ITAT & High Court Ruling: Provisional Release of Perishable Arecanuts Pending Confiscation Adjudication

Reference: Section 129 and Section 130 of the CGST Act, 2017 / Rajasthan GST Act, 2017

Status: In Favor of Assessee (Provisional Release Ordered)

1. The Core Dispute: Confiscation vs. Rights of Perishable Goods Owners

The petitioner, a proprietorship in Karnataka, dispatched 250 bags of arecanuts to a registered dealer in Delhi. Despite carrying a valid tax invoice with IGST, the consignment was intercepted. The authorities initiated confiscation proceedings under Section 130, passing an order in FORM GST MOV-11 (confirming the MOV-10 notice) which imposed heavy penalties and fines.

Assessee’s Stand: The petitioner argued that the arecanuts were being traded between registered dealers and that the procedural lapse did not warrant harsh confiscation. Critically, it was emphasized that arecanuts are perishable goods, and continued detention would lead to their total destruction and financial loss.
Revenue’s Stand: The State opposed the release, insisting on the validity of the MOV-11 order and the necessity of the confiscation adjudication to determine the intent to evade tax.

2. Legal Analysis: Conditional Release under Section 129(1)(c)

The Court balanced the Revenue’s power to adjudicate with the taxpayer’s right to protect their property from perishing.

I. Classification as Perishable Goods

The Court formally noted that arecanuts fall within the definition of perishable goods. Under the GST framework (specifically the proviso to Section 129(6)), the law recognizes that goods which depreciate in value over time or are perishable must be handled with greater urgency.

II. Safeguarding Revenue via Bank Guarantee

While the factual disputes regarding the “intent to evade” were left for the adjudication phase, the Court provided interim relief.

The Ruling: The goods were ordered to be released upon the petitioner furnishing a Bank Guarantee or Solvency Security equivalent to the invoice value of the goods.
Merits Reserved: The Court clarified that this release is “without prejudice.” This means the GST authorities are still free to conclude the confiscation adjudication on its merits; the security merely replaces the physical goods to protect both the taxpayer (from waste) and the Revenue (for potential recovery).

3. Final Ruling: Disposal of Writ with Directions

The High Court directed the immediate release of the arecanuts to prevent them from becoming unfit for consumption.

Verdict: Goods to be released upon furnishing security/bank guarantee.
Outcome: The writ petition was disposed of with instructions to the authorities to finalize the adjudication independently of this interim release.

Key Takeaways for Transporters and Traders

Perishable Priority: If your goods are perishable (fruits, vegetables, arecanuts), you can move the Court for immediate release on security, as statutory timelines (typically 15 days) can be reduced for such items.
MOV-11 is not the End: Even if a confiscation order (MOV-11) is passed, you can seek a “Fine in lieu of Confiscation” to redeem your goods or conveyance.
Security Options: Courts often allow Solvency Security or Bank Guarantees instead of cash payments to secure the release, helping with the business’s cash flow during litigation.

HIGH COURT OF RAJASTHAN

Venkateshwara Traders

Union of India^*

SANJEEV PRAKASH SHARMA, ACTG. CJ.
AND MRS. SANGEETA SHARMA, J.

D.B. CIVIL WRIT PETITION NOS. 12413, 12596 & 12598 OF 2025

DECEMBER 16, 2025

Raaghul and Niraj Kumar Yadav, Advs. for the Petitioner. Vigyan Shah, AAG, Rohit Tiwari, Sankalp Vijay, AAAGs, Priyam Agarwal, Deepak Mittal, Advs. and Praveen Singh Rajawat, Sr. CGPC for the Respondent.

JUDGMENT

1. These petitions are being decided by a common order as the issue involved therein is similar. For convenience, the facts are being taken from D.B. Civil Writ Petition No. 12413/2025.

2. Heard learned counsel for the parties.

3. Learned counsel for the petitioner submits that the petitioner is a proprietorship concerned in the State of Karnataka making a taxable supply of goods in the State of Karnataka.

4. The challenge is made to the order dated 08.07.2025 under Section 130 of the Central Goods and Services Tax Act, 2017 (hereinafter ‘the CGST Act’) whereby, penalty and fine aggregating to Rs.53,33,125/- has been imposed on the petitioner. The petitioner is engaged in trading of arecanut and in the course of business, the petitioner received a purchase order from M/s.Aryan Traders, a registered dealer based in Delhi for supply of non-edible arecanuts whereupon, the petitioner issued a Tax Invoice No.51 for supply of 250 bags of arecanuts with total weight of 17,500 kg.

5. The valuation of the goods were found to be Rs.18,20,000/-and an amount of Rs.91,000/- has been imposed @ 5% IGST. The driver of the vehicle was Manoj Kumar and the goods were transferred via Vehicle No.RJ14-GP-7783.

6. The impugned order was passed on 08.07.2025 confirming the proposal in MOV-10, penalty of Rs.2,31,875/-, fine of Rs.46,37,500/- alongwith penalty of Rs.2,31,875/- under Section 130 and fine in lieu of confiscation of convenience to an equal amount.

7. Learned counsel for the petitioner submitted that the provisions of Section 130 of the CGST Act could not have been invoked and he has therefore prayed that the goods be released and also to set aside the order dated 08.07.2025 passed in Form GST MOV-11.

8. Per contra, the State has contested the claim and pointed out that the summons were issued to the petitioner and despite service, no personal appearance of any of the accused was noticed. A written reply was filed and after considering the contentions the orders were passed.

9. It is stated that this Court ought not exercise its extraordinary jurisdiction in such cases where the record reflects that the petitioner through a web of sham firms and bogus transactions have persistently defrauded the State exchequer.

10. We have considered the submissions.

11. Admittedly, the arecanuts are such goods that come under the definition of perishable goods.

12. Considering the dispute, which needs to be examined on factual aspects, we direct that upon furnishing of a bank guarantee or solvency security of an amount equivalent to the amount as reflected in the invoice of purchase, the goods shall be released to the petitioner, however, releasing of the goods in no manner will affect the merits relating to the demand being raised by the Department which is to be examined independently by the Authorities after considering the replies and documents of the respondents and the petitioner in this regard. The exercise in this regard will be taken up within a period of three months. The goods shall be released if the solvency security is filed within a period of fifteen days.

13. The writ petitions are accordingly disposed of.

14. All pending misc. applications stand disposed of.

15. A copy of this order be placed in each connected petition.