penal proceedings under section 130 can only initiate after completion of process under section 129.

Seizure of Goods in Transit: Lack of Reasons and Improper Procedure Leads to Direction for Release

Issue: Whether the seizure of goods in transit without assigning legible reasons, failure to issue a notice under Section 129(3) within seven days, and premature initiation of proceedings under Section 130 instead of Section 129, renders the seizure unlawful and warrants the release of goods.

Facts:

• The goods belonging to the petitioners were seized in transit.
• The petitioners challenged the seizure on the grounds that:
  • No legible reasons were assigned for the seizure.
  • Authorities were required to issue a notice under Section 129(3) within seven days of seizure, but no such notice had been issued to date.
  • The authority, instead of completing the process under Section 129, moved directly to initiate proceedings under Section 130.

Decision: Upon perusal of the seizure memo, it was found that no legible reason for the seizure had been set out. Therefore, the court directed the authorities to:

1. Issue a notice under Section 129(3).
2. Ascertain the documents related to the goods and the consequent tax.
3. Release the goods. The court clarified that proceedings under Section 130 should only be initiated after the completion of the Section 129 process, which includes issuing a notice, giving an opportunity of hearing, and ascertaining documents and tax for the release of goods.

Key Takeaways:

• Mandatory Recording of Reasons for Seizure: The seizure memo must clearly and legibly state the reasons for the seizure. Failure to do so renders the seizure procedurally defective.
• Strict Adherence to Section 129 Procedure: Authorities must strictly follow the procedure outlined in Section 129, including the timely issuance of a notice under Section 129(3) within seven days of seizure. This notice is crucial for allowing the assessee to understand the grounds for seizure and respond.
• Sequence of Proceedings (Section 129 before Section 130): Proceedings under Section 130 (confiscation of goods and conveyances) are more stringent and should generally be initiated only after the completion of the process under Section 129 (detention, seizure, and release of goods on payment of tax and penalty), which involves ascertaining documents, tax, and providing an opportunity of hearing. Premature initiation of Section 130 proceedings without completing Section 129 is not permissible.
• Protection against Arbitrary Seizure: This judgment reinforces the protection against arbitrary seizure of goods and ensures that due process is followed by the tax authorities.