Gujarat HC orders for Goods and vehicle to be released on payment of amount and deposit of bank guarantee

Section 129 of CGST Act, 2017 explains Detention, seizure and release of goods and conveyances in transit.

According to Section 129, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure
These goods or documents shall be released:
1. on payment of the applicable tax and penalty equal to 100% of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to 2% of the value of goods or Rs 25,000, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty
2. on payment of the applicable tax and penalty equal to the 50% of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to 5% of the value of goods or Rs 25,000, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty
3. upon furnishing a security equivalent to the amount payable under points (a) & (b) as above

No such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
The provisions of section 67(6) shall apply for detention and seizure of goods and conveyances.
The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty
No tax, interest or penalty shall be determined without giving the person concerned an opportunity of being heard.
Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided within 7 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130
If the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the period of 7 days may be reduced by the proper officer.

Both the goods and the conveyance will be confiscated if any person –

Supplies/receives goods in contravention of the provisions of GST to evade tax
Cannot account for the presence of seized goods
Supplies goods without registering (even though he is liable to register)
Violates rules to evade tax
Uses any conveyance/vehicle to transport goods in contravention to the GST provisions

The vehicle might not be confiscated if the owner of the vehicle can prove that it was used without his knowledge.

Penalty will also be applicable in each of the above cases. Before confiscating the goods, the tax officer shall give an option of paying a fine instead of confiscation.

Let us refer to the case of Sawariya Traders v. State of Gujarat [2020], where the petitioners appealed for the release of goods which were confiscated by the tax authorities due to incomplete paperwork.

Facts of the Case:

The writ applicant No 1 was engaged in the business of areca nut and was a registered dealer under the GST.
The writ applicant No 2 was the owner of the vehicle.
The writ applicant No 1 entered into an agreement for sale of areca nuts with one Dwarkesh Enterprise carrying on business at Jamnagar, State of Gujarat.
The consignment of areca nut came to be dispatched in the truck owned by the writ applicant No 2 from Nagpur to Jamnagar.
The truck along with the goods came to be intercepted by the respondent.
At the time of inspection, the GST authority noticed the following:
1. The owner/driver/person in charge of the goods conveyance had not tendered any documents for the goods in movement.
2. The genuineness of the goods in transit (its quality etc) and/or tendered documents requires further verification
3. E-way bill not tendered for the goods in movement
4. Tax bill was not provided
5. E way bill was not provided
6. Tax invoice number was not printed

In such circumstances, the goods as well as the vehicle came to be detained under Section 129(1) of the CGST Act, 2017
Thereafter, an order of confiscation in form MOV-11 came to be passed.
After the final order of confiscation of the goods and the conveyance was passed, the authority concerned decided to put the goods and the vehicle to public auction for the purpose of realising the amount towards tax, penalty and fine.

Proceedings of the High Court (HC)

HC inquired with the writ applicants as to whether his clients were ready and willing to deposit 50% of the amount by way of cheque or demand draft and the balance 50% by way of Bank Guarantee of any Nationalized bank.
HC was very clear that if the writ applicants were ready and willing to deposit the amount as stipulated above then they would consider releasing the goods as well as the conveyance with a further liberty to prefer appeal under Section 107 of the CGST Act, 2017, against the final order of confiscation having regard to the fact that the impugned order of confiscation was served upon the writ applicants in the month of March, 2020.
The writ applicants then made a statement that Rs.18 Lac shall be deposited with the respondent and the balance amount of Rs.18 Lac shall be paid by way of a Bank Guarantee of any Nationalized bank.

As the writ applicants are ready and willing to deposit the amount towards their liability, HC passed the following order:
1. The writ applicants shall deposit 50% of Rs.36 Lac with the respondent and the balance amount of Rs.18 Lac shall be paid by way of a Bank Guarantee of any nationalized bank.
2. If the amount of Rs.36 Lac was paid to the respondent, then the conveyance as well as the goods shall be immediately released in favour of the writ applicants.
3. It was open for the writ applicants to prefer an appropriate appeal before the appellate authority under Section 107 of the Act, if they intended to question the legality and validity of the order of confiscation passed in Form MOV-11.
4. HC also clarified that they had not expressed any opinion on the merits of the case.
5. HC passed this order keeping in mind that the goods were of perishable nature and were lying with the respondent since the month of September, 2019.

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