Confiscation Order Under Section 130 Challenged: Returnable Notice Issued on Grounds of Delayed Forms, Incorrect Section Invocation, and New Reasons in Appellate Order.
Issue:
Whether an order of confiscation and penalty under Section 130 of the CGST Act is valid when the initial reason for detention was merely the non-production of bill and e-way bill (which would typically fall under Section 129), and the procedural forms (MOV-01, MOV-02) were issued two months after the initial detention by police, at which point the goods were no longer in transit. The assessee also argued that the Appellate Authority recorded reasons beyond those initially assigned.
Facts:
The assessee challenged a confiscation and penalty order passed under Section 130 of the CGST Act. The assessee submitted that the Appellate Authority had recorded reasons beyond those initially assigned in the original order. The only reason given in the initial order (and by police officers who detained/seized goods on April 30, 2022) was that the invoice and e-way bill were not produced. The assessee highlighted that the respondent authorities issued Form GST MOV-1 and Form GST MOV-2 in June 2022, two months after the goods were detained and seized by police and kept in GIDC, Matar, Kheda.
The assessee further contended that:
- The invocation of Section 130 was untenable because the only reason for the original action was the non-production of a bill and e-way bill, which properly falls under Section 129, not Section 130.
- The respondent authorities could not even have invoked Section 129 because the goods were no longer “in transit” when Form GST MOV-1 was issued on June 18, 2022 (two months after the initial detention).
Decision:
In favor of the assessee (interim relief / matter to be heard): The court, considering the submissions made, ordered that a returnable notice be issued. This means the court has found sufficient grounds in the assessee’s arguments to require the revenue department to present their detailed response, indicating that the assessee has a prima facie case and the issue warrants deeper judicial scrutiny.
Key Takeaways:
- Distinction Between Section 129 and 130:
- Section 129: Deals with detention, seizure, and release of goods/conveyances for contraventions like non-production of documents (e.g., e-way bill), incorrect details, etc. It primarily imposes a penalty (tax + penalty) and seeks to address procedural defaults that might hint at tax evasion. It typically applies when goods are in transit.
- Section 130: Deals with confiscation of goods/conveyances and levy of penalty, invoked for more serious contraventions, typically involving an intent to evade tax, such as supply without invoice, supply without actual movement of goods, or utilizing fake ITC. Confiscation is a more severe action than mere penalty.
- Grounds for Invoking Section 130: Courts have often held that for Section 130 (confiscation) to be invoked, there must be a clear finding of intent to evade tax or a serious breach of statutory provisions that goes beyond a mere procedural lapse. Simple non-production of documents (without more) typically points towards Section 129.
- Factual Discrepancy (Delayed MOV forms & “In Transit” status): The assessee’s argument that MOV forms were issued two months after initial detention and that the goods were no longer “in transit” at that point is critical. Section 129 primarily applies to goods in transit. If the formal proceedings under GST (issuance of MOV forms) are initiated long after the initial physical detention by police and when the goods are stored, it raises questions about the validity of invoking sections applicable to goods in transit.
- No New Grounds in Appellate Order: The principle that an appellate authority cannot introduce entirely new grounds or reasons to sustain an order that were not present in the original adjudication order is a matter of procedural fairness.
- Interim Relief/Notice Stage: Issuing a “returnable notice” indicates that the court finds the assessee’s arguments substantial enough to warrant a formal response from the revenue department. It is an interim step, not a final decision on the merits, but it suggests the court sees a strong prima facie case for the assessee.
- Police Detention vs. GST Detention: The case highlights the distinction between initial detention by police (e.g., for traffic violations or general suspicion) and the formal initiation of proceedings under the GST Act by GST officers. The timelines and procedures for each are distinct.
Overall, this case suggests the court is concerned about:
- The leap from a Section 129 type violation (missing documents) to a Section 130 (confiscation) order without clear evidence of tax evasion.
- Procedural delays and inconsistencies in issuing statutory forms by the GST authorities.
- The changing nature of the goods’ “transit” status over time, and its implications for the applicable GST sections.