Confiscation before Seizure can’t be Ordered on Mere Suspicion: Gujarat HC [Read Judgment]

The Gujarat High Court in the case of Synergy Fertichem Pvt. Ltd v State of Gujarat held that for the purpose of issuing a notice of confiscation u/s 130 of the Act, mere suspicion may not be sufficient to invoke Section 130 of the Act straightway.

The petitioner is engaged in an import and sale of ceramic pigment ink which is used as a colouring substance in the tiles manufacturing industry. The petitioners had ordered the same from its principal in Spain. In effect to general instructions stating that the product has a limited shelf life, the clearing and forwarding agent of the Petitioners without waiting for the e-way bill initiated transport to the warehouse. The truck with goods was hence stopped by the authorities, to be detained by the learned officer on the absence of e-way bill in respect of the goods and notices were served on the transporter.

The issues before the Court were as follows:

1. Whether proceedings for confiscation (S. 130) can be initiated without first following the procedure laid down under Section 129 of the CGST Act?
2. Whether procedure and proceedings for confiscation (S. 130) are permissible even after the procedure of Section 129 of the Act was followed i.e., the amount referred in sub-section (1) was paid by the concerned person?
3. Whether it is permissible in law to order confiscation once they are released under Section 129 of the Act on payment of the amount of tax and penalty i.e. when the authority was not in physical possession of both?

The Bench constituting of Justices J.B. Pardiwala and A.C. Rao held that:

1. On the interpretation of Sections 129 and 130, the Court held that both the sections start with 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.
2. With respect to penalty as has been provided u/s 122 and 126, the Court observed that the Department does not treat all violations similarly. The Department makes a distinction between serious and substantive violations and those that are minor/procedural in nature and hence the same is to be determined on the facts of each case.
3. On the issue of whether confiscation u/s 130 can be done before seizure u/s 129, it has been held that for the purpose of issuing a notice of confiscation u/s 130 of the Act, mere suspicion may not be sufficient to invoke Section 130 of the Act straightway. The Court also explained by way of an 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 e-way 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.
4. On the contention of whether redemption in lieu of confiscation can be imposed if goods are not available, it has been held that redemption cannot be imposed if the goods are not available. Redemption can, however, be imposed if goods were handed over to the owner upon execution of any bond/undertaking

The Bench clarified that they have, otherwise, not gone into the merits of the petitions however has ordered interim release of the goods as well as the conveyance subject to the final outcome of the confiscation proceedings.

Justice A.C. Rao while concurred with the decision Justice J.B. Pardiwala was of the view that the Legislature should, once again, look into both the provisions, i.e. Sections 129 and 130 of the Act and amend the Sections accordingly so as to remove certain inconsistencies in the two provisions.