The Union Of India vs M/S Rajeev Traders on 25 September, 2023

Judgment Summary: The Union Of India vs M/S Rajeev Traders

1. Outcome
The Writ Appeal filed by the Union of India (the Revenue) was dismissed. The High Court upheld the order of the Learned Single Judge, which had quashed the confiscation order against M/S Rajeev Traders. The Revenue was directed to comply with the Single Judge's order within four weeks.

2. Core Issue
The central legal question was whether GST authorities can initiate confiscation proceedings under Section 130 of the CGST Act, 2017, immediately after issuing a detention order under Section 129, without first concluding the proceedings and observing the mandatory waiting period prescribed under Section 129(6) of the Act (as it stood prior to the amendment of 01.01.2022).

3. Key Facts
* 13.09.2021: Seven trucks carrying areca nuts belonging to the respondent (M/S Rajeev Traders) were intercepted by GST officials.
* 13.09.2021 - 27.09.2021: The authorities conducted physical verification, drew up a mahazar, obtained a valuation report, and recorded the respondent's statement.
* 28.09.2021: An order of detention for the goods and vehicles was issued in Form GST MOV-06 under Section 129(1) of the CGST Act.
* 29.09.2021: On the very next day, the authorities issued a notice for confiscation of the goods and vehicles in Form GST MOV-10 under Section 130 of the CGST Act.
* 24.11.2021: A final order of confiscation was passed.
* 21.02.2022: The respondent's statutory appeal against the confiscation order was dismissed by the Appellate Authority.
* The respondent filed a writ petition before the Karnataka High Court, which was allowed by a Learned Single Judge, who quashed the confiscation proceedings.
* The Revenue challenged the Single Judge's order through this Intra-Court Writ Appeal.

4. Arguments
* Appellant (The Revenue):
* Sections 129 (Detention) and 130 (Confiscation) are independent and mutually exclusive provisions.
* Initiating detention proceedings under Section 129 does not bar the initiation of confiscation proceedings under Section 130, especially where there is an intent to evade tax.
* Reliance was placed on Circular No. 41/15/2018-GST dated 13.04.2018, which allegedly permitted direct invocation of Section 130 in cases of tax evasion.
* The non-obstante clause in Section 130 ("Notwithstanding anything contained in this Act...") allowed for confiscation proceedings to be initiated at any stage.

• Respondent (M/S Rajeev Traders):
  • The confiscation proceedings initiated on 29.09.2021, just one day after the detention order of 28.09.2021, were without jurisdiction.
  • The statutory scheme, particularly Section 129(6), requires the authorities to wait for 14 days after detention for the assessee to pay the applicable tax and penalty.
  • Confiscation under Section 130 could only be invoked if the assessee failed to comply with the Section 129 order within this 14-day period. The authorities prematurely and illegally jumped to confiscation.

5. Court’s Reasoning
The Division Bench concurred with the reasoning of the Learned Single Judge and dismissed the Revenue's appeal based on the following grounds:

• Mandatory Nature of Section 129(6): The Court held that a harmonious interpretation of Section 129 (prior to its amendment) establishes a clear statutory sequence. Section 129(6) explicitly stated that if the tax and penalty were not paid within 14 days of detention, "further proceedings shall be initiated in accordance with the provisions of section 130."
• Procedural Sine Qua Non: This 14-day period is a mandatory condition precedent (a sine qua non) for initiating confiscation proceedings under Section 130. The authorities cannot bypass this statutory timeline.
• Violation of Statutory Scheme: In this case, the detention order was passed on 28.09.2021, and the confiscation notice was issued the very next day on 29.09.2021. This was a clear violation of the statutory scheme, rendering the confiscation proceedings illegal, arbitrary, and without jurisdiction.
• Circular Cannot Override Statute: The Court affirmed the principle that a departmental circular cannot override express statutory provisions. The mandate of Section 129(6) must prevail over any contrary instructions in the 2018 Circular.
• Confiscation as a Last Resort: The statutory framework indicates that detention under Section 129 is primarily to secure revenue (tax and penalty). Confiscation is a more severe, penal measure to be used only when the procedure for release under Section 129 fails. The authorities cannot arbitrarily choose the harsher measure without exhausting the initial remedy.
• Disagreement with Precedents: The Court respectfully disagreed with the view taken by the Gujarat High Court in Synergy Fertichem Pvt. Ltd., limiting its finding to the law as it stood before the Finance Act, 2021 amendments came into effect on 01.01.2022.

6. Statutory References
* Central Goods and Services Act, 2017 (CGST Act):
* Section 67(6): Provisional release of seized goods.
* Section 129: Detention, seizure, and release of goods and conveyances in transit (as it stood before 01.01.2022).
* Section 130: Confiscation of goods or conveyances and levy of penalty.
* Section 168: Power of the Board to issue instructions.
* CGST Rules, 2017:
* Rules 138 to 141 and associated Forms (GST MOV-01 to MOV-11).
* Finance Act, 2021: Mentioned for its amendment to Sections 129 and 130 w.e.f. 01.01.2022.
* Karnataka High Court Act, 1961:
* Section 4: Basis for the Intra-Court appeal.

7. Precedents Cited
* Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat - 2020 (33) GSTL 513
* M.S. Meghdoot Logistics vs. Commercial Tax Officer - W.P.No.10832/2020
* State of Punjab vs. M/s. Shiv Enterprises - (2023) Live Law (SC) 56
* The South India Corporation (P) Ltd., vs. The Secretary, Board of Revenue - MANU/ SC / 0215/1963
* Bright Road Logistics vs. State of Haryana - MANU/PH/1991/2023