Facts of the Case

The petitioner, proprietor of M/s. Sridev Traders, Rajkot, trades in Areca Nuts and was registered with GST on 06.10.2021. It had placed an order for 24,500 kg of Areca Nuts worth Rs.63,70,000 with its supplier, M/s. Izaan Trading, Karnataka (the connected petitioner in SCA No.3640 of 2022). While the consignment, covered by e-way bills valid up to 16.11.2021, was in transit from Bhadravathi, Karnataka to Rajkot, the conveyance (No.TN 70 Y 8229) was intercepted at Navpura-Songadh Highway, Surat on 13.11.2021, and detention proceedings under Section 129(1) of the CGST Act, 2017 were initiated, with the department issuing Form GST MOV-01 and later Form GST MOV-06 alleging deficiencies. A co-ordinate bench had earlier, on 17.12.2021, stayed further proceedings pending release. The supplier deposited tax and penalty aggregating Rs.9,55,840 in two tranches (19.11.2021 and 18.12.2021), and both buyer and supplier then sought release of the goods and conveyance through these connected writ applications.

Issues Involved

  1. Whether the detained Areca Nut consignment and conveyance were liable to be released once tax and penalty stood deposited by the supplier.
  2. Whether the detention order dated 13.11.2021 under Section 129(1) was liable to be quashed at the writ stage.

Petitioner's Arguments

  • Neither the buyer nor the seller had been afforded any opportunity of hearing before detention action was initiated, and no notice was issued upon the buyer-petitioner at any stage.
  • The requisite tax and penalty of Rs.9,55,840 stood already deposited by the supplier, so there remained no justification for continued detention.
  • The goods were Areca Nuts, a perishable commodity, warranting urgent release of both goods and conveyance.
  • The petitioner sought quashing of the undated detention order and release of the goods without payment of further tax and penalty.

Respondent's Arguments

  • The State's counsel did not dispute that tax and penalty had been deposited by the supplier, but maintained that the department retained liberty to proceed further with the inquiry into the transaction in accordance with law.
  • It was indicated that Section 130 proceedings (confiscation) could yet follow if warranted by the outcome of the inquiry.

Court Order / Findings

  • The Court noted that tax and penalty aggregating Rs.9,55,840 had already been deposited, and the goods being perishable Areca Nuts, there was no impediment to release.
  • The respondent authority was directed to release the goods and conveyance at the earliest, and in any event on or before 28th February, 2022, without prejudice to the department's liberty to continue the inquiry in accordance with law.
  • The Court declined to quash the detention order at this stage: if the department later issues a Section 130 notice in Form GST MOV-10, the petitioner may challenge it before the appropriate forum.
  • The connected civil application, not surviving independently, was disposed of accordingly.

Important Clarification

  • Once tax and penalty demanded in Form GST MOV-06/MOV-07 proceedings under Section 129 have been deposited, release of detained perishable goods and the conveyance is ordinarily directed even while the department's inquiry into the underlying transaction continues.
  • Release of goods on deposit of tax and penalty does not amount to quashing of the detention order itself; the department retains liberty to pursue confiscation proceedings under Section 130 if the inquiry so warrants, and the assessee's remedy against any such notice lies before the appropriate forum.

Sections Involved

  • Section 129, Central Goods and Services Tax Act, 2017 — governs detention, seizure and release of goods and conveyances in transit in contravention of the Act.
  • Section 130, Central Goods and Services Tax Act, 2017 — governs confiscation of goods or conveyances and levy of penalty.

Decision – In Favour of

Disposed of with directions, substantially in favour of the Assessee on the relief of release of goods and conveyance, while leaving the department's inquiry and detention order otherwise untouched.

Related Case Laws

Companion proceeding: the same goods-interception dated 13.11.2021 at Navpura-Songadh Highway, Surat, also led to a separate GST-registration-cancellation challenge by the same petitioner group before the Gujarat High Court in C/SCA/3596/2022, already covered on this site.

Case Details

  • Court: High Court of Gujarat at Ahmedabad
  • Case No.: R/SPECIAL CIVIL APPLICATION NO. 19116 of 2021 with CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2022 and R/SPECIAL CIVIL APPLICATION NO. 3640 of 2022
  • Coram: Hon'ble Mr. Justice J.B. Pardiwala and Hon'ble Ms. Justice Nisha M. Thakore
  • Date: 23.02.2022
  • Petitioner: Sreejith K. (Proprietor, M/s. Sridev Traders)
  • Respondent: State of Gujarat

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